Paperclip Marketing

Originally Posted June 23 2008

According to the latest Comscore data, Yahoo sites still generate the most unique visitors of any internet property (121,962,000 as compared to Google’s 85,685,000). 

This is no surprise, as Yahoo is a content play before anything else.  With thousands and thousands of pages of proprietary content, discussion groups, forums, email, and everything else under the sun, being a search engine has never seemed to be the biggest priority in Sunnyvale.  With all these page views— one would think that Yahoo would reap enormous revenues. 

According to Yahoo’s own finance page on their business, Yahoo posted gross revenues of $1,817,602,000 for the first quarter of 2008.  By dividing gross revenue by the latest Comscore data on unique visitors (extrapolated to be representative of the same 3 month time period), Yahoo appears to have grossed $4.96 per visitor per month.  And, using a 41.5% cost of revenue (calculated using data from the same balance sheet), that would effectively reduce Yahoo’s net profit to $2.90 per user per month.  Yahoo claims to average 3.4 billion page views per day.  That’s 102 billion page views a month.  So, if my math is correct, Yahoo makes about $0.017 per page view.

When you are talking about how much money you make per page view, less than 2 tenths of a cent per page isn’t too good.

Compare this with Google.  By the same calculation, Google posted gross revenues of $5,186,043,000 for the same period.  Divided by the number of users in the Comscore report, adjusted for time, that equates to $20.17 gross, or $11.90 net per user (profit margin being calculated in the same manner).  Good luck finding accurate page view per user data from Google— so, let’s just say it is 2.7B (thanks to SearchEngineWatch for the guess).  That means, by the same calculation, Google makes $0.52 per page view (that’s 30X more per page).

Now, I’ll be the first to admit that this math is absolutely and completely flawed beyond being in any way accurate.  It fails to take into account any variables that exist, including revenue from other sources (content network, partnerships to name a few).  But, I would argue that this analysis is “directionally correct” at the very least, if not true to scale.

Although terribly simplified, this analysis does illustrate the problem Yahoo has.  All the users in the world are worthless if they don’t generate revenue.  That’s why Yahoo’s stock is at $21.45 (as of June 22) and Google’s is $545.21. 

But, don’t count Yahoo out— it takes many years, millions of dedicated users, and billions of dollars to generate the depth of content Yahoo has across its properties.  Search is easy, serving ads is easy.  A recent deal with Google might finally give Yahoo the means to better monetize that traffic.  Combine that with true dedicated usership, and Yahoo still might have a chance to win in the end.

It is possible.