Wall Street has lots of stock indexes. Everyone knows the NASDAQ and Dow Jones Industrials, but there are hundreds of other indexes for almost every sector and capitalisation.
With that in mind, I offer the Google Dependency Index, which is composed of a list of public companies that essentially find themselves completely at the mercy of Google.
I put this list together mostly as an exercise to quantify just how important Google was to the direct financial performance of other public Internet companies and I have to say that after going through the exercise it has convinced me that Google A) is actually even more powerful than people perceive it to be B) there will inevitably be a backlash against this power.
I should note that this is not an exhaustive list because to a certain degree almost every public Internet company is dependent on Google to some extent, but this list contains examples of companies that arguably have the most significant exposure to Google.
So without further ado here is the Google Dependency Index >
Note: The first five are Direct Dependents (Companies that actually get cash from Google). The next five are Sub-Sector Indirect Dependents (Companies that depend on Google for traffic, but not direct revenues).
This post originally appeared at Bill Burnham’s blog and is reprinted here with his permission. This is not investment advice, just some observations about how damn powerful Google has really become. The thoughts and opinions on in this post are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.
Ever wonder how much Google pays AOL to be its default search engine? Well in 2009, Google paid AOL $556M or 17% of its total revenues for the privilege. Given that this referral revenue comes with very little costs, it's a safe bet to assume that the share of AOL profits attributable to Google are probably are least 30% and perhaps higher.
Question: How much money you could make if you started a wildly popular web site and only monetized it only using Google Adsense? Answer: you would make about $21M in gross revenues, or at least that's what Answers.com did in 2009. Answers, according to Quantcast, is the 15th most visited site in United States with 55M monthly unique visitors, most than craigslist or Bing or MySpace. In 2009, Google generated 89% of Answers.com's traffic and 88% of its revenues.
Incredimail (MAIL) saw 70% of its $21.9M in revenues during the first 9 months of 2009 come from Google
Incredimail is a software developer that used to make it's money by selling share-ware applications such as a POP3 e-mail client and a universal chat client. It still makes those programs, only now it primarily monetizes those programs not through licence fees, but by replacing people's default search provider with Google and by integrating Google search into its programs. The results? Fully 70% of its $21.9M in revenues during the first 9 months of 2009 came from Google and that percentage is increasing quickly.
During the first nine months of 2009, Local.com spent $19M on paid search, $13M of that on Google, and that spending generated 56% of its overall traffic. Local.com's traffic arbitrage expenses account for almost 45% of its total expenses.
Shutterfly maintains high organic search rankings for its key products including photo printing and photo cards. These high organic results most likely drive a huge amount of its traffic.
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