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Google documents show hopes for big gains in non-search revenue Google documents show hopes for big gains in non-search revenue
(about 6 hours later)
Google projected back in October 2010 it would get more than 35% of its 2013 revenue from outside its search operation, anticipating three non-search businesses, including e-commerce, would generate over $5bn each, according to internal company documents filed in court. Google projected back in October 2010 it would get more than 35% of its 2013 revenue from outside its search operation, anticipating that three non-search businesses – including e-commerce – would generate more than $5bn (£3bn) each, according to internal company documents filed in court.
Display advertising would generate $8bn in revenue in 2013, e-commerce would bring in $5bn, while YouTube and Google TV would combine for $5bn, according to documents revealed during the high-stakes trial of Oracle Corp against Google over smartphone technology. Search, meanwhile, had been pegged to generate $34bn, the 2010 projections say, giving a forecast total revenue of $52bn for 2013. Display advertising would generate $8bn in revenue in 2013, e-commerce would bring in $5bn, while YouTube and Google TV would combine for $5bn, according to documents revealed during the high-stakes trial of Oracle against Google over smartphone technology.
Those may turn out not to be far off. Official revenue figures suggest that Google is on track to generate more than $40bn in total revenues this year, having reported first-quarter revenues of $10.6bn earlier this month, up 24% on the same period in 2011. Search, meanwhile, had been pegged to generate $34bn, the 2010 projections say, giving a forecast total revenue of $52bn for 2013.
Those may turn out not to be far off. Official revenue figures suggest that Google is on track to generate more than $40bn in total revenues this year, having reported first-quarter revenues of $10.6bn earlier in April, up 24% on the same period in 2011.
Company staffers compiled the documents in October 2010 for a Google board presentation, according to testimony in a US district court in San Francisco on Wednesday.Company staffers compiled the documents in October 2010 for a Google board presentation, according to testimony in a US district court in San Francisco on Wednesday.
Oracle attorney David Boies briefly referred to the October 2010 documents on Wednesday while questioning Android mobile software chief Andy Rubin, but Boies did not delve into the projections. However, a full copy of the internal documents has been formally admitted into evidence in the case. Oracle lawyer David Boies briefly referred to the October 2010 documents on Wednesday while questioning Android mobile software chief Andy Rubin, but Boies did not delve into the projections. However, a full copy of the internal documents has been formally admitted into evidence in the case.
The 2010 documents show that Google's search business generated $19.2bn in 2009, while the display business brought in $3.2bn that year. YouTube made $300m, while e-commerce brought in no revenue.The 2010 documents show that Google's search business generated $19.2bn in 2009, while the display business brought in $3.2bn that year. YouTube made $300m, while e-commerce brought in no revenue.
Enterprise software was projected to generate $2bn in revenue in 2013. Overlaying all of the business units are Google's Android and Chrome platforms, the documents said.Enterprise software was projected to generate $2bn in revenue in 2013. Overlaying all of the business units are Google's Android and Chrome platforms, the documents said.
"Android and Chrome platforms critical assets for their success," the documents say."Android and Chrome platforms critical assets for their success," the documents say.
Other documents entered as evidence come from an internal July 2010 presentation given by Rubin. They reveal that the company got advertising revenue of just $16.8m from Android handsets in 2009, but by mid-year of 2010 that had grown to $132.1m from ads on the fast-growing handset market – though Apple devices such as the iPhone and iPad using Google's search and maps generated $281m, or more than twice as much in total.Other documents entered as evidence come from an internal July 2010 presentation given by Rubin. They reveal that the company got advertising revenue of just $16.8m from Android handsets in 2009, but by mid-year of 2010 that had grown to $132.1m from ads on the fast-growing handset market – though Apple devices such as the iPhone and iPad using Google's search and maps generated $281m, or more than twice as much in total.
Average ad revenues from Android handsets were higher, at $9, than from Apple devices, at $6.70, because Google has to pay a share of the revenues back to Apple.Average ad revenues from Android handsets were higher, at $9, than from Apple devices, at $6.70, because Google has to pay a share of the revenues back to Apple.
The detailed breakdown of figures from Rubin's presentation show that after the costs of sales, marketing, engineering, product management and legal expenses were taken into account, the overall Android division was not expected to become profitable until 2011, by which time it was forecast to generate nearly $500m in adverts. However, sales of Android handsets have grown far more quickly than Rubin was forecasting at the time, suggesting that Google's Android revenues are far ahead of those figures. Google has told the media that the figures "don't reflect our current thinking about our business operations". The detailed breakdown of figures from Rubin's presentation show that after the costs of sales, marketing, engineering, product management and legal expenses were taken into account, the overall Android division was not expected to become profitable until 2011, by which time it was forecast to generate nearly $500m in adverts.
