Don’t be fooled by all the excitement about how Google is “no longer a one-trick pony,” as several analysts exulted today. The company’s search business is robustly healthy, but the company is still highly dependent on it.
In fact, in terms of profit (as opposed to revenue), the company is still very much a one trick pony.
Google says its mobile, display, YouTube, and other non-text-ad businesses now contribute ~$3.5 billion of revenue, more than 10% of Google’s overall gross revenue. That’s encouraging. But it’s gross revenue, not net revenue, and on a profit basis the contribution is even smaller.
Specifically, we estimate that Google’s non-search businesses contribute only about 5% of Google’s profits. The other 95% comes from search ads.
So what’s the actual good news for Google bulls? The search business is still the best media business in history. And it’s growing rapidly again.
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