Does Google make more money out of TechCrunch than Mike Arrington does?

Monday, April 6. 2009

Does Google make more money out of TechCrunch than Mike Arrington does?

TechCrunch's Mike Arrington rips into the Gruaniad piece by Henry Porter, after Porter had made the sacrilegeous point that Google was not necessarily totally benign. Sez Techcrunch:

Either he refuses to understand, or just ignores, the fact that Google is the one being bullied here. The company is making a simple profit/loss decision and apparently concluded that it can’t make money on the deal being offered. To suggest that Google must accept the deal is to suggest that Google needs to subsidize the music industry simply because it is a profitable company.

It’s ridiculous and only makes sense when Porter moves on his his argument to talk about newspapers, which provide his livelihood (with no discussion of the direct conflict of interest). He then spends paragraphs trying to tie Google’s success with the failure of newspapers. He never really gets there, but does say that Google is “delinquent and sociopathic” near the end, which at least keeps things interesting.

Let’s all be clear here. What Porter and [Billy] Bragg want is a subsidy from Google. A sort of welfare tax on a profitable company so that they can continue to draw the paychecks they’ve become accustomed to.

(Billy Bragg was the musician who pointed out that the hBebo founders made all the money when they sold, whereas musicians input all the valuable content)

Anyway, what I wondered was if Mr Arrington would wax quite so lyrical if he realised that he, too, was paying a tax to Google, and I then wondered who was making more money out of TechCrunch - Mr A, or Google?.

A quick back-of-the blog calculation.

(i) Google's total revenue last year was c $21.8bn

(ii) Alexa says that TechCrunch's total % of traffic over the last 3 months was 0.109% of internet users.

If we assumed that the % of users who view TC globally is roughly similar to the % of TC watchers in the Googleverse of users (both being very large aggregators of users) that reached TC via a Google search, then that gives Google a (0.109% x $21.8bn) = c $23.5m revenue stream from TC

What is TC's actual revenue? It is reported as c $200,000 per month, which gives it a revenue of c $2.4m annually.

In other words, if all hits to TC are via Google, then Google is making 10x more money than TC is. Or, put it another way, if Google has only 10% of the traffic going to TC via its site, it makes the same amount of money.

Another way of looking at this is bottom up - Don Dodge once had a go at calculating the average revenue per search by dividing Google revenue by reported number of searches (see here) and came up with a figure of $0.19 per search.

That translates to a CPM of roughly $190 for Google, vs a CPM of probably c 1/10th that for TechCrunch.

Again, clearly not all pages to TC will go via Google, but if only 10% do they are making roughly the same money out of TC as Mr Arrington is.

(Update - just to explain following a few comments on-net and off, this post is in the nature of a thought experiment around what you have to believe for income parity. What struck me when I did it was just how much money Google potentially is making from heavily trafficked sites, assuming of course large site pageviews adhere to the overall mean)

That's quite a tax in fact. In the Olde Economy, when one does PR for a company, as Mr A seems wont to do for Google, they pay you. In the New Economy, it seems, you pay them......(or maybe Google do pay TC for PR, it's Mr A's way of clawing the Googletax back

)

I wonder if we may see Mr Arrington and Mr Bragg on the same stage someday soon

Posted by Alan Patrick in Dis - Aggregation at 08:56 | Comments (5) | Trackbacks (0)

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The hilarious thing is that sooner or later a deal will be done, and at that point all the "My Google Right Or Wrong" crowd will talk about how great Google is for it.

Always remember - this is about Tribe, not rational decisions. The only rational players are the companies themselves, and their rationale is always simple: Make the most money you can.

#1 Ian Betteridge (Homepage) on 2009-04-06 12:06 (Reply)

I'm confused by the logic here.

Not all people who get to TC via Google are not making Google any money, unless they are clicking on ads for Techcrunch.

Google only makes revenue when an ad is clicked. If they search for something that brings up a TC link, aren't they likely to either click on the link OR click on a relevant ad, not both every time?

I think the revenue Google makes from searches that lead to a specific site is a lot lower than your calculation

#2 Rachel (Homepage) on 2009-04-06 13:15 (Reply)

The assumption that TC viewers use Google to find the blog might be a lapse: among reader, the blog is a very well known brand, and those users know how to use bookmarks. In addition to that, I wouldn't be so sure that people who end up on TC from Google click on ads — although many do that through tech-related words, and many of those, have decent clickthourgh and non negligible rate, especially hardware.

What makes you comparision interesting is that TC is a rather well valued property (many relevant ads) so a larger, equivalent estimate might reveal that Google makes more money then all Web writers. And that would be newsworthy.

#3 Bertil Hatt (Homepage) on 2009-04-06 13:29 (Reply)

@Rachel: It's a little more complicated than that, because you have to factor in behaviour and predeliction towards clicking on ads, plus the overall balance between PPC and CPM in the ad market.

First, when it comes to PPC, remember that publishers (or at least their CFOs) really don't care about whether you read their content or not. Content is just the honey - they want you to click on an ad when you've read it. So, unless you're being paid by CPM rather than PPC, any traffic that doesn't click is a cost to you, not revenue.

Google presents a series of results and some ads. At this point, the most-likely prospects for clicking on advertising will click on a Google ad. What they won't do is come to your site and then click on an ad there. Instead, you're left with the traffic that's least likely to click on an ad at the end of seeing your content.

So, effectively, Google is using your honey - and you're not getting the click.

Basically, Google works because it ensures that it gets first-shot at the customer. It creams off the people most likely to click on ads, ensuring that it doesn't have to share any of the revenue with the publishers - the people who's honey they're using.

Now this is fine, as long as publishers sell at least a decent chunk of their ads on a CPM basis. That way, they get a bit of money no matter what customers do when they get to the site.

But CPM will get less popular as companies move their ad budgets away from brand awareness campaigns towards driving direct response - a trend which will accelerate in the recession, as companies look to show real, direct ROI on their ad spend (while overall online ad spend went up in 2008, CPM was down).

That's the background. The key thing is that the discussion is being framed as "Google Good, Newspapers Bad", when in fact it's really just business to both of them. You need to understand the posturing purely in terms of money - the technology (and supposed ideology) is all just smoke and mirrors.

#4 Ian Betteridge (Homepage) on 2009-04-06 14:17 (Reply)

@Rachel - I'm using Don's top level numbers: divide revenue by total pages served and you get a mean revenue per page, thus on average any trip to TC via Google will, on average, take that $0.19 into the bag.

Ian is right when he says that the specific case may differ, my blog-packet assumption is that TC is a big enough part of the blogosphere so as to approach the mean.

@Bertil, you're right, which is why I looked for the % of (average) pages that would have to go via Google to equal TC's Ad revnues.

#5 alan p on 2009-04-06 16:45 (Reply)

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