How Much Does Google Pay To Earn a Dollar?
By Anna Johnson on October 19th, 2010Want to know what Google pays for every dollar it earns? How about 31 cents.
According to Google’s recently announced 2010 third quarter results, the company made $7.29 billion in total revenues and incurred traffic acquisition costs of $1.81 billion.
Announcing the results, Google commented that traffic acquisition costs were 26 percent of advertising revenues, indicating that its advertising revenues during the quarter were $6.96 billion. In other words, Google spends 26 cents on traffic to earn a dollar of ad revenue. Based on total revenues, Google spends 21 cents for each dollar it makes.
Traffic isn’t the only cost Google incurs in earning revenues, of course. Google also incurs data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, amounting to $747 million or 10 percent of revenues.
Okay, so add another 10 cents and Google pays 31 cents for each dollar of revenue it earns. Or 36 cents for each dollar of ad revenue.
What happens to the cost of acquiring a dollar if we confine our analysis to Google’s AdSense revenue? Google’s total traffic acquisition costs in the third quarter of 2010 were $1.81 billion, while it paid $1.52 billion to its Google AdSense and other distribution partners. Therefore the bulk (84 percent) of its traffic costs go towards its Google AdSense advertising network.
Since Google’s AdSense partner sites generated $2.20 billion (30 percent of total revenues), then the amount Google pays for each dollar of Google AdSense revenue is 69 cents.
Incidentally, paying 69 cents for each dollar of AdSense revenue is consistent with Google reporting that it pays 68 percent of Google AdSense revenue to content publishers and 51 percent to search partners.
It would be great to know how much Google pays to acquire each Google user (and how much each user is worth), but we’d need to know the total number of Google users worldwide – not just traffic to Google sites, but also those in its Google AdSense network.
Unfortunately, my brief research into the number of Google users, yielded only old estimates that probably don’t apply today. You can bet, however, that I’ll be on the look-out for relevant and up-to-date user data when it comes out…
In the meantime, we can safely say that based on these figures – and, moreover based on its scale (in the billions of dollars) – Google has a VERY impressive business…