The two sets of documents provide a rare glimpse into Google's mindset in 2010, as the company does not break down the percentage of its revenue that comes from search advertising versus its other businesses in official filings. Google had fought in pre-trial hearings to exclude such commercially sensitive data from the public trial, but was overruled by the judge. However, sales of Android handsets have grown far more quickly than Rubin was forecasting at the time, suggesting that Google's Android revenues are far ahead of those figures. Google has told the media that the figures don't reflect the company's current thinking about its business operations.
The two sets of documents provide a rare glimpse into Google's mindset in 2010, as the company does not break down the percentage of its revenue that comes from search advertising versus its other businesses in official filings.
Google had fought in pre-trial hearings to exclude such commercially sensitive data from the public trial, but was overruled by the judge.
Estimating the ratio is complicated because of the limited information Google discloses about its various businesses. Analysts' estimates for Google's non-search business currently range from 10% of the company's revenue to as much as 25%.Estimating the ratio is complicated because of the limited information Google discloses about its various businesses. Analysts' estimates for Google's non-search business currently range from 10% of the company's revenue to as much as 25%.
"Their core business has done better than they were forecasting. Search is growing faster than 10% a year," said Colin Sebastian, an analyst at RW Baird. However, Google still has work to do in areas like commerce, he said, adding that Google's mobile wallet product has not made as much progress as it hoped."Their core business has done better than they were forecasting. Search is growing faster than 10% a year," said Colin Sebastian, an analyst at RW Baird. However, Google still has work to do in areas like commerce, he said, adding that Google's mobile wallet product has not made as much progress as it hoped.
"This document suggests those businesses may not be meeting Google's initial expectations," Sebastian said."This document suggests those businesses may not be meeting Google's initial expectations," Sebastian said.
Google spokesman Jim Prosser said: "Our industry continues to evolve incredibly fast and so do our aspirations for our various products and services."Google spokesman Jim Prosser said: "Our industry continues to evolve incredibly fast and so do our aspirations for our various products and services."
The Rubin presentation from July 2010 indicated that Google hoped that 10m Android tablets would be sold in 2011, and that it would achieve a 33% share of the market.The Rubin presentation from July 2010 indicated that Google hoped that 10m Android tablets would be sold in 2011, and that it would achieve a 33% share of the market.
Overall, Rubin outlined an aggressive plan to generate more than $1.2bn in total revenue from adverts and app sales on Android phones by 2013, although after costs such as revenue shares from adverts were subtracted, the contribution to Google's bottom line would be closer to $500m.Overall, Rubin outlined an aggressive plan to generate more than $1.2bn in total revenue from adverts and app sales on Android phones by 2013, although after costs such as revenue shares from adverts were subtracted, the contribution to Google's bottom line would be closer to $500m.
But the rapid takeoff of Android sales since Rubin made his presentation, when there were just 20m Android handsets in operation – compared to more than 100m now – suggests that those targets may have been met sooner than was forecast.But the rapid takeoff of Android sales since Rubin made his presentation, when there were just 20m Android handsets in operation – compared to more than 100m now – suggests that those targets may have been met sooner than was forecast.
Rubin outlined some causes for concern at the time, including "Apple momentum with iPad, iPhone 4" [then newly launched[ and that Google was "behind [Apple and Amazon] on music, video, books". He also noted a "low rate of app purchases". Rubin outlined some causes for concern at the time, including Apple momentum with iPad, iPhone 4 [then newly launched[ and that Google was behind [Apple and Amazon] on music, video and books. He also noted a low rate of app purchases.
At the time Android handsets were being activated at the rate of 180,000 per day. The figure now is more than 700,000.At the time Android handsets were being activated at the rate of 180,000 per day. The figure now is more than 700,000.
Oracle has accused Google of violating its intellectual property rights to the Java programming language. An Oracle spokeswoman declined to comment on the figures. In pre-trial settlement talks, Oracle had suggested that Google should pay a small percentage of ongoing Android revenues in settlement of another part of the trial dispute, in which Oracle claims its patents have been infringed. Oracle has accused Google of violating its intellectual property rights to the Java programming language. An Oracle spokeswoman declined to comment on the figures.
In pre-trial settlement talks, Oracle had suggested that Google should pay a small percentage of ongoing Android revenues in settlement of another part of the trial dispute, in which Oracle claims its patents have been infringed.