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Google's Revenue Is Not All Search-Derived (AKA Gmail Isn't Search)

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So Gmail ads might be bigger than search ads for Google, we learn in this New York Post story: You Got Mail (& Ads). How about an important correction? Almost all of Google's revenue does NOT come from placement on its search engine.

Go back to my write-up on the Google IPO filing: Google IPO To Happen, Files For Public Offering. See the chart on ad revenue sources about mid-way down. In 2003 and 2004, the share of revenue earned off the Google site itself rose dramatically. As the article explains, this was almost certainly due to growth in AdSense contextual revenue.

In short, rather than search placement making up nearly all of Google's revenue, it seems closer to making up about three-quarters of it. And AdSense is nearly two years old now -- so the quote about Google realizing they need to do more than search overlooks entirely the fact that contextual ads ARE NOT SEARCH.

Gmail ads, by the way, are simply contextual ads. It is new that Google now has an entirely new distribution area for these ads through Gmail, and in a place where it needn't share revenue. But Gmail placement is simply an extension of Google turning the entire web into billboards for its non-search advertising that began in 2003.

In some related tangents, nice comments on John's blog about how one SEM firm finds AdSense contextual placement not performing as well as AdWords but is positive on contextual offerings from other players: Fathoming Context: Much More to Come.

And, a nice catch by Andy Beal, a CNN article with the first Google comment I've seen about the entire browser issue (No plans to "reinvent the wheel," which certainly doesn't rule the idea out).

The article suggests that when some firms begin coverage of Google today, that -- along with the need to report third quarter earnings next month -- will make Google more open about plans and activities. Article here: Google's veil of secrecy.

Perhaps. Even if so, will Google break out search revenues from contextual or continue to play the game of mixing the two together, which confuses everyone. Nor are they alone in this, as this recent blog entry from me explains: Search Spending Continues To Rise -- But Is Contextual Lumped In?.

Want to discuss? Join our forum thread: Will emails ads be bigger than search ads?


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