Google's Search Revenue Share is Now 93% & Google Is Hiking Prices for Captive Publishers

In the last year, Google has taken almost a third of the search revenue market share that they did not have before -- per recent company reports.

• In other words, Google's search revenue share increased from 90% in 4Q08 to 93% in 4Q09.
• To understand the math, supporting numbers,and links behind this estimate see the end of this post.

Google's 4Q09 earnings release also shows Google is exercising its market pricing power at the expense of web publishers by reducing the revenue share percentage shared with web publishers (i.e. raising prices) because web publishers have no where else to go; please see the illuminating analysis by Amit Agarwal of Digital Inspiration blog who deserves credit for this important insight.

• Not only does his analysis show that the revenue Google shares with its web publisher "partners" is going down from 75% at the beginning of 2009 to 72.1% at the end of 2009, these percentages actually understate the price increases imposed upon web publishers because the data masks that the total numbers involve more publishers getting relatively smaller pieces of the overall pie.

So what are the takeaways here?

First, Google is indeed a monopoly and only growing more dominant quickly.

Second, Google is abusing that dominance by raising prices on web publishers that have no real competitive alternative.

Third, these facts make it more likely that:

• The DOJ will eventually approve the combination of Microsoft and Yahoo's search businesses;
• The DOJ will take a hard line on the Google Book Settlement; and
• The FTC will take a hard line on Google's proposed acquisition of mobile advertising leader, AdMob.

Worksheet for 90-93% share estimate:

The evidence of this massive increase in market share can be found in the 4Q09 company reports of Google, Yahoo, and Microsoft, and it is straightforward and not hard to derive. See my analysis below.  

• Google's 4Q09 $6.67B dominant share of search advertising revenues increased $970m or 17% (4Q09/4Q08).
• Yahoo's 4Q09 $370m #2 weakening share of search advertising revenues decreased $66m or 15% (4Q09/4Q08).
• Microsoft's search advertising revenues are much smaller, roughly half of Yahoo's and they are obviously falling substantially as well. Microsoft's online advertising revenues, (of which search is only a portion) were $581m in 4Q09 and decreased $285m or 33% (4Q09/4Q08).  
  • For comparative purposes, if we assume Microsoft's search share of its online business is the same as Yahoo's search share is of its business -- ~21%, this rough proxy of Microsoft's search advertising business would mean Microsoft's search advertising revenue proxy decreased $59m or 33% from $181m in 4Q08 to $122m in 4Q09.
• All other publicly traded entities search advertising is provided by Google on an outsourced or syndicated basis, so the analysis for all intents and purposes involves three companies: Google, Yahoo and Microsoft.   

Putting all this together:

• 4Q08 search advertising revenues of Google $5,700m, Yahoo $436m and Microsoft ~$181m equal ~$6,317m.
• 4Q09 search advertising revenues of Google $6,670m, Yahoo $370m and Microsoft ~122m equal ~7,162m.
• 4Q08 Google's search advertising revenue share is 5,700/6317 = 90% revenue market share.
• 4Q09 Google's search advertising share is 6670/7162 = 93% revenue market share.