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Internet Ads – Good For Google, Yahoo

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Interactive Advertising Bureau and PricewaterhouseCoopers (PwC) say that Internet advertising revenues hit a new record – $3.9 billion – in the first quarter of 2006. That’s a 38% jump from the first quarter of 2005, and 6% jump from the fourth quarter of 2005. You betcha, Eyeballs are back. But you knew that already, didn’t you?

The big first quarter number is tantalizing, but in reality it is benefitting two companies – Google and Yahoo – the most. These two take in roughly 45%-to-48% of total online ad dollars spent in the US. Google had sales of $2.25 billion in the first quarter, which is mostly from advertising. Assuming that $1.3 billion came from US online advertising (since 42% of their sales are International), a quick back of the envelope calculation shows that Google is getting about 33% of the total online advertising pie. (UBS estimates over 95% of Google revenues come from advertising.)

Yahoo says US accounted for about $682 million of its total first quarter of 2006 sales of around $1.56 billion. I am not sure how much of it is advertising and how much is through “fees” for other products, but I assume a bulk of it is advertising, say $500 million. [If you have better data, drop me a note.] Sure both Google and Yahoo give out a part of these revenue to their “network of sites,” and “affiliates,” nevertheless the whole advertising boom is helping them line their coffers even more.

One Response to “Internet Ads – Good For Google, Yahoo”

  1. When counting Google’s revenues, such as that $1.3 billion in the US in Q1, you’ve got to subtract traffic acquisition costs (TAC), o’wise you’re double-counting when figuring percentages of the whole (the IAB/PwC numbers).

    In that case, Google’s Q1 in the US is closer to $878 million in ad revenues, or more like 23% of the $3.86 billion from the IAB/PwC.

    Similarly, Yahoo’s US Q1 ad revenues minus TAC is more like $728 million, or 19% of the whole.

    Together, then Google and Yahoo’s US ad revenues are about 42%…a bit less than the 45% to 48% range you mention.

    Hope that helps.