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Is there any literature on this? I always figured Google and Facebook dominated the market so heavily everyone else was left with scraps (twitter, for example).

hanginghyena 10y ago
Actually, those guys make only a tiny slice of the value per click. Banner advertising is a low return game. Now...if you control the landing page and conversion funnel, basically delivering paid customers (vs. clicks) to a paying merchant, your value per visit goes up by a factor of 10 - 50. $.25/click vs. $10 - $30 (varies by product). Now imagine a company that launches dozens of offers with hundreds of variations and plows it's bankroll back into the best (most profitable) version (for years at a time). Yeah, $400MM is possible.
- paulsutter 10y ago
  You make a great point that advertising and ecommerce have no clear demarcation. Revenue for all online commerce is divided among layers of players performing specialized steps in the process, so any sizing of the online advertising market starts with an arbitrary distinction.
nostrademons 10y ago
Google annual revenue is $75B, Facebook annual revenue is $18B. The total Internet advertising spending this year is about $250B [1], and total advertising combined is $600B [2]. Google and Facebook combined account for only about 30% of Internet advertising, and 15% of total advertising. They get the lion's share of attention because they're the biggest players, but that doesn't mean they're the only ones, or even that they own a majority of the market. People in general are not well-equipped to process the idea of a long-tail, where disparate players collectively make up a majority of the market but aren't identifiable as a single organization. By the numbers, there's room for about 400 $400M companies in the space of the online advertising market not claimed by Google and Facebook, or alternatively, for 1.6M sole proprietors who each earn a six-figure income on ad revenue alone. Twitter, BTW, makes a very respectable $2B+/year in revenue. Their problem is that their cost structure assumes that they're going to beat Facebook; they're supporting 4000 employees with fat salaries & option packages on that revenue (Facebook, with 8x the revenue, has only 4x the employees). If they fired half their employees they could easily be profitable. And the company in the article probably has no more than a few dozen employees, hence its massive profitability. [1] http://www.pwc.com/gx/en/industries/entertainment-media/outlook/segment-insights/internet-advertising.html http://www.pwc.com/gx/en/industries/entertainment-media/outl... [2] https://www.emarketer.com/Article/Advertisers-Will-Spend-Nearly-600-Billion-Worldwide-2015/1011691 https://www.emarketer.com/Article/Advertisers-Will-Spend-Nea...

hanginghyena 10y ago

Actually, those guys make only a tiny slice of the value per click. Banner advertising is a low return game. Now...if you control the landing page and conversion funnel, basically delivering paid customers (vs. clicks) to a paying merchant, your value per visit goes up by a factor of 10 - 50. $.25/click vs. $10 - $30 (varies by product). Now imagine a company that launches dozens of offers with hundreds of variations and plows it's bankroll back into the best (most profitable) version (for years at a time). Yeah, $400MM is possible.

paulsutter 10y ago
You make a great point that advertising and ecommerce have no clear demarcation. Revenue for all online commerce is divided among layers of players performing specialized steps in the process, so any sizing of the online advertising market starts with an arbitrary distinction.

nostrademons 10y ago

Google annual revenue is $75B, Facebook annual revenue is $18B. The total Internet advertising spending this year is about $250B [1], and total advertising combined is $600B [2]. Google and Facebook combined account for only about 30% of Internet advertising, and 15% of total advertising. They get the lion's share of attention because they're the biggest players, but that doesn't mean they're the only ones, or even that they own a majority of the market. People in general are not well-equipped to process the idea of a long-tail, where disparate players collectively make up a majority of the market but aren't identifiable as a single organization. By the numbers, there's room for about 400 $400M companies in the space of the online advertising market not claimed by Google and Facebook, or alternatively, for 1.6M sole proprietors who each earn a six-figure income on ad revenue alone. Twitter, BTW, makes a very respectable $2B+/year in revenue. Their problem is that their cost structure assumes that they're going to beat Facebook; they're supporting 4000 employees with fat salaries & option packages on that revenue (Facebook, with 8x the revenue, has only 4x the employees). If they fired half their employees they could easily be profitable. And the company in the article probably has no more than a few dozen employees, hence its massive profitability. [1] http://www.pwc.com/gx/en/industries/entertainment-media/outlook/segment-insights/internet-advertising.html http://www.pwc.com/gx/en/industries/entertainment-media/outl... [2] https://www.emarketer.com/Article/Advertisers-Will-Spend-Nearly-600-Billion-Worldwide-2015/1011691 https://www.emarketer.com/Article/Advertisers-Will-Spend-Nea...