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Comparing to revenue doesn't make much sense. If you look at profit margins they could easily be spending more than all of their profit on R&D. Also, that's a
by thedufer 8y ago
Comparing to revenue doesn't make much sense. If you look at profit margins they could easily be spending more than all of their profit on R&D.
Also, that's a rather low estimate for average compensation for devs at Google. If, as you mentioned elsewhere, the 25% number is a purposeful overestimate, then combining it with an underestimate of compensation means that your total number is murky; it could easily be a drastic over- or under-estimate.
That said, 25% is also an underestimate - in 2016 Google reported that ~38% of full-time employees were in R&D. So it sounds like you think you're overestimating how much they spend on R&D, but in fact you're way underestimating it.
- barrkel 8y agoComparing costs with revenues is right. Profit already accounts for costs, and can be razor thin in very large companies with lots of costs - a comparison of costs with profit in such a company would be highly misleading.
- thedufer 8y agoI think you're right that comparing to profit isn't right, but I still contend that comparing to revenue isn't either. What I meant is looking at per-unit profit margins (i.e. excluding things like R&D) - if just producing whatever they're selling costs 99% of revenue generated from it, then 5% of revenue on R&D looks pretty high - they're drawing on capital to do so. If, on the other hand, those costs are only 5%, then they're stashing away an enormous portion of revenue despite R&D and thus they're R&D spend looks pretty low.