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Sunday, May 27, 2007

Google Poised To Disproportionately Increase Revenue

Dan Dodge concludes, 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.

The world internet population is in excess of 1.2 B internet users and Google leverages the internet through search and adsense – of 50% of internet search happens through Google, and a portion of revenue coming through adsene.

We are going to see the explosion of internet moving forward. Jakob Nielsen points out that with usability scene improving, in the long run, every time companies increase the value of their online businesses, they end up handing over all that added value to the search engines. Any gain is temporary; once competing sites improve their profit-per-visitor enough to increase their search bids, they'll drive up everybody's cost of traffic. This is great news for search engines: they can double their income by doing nothing. Google is improving its market share consistently – we are likely to see a disproportionate share of revenue growth moving forward – it is likely that Google’s revenue growth would rise faster than the rise of its search marketshare. That’s why it is interesting to see Microsoft beginning to focus on advertorial market in an aggressive manner – after all revenue streams in the internet revolve around search and advertorial market. Having lost the search game, Microsoft wants to atleast build some revenue streams – one will have to wait & see how this would pan out. But one thing is clear : short of a technological shift in the internet/search technology, google is poised to vastly improve its revenue as the internet begins to reach more and more people around the world.

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