Posted by mobile phone:
Reading about the Microsoft-Yahoo! Bid in the FT this morning I got a reminder of a fact that I guess we all know and understand:
On the web the value is where the traffic is.
All the biggest web companies own their audience, with Google and Yahoo! Being the best examples. Similarly all the best recent startup successes have belonged to companies with massive traffic (admittedly with questionable monetisation) – I’m thinking about Skype, YouTube and Facebook.
The reminder I got from the FT was this:
“Google’s search engine and other ‘owned and operated’ wbsites account for 92% of its net revenue, up from 81% three years ago. ”
Clearly I believe in the possibility of building successful businesses on an ad network model. Our investment in buy.at is testament to that, and the evidence of Doubleclick and other companies also proves the point.
But the 92% figure in the above quote tells us where the big money is. That means Adsense on third party sites is less than 8% of Google’s revenues. (I can’t check that number today, but the FT is unambiguous.)
The big money follows the traffic.
And search is the biggest traffic play of all. I think that is the main driver behind the Microsoft move on Yahoo! Ballmer has been saying for a while now that search needs to get much better, but he has struggled to deliver much because he lacks the query volume he needs to innovate effectively.
This is the perspiration approach to innovation in search. Regular readers will know I think there might be mileage in relying on inspiration instead – particularly in the area of social search.
Ballmer’s belief in the need for innovation in search and the potential of the market strengthen my conviction in this area.