Last Thursday's blowout quarter from Google included several highlights announced on the conference call (see transcript from Seeking Alpha):
- Search Retargeting - CEO Eric Schmidt still says "no": "We have a pretty strong opinion that we are not going to do very much of it. The reason is that we take our end user data privacy incredibly seriously." Sounds like a few, healthy months away - with (maybe) a stair-stepped approach mapping broad keywords, phrases and verticals to large cookie groups? Brand dollars would like the scale, potentially. Microsoft and Yahoo! remain a bit "under the radar" as they've already rolled out their search retargeting efforts.
- "The $2.5 Billion" - SVP Jonathan Rosenberg said: "So first big number, $2.5 billion; as in display is on an annualized run rate of over $2.5 billion. So that's non-text display, meaning it doesn't count text ads running on our network. What it does count is YouTube ads, non-text ads on the Google Display Network, and of course on the DoubleClick platform."
FYI, $2.5 billion is a gross, not "net" number, estimate for the next 12 months according to Google execs. And, still no word here about the DoubleClick Ad Exchange, specifically, as Henry Blodgett covers some of the inherent fogginess of this number here and mentions the likely strength of ad serving platform revenues (DFP and DFA).
Let's take a crack at it!
Assuming, aggressively, that DoubleClick is making $450 million annually for the coming year from its ad serving tools (triple 2007 rev estimates as Atlas decays and Google pours on the gas), that leaves roughly $2 billion between display ads and YouTube. I'll assume that mobile display and AdMob are not part of this number as mobile was broken out separately on the call. And even if it is, its a sub-$100 million rounding error. No offense AdMob, your day is likely coming.
I'll further prognosticate that YouTube is a $1.2 billion revenue business over the next 12 months using Citibank analyst Mark Mahaney's guess from earlier in the year as a basis. That leaves $800 million.
Given Invite Media's momentum pre-acquisition, it may have between $150 and $200 million in gross revenues in the coming year courtesy of Publicis and Omnicom dollars among others -for accounting purposes, let's say half of that $200 million in revenue is bought through Doubleclick Ad Exchange. That leaves roughly $700 million of inventory purchased through the DoubleClick Ad Exchange over the next year which includes DoubleClick For Publisher and AdSense graphical display revenue (and not including any biddable display through YouTube).
How much of that is profit? Using Google's past pronouncements on AdSense rev share, let's say 30% rev share which brings us, aggressively, to $200-250 million in profits for the DoubleClick Ad Exchange.
On the conference call, Goldman Sachs tried to drill-in on the numbers during the call but didn't get anywhere.
At some point, even impression levels would be a nice start for understanding exchange momentum. And as the exchange continues to catch fire, it would seem to be in Google's best interest (for the stock price) to start offering their own impression benchmarks which can be compared against the 9 billion impressions per day on Yahoo!'s Right Media Exchange. But, it's likely that number won't be revealed until Google can say its bigger than anyone. Tick tick tick tick tick...
By John Ebbert