On Google's Q3 2012 earnings call yesterday, CEO Larry Page said the company had an $8 billion mobile revenue run rate, and CFO Patrick Pichette added, "Ads continue to be the bulk of [the $8 billion], the vast majority of it."
They declined to break that number down any further.
There's one major problem with this number:
Where the heck did all that money come from?
In September, eMarketer estimated that the ENTIRE mobile ad business in the U.S. would be worth $2.6 billion in 2012 and maybe $6.6 billion in 2014.
Suddenly, Google is already booking multiples of that. eMarketer vp/communications Clark Fredrickson tells me that the “entire” global market figure is $6.5 billion for 2012, which still leaves a question mark over the margin between that and $8 billion.
It is also difficult to reconcile the $8 billion number with Google's other reported revenues. Here's what we know:
- Google booked $14.1 million in total revenue in Q3. That would imply a total annual revenue run-rate of greater than $56 billion.
- The $8 billion number implies that mobile revenues are running at roughly $2 billion per quarter, or 14 percent of Google's entire revenue base.
- One way to account for that is if Page is referring to mobile revenues coming from Motorola Mobility. That unit of Google has $2.5 billion in revenue. But most of that revenue ought to be coming from mobile phone device sales, not ads.
- The remaining $11.5 billion in revenue comes almost entirely from Google's regular advertising business, in which the company has traditionally included its mobile ad business.
If the better part of $2 billion within that $11.5 billion is now actually mobile ad revenue, then that would imply that Google's regular search and display ad businesses are being decimated by the mobile ad business.
What's probably happening is that there's a deluge of search queries coming from mobile users, and increased search drives the price per click down (because the supply of inventory being displayed is increasing).
In other words, minus the mobile ad revenues — still a new business for Google — the company's regular desktop ad revenue declined 2 percent from Q3 2011, to $9.5 billion.
The idea that Google's bedrock business might now be contracting is a sobering thought.
Now combine that with the charts we showed you yesterday, which indicate that mobile is indeed hobbling Google's ability to charge premium prices for its clicks. Prices are declining at Google, and total paid click growth is slowing too.
Scary, right?
Of course, this is all conjecture. It would be nice to have a better explanation of where that $8 billion comes from, though.
Related:
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CHARTS: Google's Q3 Shows Its Power To Monetize Clicks Is In Decline
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Yes, Google CEO Larry Page Talked About 'Gangnam Style' On His Earnings Call
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