Are Search Engines fair Partners?

the value proposition for the websites owners from search engines is quite simple : search engines sends you traffic, and you let search engines index your site. search companies makes money due to it’s search, you make money with traffic. right?

lets look at some back-envelope numbers to see how fair the deal is, taking google example. google does about 5 billion searches a month (as of sep 2007) , and it’s index probably has about 10 billion pages in its index. that’s one query per 2 pages per month. if an average site has 100 pages, it’s about 50 queries per month per site. assuming that it’s equivalent to 50 unique users coming to the site from google. if each users views 2 pages after coming in from google, its equivalent to a total of 100 page views per month.
even if you have the best monetization scheme, you are probably raking in a modest $4 eCPM ($4 per 1000 page views), which means that

an average site is making $0.40 per month due to google traffic. if you take long-term value of the traffic to be 2.5x, may be $1.0 per month due to google-generated traffic.

at 5 billion searches per month and $15B in annual revenue ($1.25B per month), you are looking at google’s revenue of $0.25/search. it may not be that high, but not too far of an order of magnitude. so if google is sending 50 searchers your way,

google makes 50*0.25 = $12.5 per month due to the traffic it sends to a site.

assuming long-term value is roughly equivalent to per-user revenue on a monthly run rate, google makes $52.36 per user 113M unique users per month. it compares with the $1.0 long-term value per user for a site.

bottomline, google makes roughly 30-50 times the money you make with this business deal. yahoo is probably in the 15-30x range.

And now here’s where a site owner should get the “used-condom” feeling: and over time, search engines will develop a site that could compete with yours (health site, travel site, news site, etc.) and can screw the websites even of that little bit of revenue share: all by optimizing their own sites to be getting more traffic than other websites. mapquest is the latest victim. wouldn’t it be nice to have a rev-share law that protects the little guys from being divided and royally screwed over by the big guys??

Update: A similar post from GigaOm: Google is a Fair Weather Partner

9 thoughts on “Are Search Engines fair Partners?

  1. MapQuest is hardly a “victim”. They have sat on their ass for year and have not added a single new feature in that timeframe. No wonder users are moving on.

  2. ah the red herring.

    the point is not whether the users are penalizing mapquest. i moved on from mapquest due to a better product being offered by someone else.

    but that’s besides the point.

    the point is about how search engines screw the same websites that fulfill their searches for them, and make a handsome 30x revenue while doing so.

  3. I totally agree… add almost all ‘local business” listing websites.. especially in countries other that the US. The list is endless… google somehow seems to improve the indexing on site.. and they seem into e into that very website business in no time.. there HAS to be some sort of protection for the small website owners..

    but.. thankfully.. google still had the habit of picking something new.. getting all excited about it and drop it halfway.. they are pretty popular about never leading a new project idea to finish.. they act like a 2 yrs old. .short attention span !

  4. the problem with google’s products is that very few of them are perfect when they come out. and users only give one chance on the web – if you don’t grab it, you are out immediately. google finance is an example.

    only a change in copyright laws could help small website owners. google is within the existing law pick off small revenue off of each website, and make 30x money in the process.

  5. I find this subject immensely interesting- coming fromt the cold as I do. Infact these days I’ve been thinking a lot about how bloggers make money and the logistics of it all. I’d be really grateful for anyinformation you could give me on that subject. thanx a ton :)

  6. artnlight is a wonderful reflection of all things beautiful in india. keep ‘em coming. i will soon post on the blog monetization (the term insiders use to convey ‘making money’) concepts.

  7. Pingback: Google is Scraping the Bottom

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