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Are we allowed to remove AdSense advertisement and replace it with another or one from a different ad network once the original ad is loaded and, say, 10 seconds have passed? This is exactly what Grooveshark is doing, and I was wondering if this is OK.

Another question: Does an AdSense ad (say an animated display ad) refresh itself automatically, and if so, does that count as a new impression?

EDIT: On Grooveshark, every click somewhere on the page generates a new ad impression.

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It's possible that Grooveshark is large enough that they might have a custom contract with Google that has a different payout structure and different rules. Also, since Grooveshark is an online media player and designed with an AJAX interface, there aren't many opportunities for them to generate new impressions without rotating the ads on user clicks. The user could sit there with Grooveshark open all day long and never click to a new page or refresh. –  Lèse majesté Dec 18 '11 at 8:50

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From the policies:

prohibited methods include, but are not limited to, repeated manual clicks or impressions, automated click and impression generating tools and the use of robots or deceptive software.

So, at a base level, no you're not allowed to do this.
Some ad management applications do have a built-in function that will automatically rotate ads after some interval, and it would appear you shouldn't use that on anything that'll contain AdSense code.

As for Grooveshark's behavior, the only way to get a definitive answer is to ask them or Google. You shouldn't assume them doing it tells you anything. Maybe they have a deal, maybe they're just getting away with it(for now) and waiting to be busted. One thing to note is that last year, Google was doing a test run of an AdSense sub-product specifically for Ajax situations(now closed); @Lèsemajesté has a point about opportunities for impressions being limited. It's also possible Grooveshark was in on that and can still use it.

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