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Part of the gap can be explained by: (1) Increasing income of internet users, (2) The average user spending more time on the internet, (3) Google getting more e

by MarkMc 9y ago

Part of the gap can be explained by: (1) Increasing income of internet users, (2) The average user spending more time on the internet, (3) Google getting more effective at matching advertisers with Google users

tyingq 9y ago
I believe that, but nobody other Google really knows how much of the gap is things that are either good/neutral for consumers, and how much of it isn't. Certainly some part of it is pushing the organics down, long forced ads in front of videos, etc. However, investors are expecting that continued ~20% YoY growth...which will further widen the gap. I don't see how that's possible without doing more things that are bad for consumers.
- MarkMc 9y ago
  I'm actually a Google shareholder and yes I do expect continued 20% growth, at least for the next decade. But increasing the ad/content ratio is only a small component of that growth. Here are my estimates for the major components of Google's revenue growth over the next 10 years: 1. Number of Google users * avg income per user grows 3% per year 2. Time spent on internet by average user grows 5% per year 3. Ad/content ratio gows 3% per year 4. Google ad effectiveness grows 8% per year
  - tyingq 9y ago
    Do some compound interest calculation on some of those and you'll see the problem. Assume they've been doing it for years and years already. There is a hard cap on some of those. Especially ad/content ratio and CTR. At some point, you're done. For many queries, ad/content ratio is already maxed. Like, how do you optimize this further? It's a 2 page ad already, with links out to other ads that pay google. https://imgur.com/a/hAFas https://imgur.com/a/hAFas Also, there is a point where that sours. Some consumers will bail once the ad overhead is too much. Either via ad blockers, or the next "Google".
    - MarkMc 9y ago
      I agree Google's revenue will not grow 20% annually forever, but I don't see any problem with my 10-year projection. When I watch YouTube I see about 30 seconds of ads for every 10 minutes of video content. I could easily see this rising to 60 seconds over the next decade. And the ads I do see are not very well tailored to me: I see cat food ads even though I don't have a cat. I see gambling ads even though I've never gambled in my life. I see ads for a sit-stand desk even though I already bought it. I never see MacBook Pro ads even though I put one in my shopping cart on Apple's website 6 months ago but did not purchase it. (Google has all my photos, all my emails and my location history for past 4 years, so Google should know all this). Google has a long way to go to maximize the effectiveness of their ads.
majewsky 9y ago
> increasing income of internet users If anything, the average income of internet users is decreasing. The majority of people in the rich countries have been online since the 90s and early 2000s. Everyone who's been joining after that is most likely from an underdeveloped or developing country.
- MarkMc 9y ago
  Good point - I missed that. Your comment reminds me of a story [1] about how a Google engineer once significantly reduced the size of the YouTube video page but average load times got worse. Turns out they were getting lots of new users from third world countries with much worse connection speeds. I also wonder to what degree this effect counters the argument that average incomes in Australia and US have not risen for decades [2]. Perhaps native-born people see their incomes rise, but the average is dragged down by immigrants who typically have lower incomes. [1] http://blog.chriszacharias.com/page-weight-matters http://blog.chriszacharias.com/page-weight-matters [2] http://www.rossgittins.com/2017/09/sorry-but-using-migration-to-boost.html?m=1 http://www.rossgittins.com/2017/09/sorry-but-using-migration...
mFixman 9y ago
And, most importantly, (4) Android.
bigbugbag 9y ago
I think your (1) is mistaken, it should be something like google expanding its domination over the web by multiplying the places to show adwords and adsense (gmail, youtube, analytics, maps, android, play store, earth, docs, drive, etc.)

by MarkMc 9y ago

tyingq 9y ago

I believe that, but nobody other Google really knows how much of the gap is things that are either good/neutral for consumers, and how much of it isn't. Certainly some part of it is pushing the organics down, long forced ads in front of videos, etc. However, investors are expecting that continued ~20% YoY growth...which will further widen the gap. I don't see how that's possible without doing more things that are bad for consumers.

MarkMc 9y ago
I'm actually a Google shareholder and yes I do expect continued 20% growth, at least for the next decade. But increasing the ad/content ratio is only a small component of that growth. Here are my estimates for the major components of Google's revenue growth over the next 10 years: 1. Number of Google users * avg income per user grows 3% per year 2. Time spent on internet by average user grows 5% per year 3. Ad/content ratio gows 3% per year 4. Google ad effectiveness grows 8% per year
- tyingq 9y ago
  Do some compound interest calculation on some of those and you'll see the problem. Assume they've been doing it for years and years already. There is a hard cap on some of those. Especially ad/content ratio and CTR. At some point, you're done. For many queries, ad/content ratio is already maxed. Like, how do you optimize this further? It's a 2 page ad already, with links out to other ads that pay google. https://imgur.com/a/hAFas https://imgur.com/a/hAFas Also, there is a point where that sours. Some consumers will bail once the ad overhead is too much. Either via ad blockers, or the next "Google".
  - MarkMc 9y ago
    I agree Google's revenue will not grow 20% annually forever, but I don't see any problem with my 10-year projection. When I watch YouTube I see about 30 seconds of ads for every 10 minutes of video content. I could easily see this rising to 60 seconds over the next decade. And the ads I do see are not very well tailored to me: I see cat food ads even though I don't have a cat. I see gambling ads even though I've never gambled in my life. I see ads for a sit-stand desk even though I already bought it. I never see MacBook Pro ads even though I put one in my shopping cart on Apple's website 6 months ago but did not purchase it. (Google has all my photos, all my emails and my location history for past 4 years, so Google should know all this). Google has a long way to go to maximize the effectiveness of their ads.

majewsky 9y ago

> increasing income of internet users If anything, the average income of internet users is decreasing. The majority of people in the rich countries have been online since the 90s and early 2000s. Everyone who's been joining after that is most likely from an underdeveloped or developing country.

MarkMc 9y ago
Good point - I missed that. Your comment reminds me of a story [1] about how a Google engineer once significantly reduced the size of the YouTube video page but average load times got worse. Turns out they were getting lots of new users from third world countries with much worse connection speeds. I also wonder to what degree this effect counters the argument that average incomes in Australia and US have not risen for decades [2]. Perhaps native-born people see their incomes rise, but the average is dragged down by immigrants who typically have lower incomes. [1] http://blog.chriszacharias.com/page-weight-matters http://blog.chriszacharias.com/page-weight-matters [2] http://www.rossgittins.com/2017/09/sorry-but-using-migration-to-boost.html?m=1 http://www.rossgittins.com/2017/09/sorry-but-using-migration...

mFixman 9y ago

And, most importantly, (4) Android.

bigbugbag 9y ago

I think your (1) is mistaken, it should be something like google expanding its domination over the web by multiplying the places to show adwords and adsense (gmail, youtube, analytics, maps, android, play store, earth, docs, drive, etc.)