Thursday, October 19, 2006

Google to Hit $208 Billion in Sales?

My good buddy Gord Hotchkiss, the Chaiman of SEMPO (also known as the Search Engine Marketing Professionals Organization), makes some very astute observations in today's Search Insider by Mediapost. In short, at a SEMPO planning retreat in New York recently, Gord made note of several recent trends that may indicate our little cottage industry of search marketing may be 'crossing the chasm' into mainstream marketing:

"Observations included the current build-or-buy-search- marketing-capabilities dilemma faced by the big agencies, the red-hot demand for anyone with search marketing experience, the sudden development of search marketing in-house groups in large organizations, and the current push for industry-wide certification of SEM practitioners. Also, more than a few at the table mentioned that they've noticed a significant change in the prospects they're talking to--and the contact points within those companies. Today, our sales leads are more often Fortune 1000s than the latest online start-up. With increasing frequency, we're starting to get C-level interest at the table when talk turns to search."

I have to agree with Gord and the SEMPO planning committee, I have seen a radical shift towards a change in attitude towards search from Fortune 1000 and enterprise level companies and the types of people in charge of online marketing are increasingly more sophisticated and offer up highly intelligent questions regarding their online marketing strategy. In fact I remember one week in particular recently where in some meetings for new client engagements, in three of the meetings, the CEO was in attendance and this includes a venture capital funded start-up, an Inc. 500 major ecommerce player and a NASDAQ listed publicly held company. At the last meeting of the week, a SVP at the meeting leaned over to me and stated "I'll bet it's not everyday you get the CEO to one of these meetings eh?", to which I quickly blurted out without thinking "Actually it happens all the time, in fact this is the third time this week!". So much for playing it low key. Good one Joe.

Also with running the In-House Forum over at Search Engine Watch and through working with several of my clients Ive noticed a much stronger uptick in SEO and SEM related titles and many of them with more power within their organizations than before. I'm also seeing a level of expertise of these in house marketers that I never saw 3 or even 2 years ago.

So how does this equate with Google hitting $208 Billion in sales? Referencing Geoff Moore's book, 'Crossing the Chasm' (still a must read!) where Geoff discusses early adoptors who migrate into mainstream markets, search is closely following the patterns that Geoff outlines in his book. Gord also does some interesting back of the napkin calculations to come up with his potential forecast:

"According to InfoUSA and the Kelsey Group, there are about 350,000 Web-based businesses in the US, and 4 million businesses with a brochure-ware site. That leaves almost 10 million businesses without a Web site at all. That's a total of almost 15 million businesses. There are no hard numbers for Google's advertiser base, but an educated guess would put it somewhat north of 300,000. So, even with businesses with a Web site, that means Google only has 6.9% market penetration currently...

...Based on Google's reported revenue of approximately $6 billion, that averages out to about $20,000 per advertiser. That may sound impressive until you remember that a substantial portion of Google's advertisers are large, multi-million-dollar companies.

Let's assume that over the next three years search marketing does cross the chasm, and Google manages to capture 50% of businesses with a Web site. Also, let's assume that budgets loosen up substantially as search moves into the mainstream and more advertising options are open, increasing average spend up to $50,000. Neither of these predictions is overly optimistic, given a chasm-crossing scenario. And that doesn't even touch the 10 million Web-less businesses that are likely prospects of local search, or the global market. That puts Google's potential revenue at $208 billion. Currently, that would put Google at number 3 on the Fortune 500, right behind Exxon and Wal-Mart, and ahead of GM and Ford. Even if I'm wildly optimistic, those are numbers to pay attention to."


Even if Gord is only close to being right, I think those of us in the online advertising business have a lot to smile about right now.

2 comments:

Ed Kohler said...

I think a lot of departments within Fortune 1000 companies have managed to test the waters and prove the value of SEM from within. For example, an HR department may have figured out the value of search for their careers site. That plays into Crossing the Chasm because the strategies are then sold to the laggards within the company by trusted techies.

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