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Google is really bad at monetizing content: $302m in 2008

Google is about as bad at making money from content as the newspaper companies its CEO Eric Schmidt loves to lecture.The numbers are hiding in plain view, and its astounding that no one has picked this up.
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Written by Tom Foremski on

Google is about as bad at making money from content as the newspaper companies its CEO Eric Schmidt loves to lecture.

The numbers are hiding in plain view, and its astounding that no one has picked this up. Google reported 2008 revenues of $21.8 billion.

- About 66% of revenues, $14.4 billion came from advertising related to search. This is Google's AdWords program where companies buy keywords related to search terms and Google serves up their ads on the search results page.

- About 31% of revenues, $6.7 billion came from advertising around content on non-Google sites; these are partner sites that run Google's AdSense program on their pages and it includes many media companies. This is where Google monetizes content, it serves up contextually relevant ads next to the content on a web page.

A look at profitability shows search advertising is 19 times more lucrative for Google than content advertising.

- In 2008 search ads produced a profit of about $5.65 billion on revenues of $14. 4 billion, a 39% profit margin.

- In 2008 content ads produced a profit of about $302 million on revenues of $6.7 billion, a 4.5% profit margin.

GOOG's financial trends show the company is shifting revenues away from content advertising to search advertising. Which makes sense since it is so much more profitable.

Since 2006 its content advertising has dropped from 39% of revenues to just 30%. In addition, total content advertising fell 3% in the most recent quarter, year over year, yet search advertising grew 9%.

Google's profit margin on content advertising is just 4.5%, many traditional media companies are much more profitable. And Google is moving away from content advertising because it can't monetize it effectively. Yet Mr Schmidt feels free to dispense advice to newspapers on how to be successful at something that Google isn't.

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