Google is an advertising company
I've said it before, and I'll say it again: Google is really an advertising company, not a search engine company. Like I said in my AdSense book, “Google is one of the major players in online advertising”. For proof of this, just take a look at Google's second quarter earnings release (PDF). In particular:
- 46% of Google's revenues ($630 million) came from partner sites, which includes sites displaying AdSense ads. Presumably the majority of those revenues came from the AdSense Premium sites, but I'm sure the “regular” AdSense revenues are nothing to sneeze at.
- Google paid $494 million to partners in revenue-sharing.
Now, 494/630 gives you 78%, so it looks like Google is only keeping 22% of the revenue it makes from advertising, but I'm not sure that the traffic acquisition costs can actually be allocated that way. Still, it looks like the majority of the ad revenue gets shared with its partners. Again, the Premium partners would get better payouts than the regular guys.
Any way you slice it, though, $630 million is a lot of advertising revenue! It's going to be hard for them to keep up the kind of growth they've seen, no doubt — at some point the ad revenues will flatten out.
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