According to Sedo they will still monetize adult domains. The previous newsletter (which I think nobody really read!) anticipated the change in Google policy and clarified the situation. I'll paste it in below to set minds at rest.
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New advertiser policy is that adult domains can ONLY display adult ads
Due to a new policy at our upstream advertising provider, you may notice some changes in the advertisements returned by adult-related domains, or domains with adult keywords set.
WHAT IS GOING TO CHANGE?
As of today, all domain names classified as adult will now only display ads if the keyword you set is also adult. For example,
www.hardcoresexsite.com will not return advertisements if you select the keyword âbusinessâ. If there is no relevant adult keyword set, adult domains will automatically default to the Adult Portal site. The Adult Portal site features high-paying and relevant adult keywords in a number of categories (see
www.betteradult.com for an example). Clicks on any of these keywords will generate advertisements and paying clicks!
WHY HAS THERE BEEN A CHANGE?
The new system attempts to ensure that no mainstream advertisers have their ads appear on adult domains. This is a policy decision made by our upstream advertising provider in response to complaints from mainstream advertisers who did not want their brands to be associated with adult domain names. At the same time, the change will deliver better quality traffic to both mainstream and adult advertisers, which over the long run should result in more and higher paying advertisements for all!
WHAT DO YOU NEED TO DO?
Please make sure that youâve selected a relevant adult keyword for all of your adult domains (and relevant non-adult keywords for all of your non-adult domains). If you prefer, you can simply use the keyword âAdult Portalâ and the domain will automatically resolve to our Adult Portal site. If you notice any domains that suddenly stop displaying advertisements, it may be that our advertising partner has incorrectly categorized your domain as adult (and is thus filtering everything but adult ads). In this case please send an e-mail to your SedoPro account manager with the affected domain name and we will request that the domain name be re-classified.
The issue seems to be that Google wants to distance itself from adult (hence closing it down in AdSense for Domains - which is a direct feed) but allowing it through the middlemen PPC operators. At least that's my take on what's happening.