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Projecting 2012 Google Mobile Revenues: $4 or $6 Billion?
On Google’s Q3 2011 earnings call CEO Larry Page casually mentioned that Google had a mobile revenue “run rate” of more than $2.5 billion. On the Q4 earnings call, just last week, Google announced a $5 billion annualized “run rate” for display advertising (including mobile). These two pronouncements have led to several financial analysts to speculate aggressively about Google’s mobile ad revenues in 2012.
In October last year, after the Q3 call, I wrote that if Google’s current rate of mobile ad revenue growth continued that the company could see a “run rate” of $6.25 billion. However I argued that it would likely be closer to $4 billion. I reiterated that figure in my December 12 Mobile Predictions for 2102 article at MarketingLand.
In January Piper Jaffray analyst Gene Munster asserted that Google mobile revenues “could top $4 billion.” And this weekend TechCrunch is reporting that Cowen & Company analyst Jim Friedland estimates (based on a per-device revenue calculation of $7) that Google will make $5.8 billion in mobile ad revenue this year.
Accordingly the Google 2012 mobile revenue “run rate” range is probably between $4 and $6 billion (globally). In the US the figure would probably be just over half the number.
Most Google mobile ad revenue appears to come from paid search. On the Q3 call, Google SVP Nikesh Arora said this about where mobile ad revenues were coming from: “Larry mentioned $2.5 billion as a run rate. Our revenue growth continues to accelerate even in mobile, driven primarily by mobile search” (my emphasis).
Click2Call is a big driver of revenue for Google as a subset of mobile paid search.
Right now there are more mobile “page views” than display ads to fill them. That may depress the value and pricing of mobile display inventory. Indeed, many analysts on the Q4 Google call were asking whether mobile was partly responsible for a decline in Google’s CPC rate. However Efficient Frontier said that mobile click prices were higher and conversion rates were lower on mobile devices:
Mobile and tablet CTRs are higher than desktop campaigns. CPCs are higher on mobile than tablets at 108% and 85% respectively than Desktop. Conversion rates on mobile and tablets are still lower than desktop conversion rates at 31% and 96% respectively representing the need to continually optimize mobile platforms for higher performance.
Of all the mobile ad networks Google is the largest, generating the most revenue with its combined search and display assets. In terms of mobile search Google is almost the only game in town, with roughly 97 percent of browser-based mobile search query volume.
As it grows, more than 90 percent of mobile search ad revenue will flow to Google. However display is something of a wild card in the Google mobile revenues guessing game.
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