During the earnings call last week after Google announced massive quarterly revenues ($9.72 billion), CEO Larry Page casually dropped the following remark about the company’s mobile business: “We’re also seeing a huge positive revenue impact from mobile, which has grown 2.5x in the last 12 months to a run rate of over $2.5 billion.”
Claire Miller over at the New York Times asks, “Can Mobile Search Be as Big for Google as Desktop Search?” Not in the immediate future, but longer term who knows?
If Google were to grow current mobile revenues by that same 2.5x annual rate again — there is every reason to argue mobile is accelerating and has barely penetrated the market — Google would be sitting on a run rate of $6.25 billion in mobile ad revenue next year. That scenario may be aggressive or “optimistic” but it’s not out of the realm of possibility.
My guess is something closer to $4 billion.
If Google’s annual mobile-ad revenue run rate is $2.5 billion that means the company is taking in about $208.3 million per month on average in mobile revenue. How does that break down? What percentage is US vs. international? What percentage is search vs. display?
Let’s make the crude assumption (for now) that mobile roughly parallel’s Google’s PC businesses. Display advertising in Q3 was a little more than 26 percent of revenues, while paid search was just over 69 percent of revenue. The category “other” is about 4 percent.
International revenues were 55 percent and US revenue was 45 percent. I suspect, however, the equation is flipped for mobile, with international ad markets being somewhat less developed than the US market. So let’s assume that US mobile revenues contribute 55 percent to international’s 45 percent.
If these assumptions are generally accurate, here’s what $2.5 billion in annualized mobile ad revenue might generally look like for Google (getting rid of “other”):
- Mobile paid search: $1.75 billion
- Mobile display: $750 million
- Total US (at 55 percent): $1.38 billion
- Total international (at 45 percent): $1.12 billion
I’m going to guess that the mobile display contribution is larger than its PC counterpart. It may be as high as 35-40 percent of total mobile ad revenue for Google.
During the earnings call Google wouldn’t reveal any specifics along the lines of my speculation above. But here’s what Google SVP Nikesh Arora said 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).
Another question: What percentage of mobile search revenues are being driven by Click to Call? (Click to Call is also available for the display network.) Google previously said that it had 500,000 mobile Click to Call advertisers and that the program was generating “millions of calls every month.”
To almost any other internet company $2.5 billion in ad revenue would be huge. To Google it’s still a small slice of the earnings pie. But it’s one that’s sure to keep expanding — very rapidly.