August 10, 2012 · 0 Comments
A few weeks ago I suggested that Google’s Motorola Mobility acquisition was about more than just the patents—that in fact Google’s revenue growth was feeble in Q2 2012, once you removed Motorola from the numbers.
That got me thinking about why Google’s core ad business isn’t growing like a forest fire any more. In part, of course, it’s the Big Numbers problem: It’s harder to grow percentage digits when you’re an $11 billion per quarter business: Even if you add a few hundred million dollars it doesn’t move the needle.
These two charts (below) illustrate that scenario. They imagine a world in which Facebook never existed, and all the ad dollars on the social network went to Google instead. (There are, obviously, a huge number of assumptions here but let’s just run with it.)
In the first chart, the two columns represent Google’s current ad revenues (red) and Google’s ad revenues with Facebook’s ad revenues combined (pink):
This scenario suggests that Facebook has syphoned about $1 billion in ads from Google in just the last quarter. Since Q1 2010, $6.8 billion in ad revenue went to Facebook that could have gone to Google.
Now here’s the growth story, in terms of sequential quarters:
It’s a little more mixed. In some quarters Google grew more aggressively on its own when it didn’t have to beat tough comparables from the imaginary Google/Facebook combo. But in most other periods it looks like Facebook is stealing up to a whole point of percentage growth from Google.
Here’s the year-on-year picture:
The visuals are less clear but the same thing appears to be true: Facebook is taking 1-3 percent points of growth off Google’s topline.
Disclosure: The authors owns stock in both Facebook and Google.