Google Making $1 Per Internet User
Check out Don Dodge's recent article, entitled 'Why 1% of search market share is worth over $1 Billion'. His math concludes that each search query produces $0.12 ad revenue, which gives a value of $1B for just 1% of total search market share. Don is from Microsoft and this post was a response to the latest ComScore search market share numbers, showing that Google increased its market share lead to about 50%. Yahoo has about 27%, Microsoft 10%, AOL 5%, and Ask.com has 5%. So let's look closer at the numbers...
Fact #1 - Don Dodge's math implies a $2B valuation in 2.5 years
The graph below is from a Forrester research document published in May, 2005. According to this, the total online ad spending is expected to jump 50% in 2.5 years, from $20.3B to $29.4B.
Now check out how closely that graph reflected the reality in the last couple of years. Google's annual revenues were:
- $6,138.56 B in 2005
- $10,604.92 B in 2006
This 72% boost compares with the 33% increase on the graph for the same time period. The difference is understandable because Google, as the leading ad network operator, should have a larger growth in earnings than others.
Hence, when we consider this derivation and Don Dodge's propositions true, we conclude that a 100% increase in revenues and valuation from Google is highly likely to happen in the next 2.5 years.
Fact #2 - Reaching Google's numbers with another method
OK, now let's try an alternative method to analyze Google's numbers:
Facts:
- Google's last quarter revenues was $3.664B
- which implies to monthly revenues of $1.221B
- which implies to daily revenues of $40.7 M
- There are approximately 1.2 B internet users worldwide
- Google holds 50% of the search market
- 53% of Google revenues come from search, 37% from AdSense
Considering these facts, we can quickly reach the rough conclusion that Google makes $1 per internet user. But not all of the revenues come from Google Search - they control only 50% of the search market, but the whole web is organically getting covered by Google ads via AdSense and AdWords. Therefore, even if you perform your searches from Yahoo or Live, you may end up being directed to a long tail web page powered by Google AdSense. Another way to look at it - if you use Google as your favourite search engine, you may be giving them $2 per month. But even if you you use a different search engine, you may still give ~$0.5 via Adsense and the Long Tail.
Lastly, ask yourself this: approximately how many times a month do you click on ads shown by your search engine? Four, ten, twenty, forty? Note that each ad approximately generates something in the range of $0.1 to $0.5; this will lead you to parallel results with the above.
Conclusion
To sum up, things are certainly not so linear - but as new internet advertising methods emerge and internet penetration increases with projects like Potenco and One Laptop Per Child in under-developed countries, online advertising revenues will keep boosting at unbelievable rates!
Disclosure: Emre Sokullu works for Hakia, one of the search engines mentioned in Don Dodge's post.
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People are craze with google and making lot of sutff in the net. Check out a google fan made a song for google!!!
http://meninweb.blogspot.com/2007/05/google-song.html
Big problem here: "approximately how many times a month do you click on ads shown by your search engine? Four, ten, twenty, forty?"
Not only do I rarely see any ads (thx GM & Adblocker!), but even when I did, I've never clicked on an ad my whole life!
I think it is also likely that we will see a strong shift from advertising in other mediums to internet based advertising. This will take longer - but items like podcasts will begin to steal revenue from radio, webisodes and IPTV will steal revenue from traditional television.
These calculations are effectively meaningless, because they do not factor in the reality that Google is an auction marketplace and therefore the revenue per user is a direct function of number of advertisers competing on price for that user.
I outlined the reasons in a blog post a few weeks ago (On Return on Effort), as to why even 1% of the search market is not worth the effort:
http://www.vinnylingham.com/2007/03/return-on-effort-with-ppc-campaigns.html
I totally believe that Google is going to be in stiff competition of having the new AdSystem that FREE1UP is going to be Pre-Launching in the very near future.
It will tell you what the best sites are to advertise plus will follow up with those people automatically. Plus it will be targeted for all to use. Easy and simple.
No more fraud with advertising on the internet will be around. They will just have to come and see why over 55,000+ have joined this in 6 months. FREE1UP is Rocking the Internet World.
$1.00 per Internet user? Is it that low?
I know of people who make $millions from adsense, so I am dissapointd that it is this small. Besides, it does hot up the market share argument.
For me have been astonisment- if Google will be donation to one dollar on my banking account. However,a lot of the letters,which I was writing in the course 5 years to be very good selling. I understand that my earning fee have not vanish as simply,but for me is a big difficult receive own money.
I have need get a present to one dollar from GOOGLE.
Really i started with google but i don,tknow how google pay for search engine ,we need map for discriptions
Really i started with google but i don,tknow how google pay for search engine ,we need map for discriptions
Google is a very smart company and I'm sure it's going to double the profit making at this moment. As far as the statistical analysis of these figures, I'm sure they are touching the minimum limits...
Hello Emre, and community,
I am looking for assistance with search valuation.
Our MyWebDNA technology has been independently validated and confirmed to produce the following result:
A Google user is 14% more likely to click on a search link with a high VortexDNA score than on a link with a low one.
That 14%, though, is an increase in relevance, not clickthroughs. We believe that the 14% would subsequently generate a 3% increase in clickthroughs for Google. A 3% increase in clickthroughs would result in $300 million in revenues, according to one brand of math.
Rather than commit myself further, though, I'll put it out there for discussion: any thoughts on what a 14% increase in relevance might be worth?
Emre, I posted a similar comment on Don's original article, and referenced you in a blog post today.
Thanks and best regards,
Kaila Colbin
VortexDNA Blogger