Google has 93.7% Share of U.S. Search Revenues & Is Rapidly Taking Share

With reports of the FTC's looming antitrust investigation of Google, it is highly-relevant that Google now has ~93.7% of U.S. revenue share of search advertising and that Google has taken ~26% of the search advertising revenue share that it did not have a year ago.

• Google continues to relentlessly gobble up massive search advertising revenue share from its only significant competitors, Yahoo and Microsoft (which have combined forces in search in the last year), in part because:
  • Google's relevant search revenues are 24x bigger than Yahoo's and 39x bigger that Microsoft's; and
  • Google is growing its huge search revenue base so much faster -- +27% to Yahoo's -19% and Microsoft's +14%.
    • (These revenue share calculations are relatively easy to do -- they are explained in detail at the end of this post.)

Many do not realize that antitrust authorities already believe that Google is a monopoly, because the most commonly cited market share numbers in the media are from ComScore, which tracks share of searches not search advertising revenue share.

• Antitrust authorities appropriately are focused on competition for customers.
• Since users do not pay for search, but advertisers do via advertising, the relevant competitive market is search advertising -- not search.
• And Google's share of search advertising revenue share is over 90% and growing by any estimate based on publicly available numbers.

In sum, the FTC and/or the DOJ clearly have the baseline data proof of a search advertising monopoly to launch a formal antitrust investigation.

• Thus the purpose of an FTC (or DOJ) antitrust investigation would be to determine and prove if Google gained its monopoly by illegal anti-competitive means, i.e. pro-actively preventing competitors from being able to compete by a one or more of a variety of potential anti-competitive practices.
• For a one-page summary of Google's alleged anti-competitive practices see page 23 of my Googleopoly VI powerpoint presentation which may be the most comprehensive publicly-available analysis of Google's anti-competitive behavior.

In a word, Google is obviously a monopoly; the open question for an FTC (or DOJ) investigation to answer is has it illegally abused its market power?

*** How was Google's 93.7% U.S. revenue share  calculated?

• Google's 1Q11 $8.58b dominant share of search advertising revenues increased $1.81b or +27% (1Q11/1Q10).
• Yahoo's 1Q11 $357m share of search advertising revenues decreased $83m or -19% (1Q11/1Q10).
• Microsoft's 1Q11 search advertising revenues are much smaller, roughly half of Yahoo's. Microsoft's online advertising revenues, (of which search is only a portion) were $648m in 1Q11 and increased $82m or +14% (1Q11/1Q10) from $566m in 1Q10.
  • 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 -- ~34%, this rough proxy of Microsoft's search advertising business would mean Microsoft's search advertising revenue proxy increased $28m or +14% from $192m in 1Q10 to $220m in 1Q11.
  • All other publicly traded entities search advertising is provided by Google on an outsourced or syndicated basis, so this revenue share analysis for all intents and purposes involves three companies: Google, Yahoo and Microsoft.
• Putting all this together:
  • 1Q10 search advertising revenues of Google $6,770m, Yahoo $440m and Microsoft ~$192m equal ~$7,402m.
  • 1Q11 search advertising revenues of Google $8,580m, Yahoo $357m and Microsoft ~220m equal ~9,157m.
  • 1Q10 Google's search advertising revenue share was 6,770/7,402 = 91.5% revenue market share.
  • 1Q11 Google's search advertising share is 8,580/9,157 = 93.7%revenue market share.
• In sum, the best metric for gauging Google's true monopoly position and market dominance is search advertising revenue market share, which is ~93.7% according to the calculations and assumptions openly presented above.
  • This also means that in the last year Google has continued to take massive revenue share, i.e. Google has taken ~26% of the search advertising revenue market share that it did not have the year before -- per company reports.
    • (+2.2% increase in Google U.S. revenue market share 1Q10 to 1Q11 divided by 8.5% the market share still held by Google competitors in 1Q10 (2.2/8.5) equals ~26%.)