Several readers weighed in on yesterday's post about how much revenue Google might generate if it started placing display advertising on its front page. These suggestions should help us refine yesterday's back-of-the-envelope calculation of $700 million to $1.1 billion.
One reader suggested, effectively, that the real number was zero, because if Google plastered the page with billboards, no users would ever come back. I agree that if Google made the page look like a NASCAR hood, people would get offended, but I don't think an ad or two would have a material impact. People hate the idea of change, especially when it involves moving from less-commercial to more-commercial, but if it is reasonable, they grumble and fuss and then get over it.
Another reader suggested that the numbers were too high because the other portals don't seem to be making this much--a very valid point. After stripping out Traffic Acquisition Costs, Yahoo! will generate something north of $3 billion in ad revenue this year, perhaps half of which is Yahoo!-based search. Although the front page is probably by far the biggest single contributor to display revenue and a meaningful contributor to overall page views, it is unlikely that it generates half or most of the company's display revenue. The same, presumably, goes for AOL and MSN.
Lastly, another reader suggested that a next step in Google's evolution will likely be Google Finance, Google Sports, Google Games, etc., and that we should think about the ad potential of this inventory as well.
So, factoring all this in, let's refine the thinking. If Google were to flick a switch and ad advertising to the front page it might generate somewhere in the neighborhood of $500 million a year. If it were to create channels and ad display ads to these as well, then the numbers would probably jump to at least $1.5 billion--most of which would drop to the bottom line.
Will Google do this? In my opinion, not until they have to. What would make them have to? A stumble in search and a subsequent shareholder revolt. Although both seem inconceivable given the recent search trajectory, things can change fast.
One could actually argue that they already sell that real-estate. To themselves! They have enough new products coming down the pipe that need to be promoted that there is no reason to sell the space to third parties in the near future. That kind of promotion can be done very effectively and yet non intrusively (like they do now with the properties listed on top of the input box). With the extra benefit of not offending anyone...
Posted by: Franck | November 17, 2005 at 12:40 PM
Henry, your calculations are wrong. It's all about branding. Google is a $100 billion brand. It's simple and clean. No banners. The magic of Google.
Posted by: Dimitar Vesselinov | November 17, 2005 at 11:14 PM
Correction: Google is a 112.59 billion brand.
“Google’s Stock price has just hit 400 for the first time I believe (currently it’s 403.18). It’s now valued at 112.59 Billion!!”
http://blog.outer-court.com/archive/2005-11-18.html#n82
Posted by: Dimitar Vesselinov | November 18, 2005 at 12:26 PM
Henry,
The real killer-app for this would be for Google to leverage your search history and place a small section on the homepage presenting advertisers most similar to your needs/interests. This could all be done dynamically and run through their normal systems, it's just another placement that would intelligently roll-up your last 10, 20, or 50 searches into some kind of profile.
That my friend, would be some solid cash.
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