January 31st, 2006
Google financials show it is shifting revenue from its partner media sites
The key numbers in Google’s latest financial results are TAC (Traffic Acquisition Costs), and the revenue from its own sites, compared with revenue from network partner sites such as the New York Times.
GOOG has generally maintained a 50/50 split between revenue from Google sites and revenue from third-party Google network sites. But over the past year it has begun moving more ads through its own sites where it doesn’t have to share revenues with partner sites.
A lot of media companies, such as the New York Times feature Google ads prominently on their online sites. In some cases Google hands over as much as 100 per cent of the revenues to key partners. It does this to gain distribution and it is also able to grab the customer relationship through its "advertise on this site" feature.
Tuesday’s Q4 GOOG report shows Google sites generated revenues of $1.098bn, an increase of 24 per cent from Q3.
Network sites generated $799m, an increase of 18 per cent from Q3.
(In Q3 revenues from Google sites grew 20 per cent as revenues from Google’s network sites grew 7 per cent.)
TAC costs in Q4 decreased "reflecting primarily the continued shift in our revenue mix from Google network revenue to Google-owned site revenue."
This is bad news for media companies that are already hurting badly from the efficiency of search engine marketing, and were at least earning some money from being members of Google’s AdSense advertising network.
It is also bad news for the many VC funded web service startups whose revenue models are based on being honey pots for Google AdSense clicks.
Tom Foremski reports on the business and culture of Silicon Valley at the intersection of technology and media. He also writes at Silicon Valley Watcher. See his full profile and disclosure of his industry affiliations.
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| 02/01/06
