However, the bigger hammer of pushing organic content down is pretty much done. Just about any query that seems like it can be monetized results in more ads than content above the fold.
I would guess that sometime soon their ad revenue growth slows down to match internet growth.
As an aside, here's what Fortune magazine said about the Coca Cola Company in 1938:
“Several times every year a weighty and serious investor looks long and with profound respect at Coca-Cola’s record, but comes regretfully to the conclusion that he is looking too late. The specters of saturation and competition rise before him.”
From http://www.mdaniels.com/coca-cola-on-market-saturation-and-c...
- Revenue continues to be mostly ad driven
- They have been able to maintain growth that exceeds internet growth by having big levers...like showing more ads above the fold than they used to.
- I don't see any more big levers, just smaller ones, and "not free" ones. You can see their traffic acquisition cost is up.
The Internet may have tapped out in terms of number of people online (although even this I doubt; last I heard it was something like 3B Internet users, out of 7B total humans), but it still has a long way to go in terms of usage. Think of all the senior citizens who still watch the evening news, read the newspaper, go shopping in a physical store, decide where to eat by walking around, call up contractors by looking in the yellow pages, and decide which financial products to use based on which sales rep cold-calls them. My mom still does all of the above. As a Millenial, all of those activities have moved online for me.
I used to work for Google Search, and my position allowed me to have access to their query metrics. We'd listen to the earnings calls and laugh at the Wall Street analysts whose questions indicated that they assumed that # of queries was static, something we knew wasn't true.
Goog is valued at $700 BILLION right now. Will it be $1.5 Trillion in 5-10 years?
That's what happens when you get a technological revolution - the new means of production completely replaces the old. Imagine you were born into a wealthy Virginia plantation in 1830. Your mental model of the world is that cotton is king, wealth comes from working and owning the land, slavery is just how things are done, traveling beyond your plantation is prohibitive in time and cost, and your family is part of the landed aristocracy and secure in its social position. If you live to the ripe old age of 90 and die in 1920, you will have seen cotton become just another commodity, inconceivable wealth generated by newfangled machines that you could not have imagined, over half the population move to tenements in cities, people crossing the Atlantic in a matter of days, slavery outlawed, and your plantation burned and its title stripped from you and divided amongst your slaves.
And yeah, if the state survives, it will absolutely get involved. I would bet even money that the concept of a nation state fractures and starts to disintegrate within 20 years, though. The idea of a nation-state as it currently exists is a construct of the Industrial Revolution: the new technologies being developed benefitted from vastly increased scale and social organization, and so those populations that organized themselves as nations were able to defeat those that did not in battle. (Note that in the example above, the "state" was Virginia in 1830 but the United States in 1920; the U.S. of 1830 was organized as a loose confederation of states while that of 1920 was organized as a nation-state with a strong central government, and it took the "Union" defeating the "Confederacy" to bring that about.) I don't know what sort of social organization the information age will demand, whether it'll be city-states in a trade confederation or corporate feudalism where you pledge loyalty for your employer in exchange for protection, but it'll likely not be the nation state as we currently know it.
- Number of people connected to internet grows by 7%
- Average income of existing users grows by 2%
- Amount of time on internet spent by average user grows 7%
- Number of ads served to an average user per hour of internet time grows 2%
- Effectiveness of an average Google ad grows 9%
Total growth in Google revenue: 30%
Also keep in mind that most of Google's costs do not need to rise in line with revenue - it wouldn't take twice as many employees to serve twice as many ads. Including dividends, I would put the chance of a $1.5 trillion valuation in 10 years at 60%
Uh, no. I specifically called out the relationship to internet growth. Their growth has been exceeding it, I predicted it would slow down to match.
"I would guess that sometime soon their ad revenue growth slows down to match internet growth."
https://en.wikipedia.org/wiki/List_of_Coca-Cola_brands
What is Google gonna buy, especially now that EU antitrust is on their tail?
I recently visited my brother and he was talking about crowdfunding a project of his..guess what? YouTube showed me ads for crowdfunding platforms later that day, probably because I was logged into his wifi.
It sure feels a bit creepy sometimes!
A few days later one of these friends calls me asking how is it possible that he's seeing Bitcoin ads everywhere after we talked. I also thought that's Baader-Meinhof happening, but it doesn't make ads any less creepy.
This is all suppositions of course, I have no idea how it works. But I've tried this experiment with my gf once:
We both opened Instagram and started talking about a product class that we never saw ads for there, say like shampoos. We even mentioned a few brands and then waited for the ads to hit us. They never did.
EDIT We use iPhones
Nice, let's call this technique "advertisement by osmosis" :-)
It's a particularly bad case of opaque naming, because even knowing about the terms that make it up gives you no clue what it means (since it doesn't reference the Baader-Meinhof Gang, but instead presumably the experience of the person who coined the term around the time they first encountered the name “Baader-Meinhof Gang”.)
Further shortening to “Baader-Meinhof” (perhaps a result of mistaking the name for being named after the discoverers, which would be less opaque, like the Dunning-Kruger Effect, where familiarity with the work of the researchers in question makes the term less opaque) actually makes the term worse, since then it seems like a direct reference or analogy to the group.
I'm guessing at least one person in the room was on android and syncing with gcal.
For me, it happened with my Google Now feed and the Netflix show Riverdale (not my cup of tea, but my wife was watching it).
So I'm inclined to think Google is not optimising their ads.
This episode has made me think Google should have a "Human vs AI" internal competition: Take a specific Google end user, and see whether a Google employee can tweak that user's ads to get a better conversion rate. If so, the employee gets a big bonus and the engineering team get to know where their ad algorithm is lacking.