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May 31, 2008

The Google Money Machine - A List of Backup Plans

Ed: Domestic paid click rates have hit a wall. Search and international growth hide the same store limits. 

Here is a list of Google's backup inventory, if global paid click growth slows:

Google CTR Down Due To Click Area Changes

...After Google’s stock took a hit based on reports that Google ads are not being clicked on as much as they use to be, comScore is reporting today that the market may have got it wrong the evidence suggests that the softness in Google’s paid click metrics is primarily a result of Google’s own quality initiatives that result in a reduction in the n... TechCrunch 

FeedBurner Finally Rolls Out AdSense

from TechCrunch by 

Nearly a year after it was bought by Google for $100 million, FeedBurner is finally going to roll out Google’s AdSense as an advertising option for blogs and Websites that use its service to publish their feeds. FeedBurner will start with a few select publishers next week, and then expand the option to all of its customers soon afterwards.

What took them so long? That seemed to be the whole point of the acquisition.

FeedBurner intersperses ads in blog feeds between every few posts. Integrating with AdSense will allow for publishers to tap into contextual ads for their feeds, in addition to the ads that FeedBurner already sells.

Hopefully, Google also found the time to integrate its automated back-end payment system into all FeedBurner accounts. Until recently, FeedBurner was still sends out paper checks to publishers participating in its ad network. At least, that’s how TechCrunch gets paid.

Google’s Home Page Could Get Them In Trouble With The Law (GOOG)

... We're also not sure how that makes Google any more or less interested in privacy than any of its competitors. But this isn't the only time that Google's been stubborn about keeping its front page aesthetics: More signifcantly, we figure they could be generating another $1 billion in annual revenue with just a handful of tasteful display ads.

Google's YouTube: Not Such A Money Pit After All?

/images/skateboard-dog.jpgThe old wisdom: YouTube (GOOG) dominates Web video but can't make any money from it. Forbes' wisdom: YouTube still doesn't make much money, but a bit more than people think.

The mag says YouTube will make $200 million in revenue in 2008 and $350 million in 2009. These are unsourced numbers, but also not denied by YouTube head of content partnerships Jordan Hoffner, who participated in the story.

If true, that about doubles everyone else's revenue estimates for YouTube, including the widely-quoted $90 million estimate from Bear Stearns analyst Bob Peck or Morgan Stanley analyst Mary Meeker's $75 million to $189 million estimate. How does YouTube get there?

  • Front-page YouTube ad: $175,000 per day plus a commitment to spend at least $50,000 more on YouTube or Google.
  • Branded YouTube channel: $200,000 apiece.

Even if Forbes is right and YouTube makes $200 million this year, let's step back a minute and consider what that means: YouTube accounts for 73% of all visits to video sites (Hitwise) and, depending on who you believe, serves either 48% (Nielsen) or 38% (comScore) of all video on the Web. Meanwhile, eMarketer estimates $1.35 billion will be spent on Web video ads in 2008. So even though YouTube serves up the most videos, most of the money is going elsewhere -- professional video sites like Hulu, TV network sites, etc.

If you look at YouTube’s numbers, one thing is clear: It completely dominates online video. YouTube accounts for 37 percent of all videos watched on the Internet and attracts about half of the audience, according to comScore. (And if you add in Google Video, that brings the total to 38 percent of videos watched). The No. 2 player, Fox Interactive Media (i.e., MySpace), accounts for only 4.2 percent of videos watched. And as the Forbes chart above shows, YouTube is still growing at a faster pace in terms of traffic than Google overall.


Yet when it comes to turning that market dominance into dollars, YouTube is holding back. Forbes estimates that YouTube will make $200 million in revenues this year, and $350 million next year. Although it never explains how it gets to those numbers, and they are higher than some Wall Street estimates, they are not unreasonable. (The home page alone is $175,000 a day, plus a commitment to buy $50,000 in Google ads elsewhere—that’s about $80 million a year right there. Plus each branded YouTube channel goes for $200,000. If someone from Forbes can lay out the math in comments, though, that would be helpful). Google does not break out YouTube’s revenues because, even at $200 million, it would be less than one percent of the company’s total.

emarketer-video.gifA $200 million business going to $350 million is nothing to sneeze at. But if you believe eMarketer’s estimate that online video advertising will reach $1.35 billion this year, that would mean that YouTube’s share of video advertising dollars will only be 15 percent (less than half of its share of videos watched).

This gap could mean one of two things. Either YouTube is unable to make money from a large portion of its user-generated video inventory (advertisers want to stick to the home page and the safety of their own channels). Or YouTube just hasn’t turned on the money-gushing hose yet. It has built an increasingly unassailable market dominance under the shelter of Google’s wing without the need to maximize revenues. That attitude, though, is obviously changing, with YouTube nowpushing AdSense for video and spreading that wealth with more content partners.

Which one is it?

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Google Confirms Plans to Put Display Ads on Google.com

Posted May 09, 2008 10:15am EDT by Henry Blodget in Internet
From Silicon Alley Insider, May 9, 2008:

The most pressing question for Google (GOOG) shareholders is what product will drive the company's next growth boom as the search product cycle ends. Most likely candidate? Not sexy mobile or video. Just boring old display ads.

Google has been serving display ads on other sites for years, and the DoubleClick acquisition will accelerate that effort. Third-party display ads will only make a small contribution to the bottom line, however (10-20 cents on the dollar). So the key question here has been whether Google would deign to put display ads on its own sites.

We've argued that a full load of display ads on Google.com could add $3-$4 billion in annual revenue. Many SAI readers considered this estimate too optimistic, and it might be, at least over the next couple of years. But $1-$2 billion seems easily achievable.

Most importantly, Google itself is now talking explicitly about display ads on Google.com. It will start small -- placing display ads on, for example, image search results. But we imagine that display ads will gradually spread throughout Google.com over the next few years.

Here's Marissa Mayer (from Bloomberg, via John Battelle):

Matching graphical-display ads with image searches "represents a large opportunity, and there's lot of potential for advertising revenue there,' Marissa Mayer, a Google vice president, told Bloomberg Radio today. At the same time, the company must ensure such ads don't drive users away, she said...

"We haven't found a proper way to monetize image search to date,'' said Mayer, who oversees search products. "You may see us roll out an ads-image search in the future, but when we do you'll know that's because we found a way that ultimately enhances user happiness with the product.''

Google calculated in 2006 that it was giving up as much as $200 million a year by not including text advertisements with its image search results, and that figure has probably increased since, Mayer said. Trials showed that text ads drove people away from conducting image searches, and Google dropped that idea.

Display ads may work better with image searches because they seem more natural to people looking for pictures, Mayer said. While the company has done mock-ups of how it might present the ads, it hasn't tested them on users, she said....

"DoubleClick's strength in display advertising and their work in brand advertising we think ultimately may mean we'll have a better set of options in terms of image ads to run on image search,'' she said.

Billions of choices for growth.

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