Googolplexing Google

Few days ago I read the news of Microsoft trying to align with Yahoo to face Google. I was not only surprised but also amazed by the immaturity of the industry being reflected through the action of the most successful and largest player in the Industry. Not being a mature industry is the exact reason Google should not think it is shielded from the booms and more specifically busts of the industry. Here I would like to draw a framework of how, even, Google with all its growth and earnings momentum can be Googolplexed (Googolplex is 10 to the power of 1000).

Two computer scientists think about the best algorithm to search for the relevant content and create Google. Google’s creation was also driven by the increasingly chaotic internet content. Well known players in the arena were busy with their own priorities like desktop solutions and universal portals with instant messaging, ignoring the ability to create a faster way of searching the increasingly large and fat world of internet content. It was same time when Microsoft was already facing criticism of trying to monopolize the desktop. This was a perfect time for Google creators to launch a search engine that was going to change the way people think about internet. Open source enthusiasts supported the search engine with all might and the information about this new search engine spread like a virus.

As a Linux enthusiast I got introduced to Google in 1999 and before 2001 Google was already a huge force in the internet space. The growth was powered by not only the superior algorithm, Google creators invented, but also by the perfect storm created by open source enthusiasts and the overall increase in rate of internet penetration and usage across the world. Google too realizes that common man’s viewpoint is important for its continued growth. This has kept all the Google offerings free to everyone. Google has intelligently created its own space in the internet advertisements and advertising brokering business to become a $100+B company. Google ads are today displayed on billions of web pages making Google a perpetual money generating mechanism.

Let’s analyze Google’s revenue a bit closely by doing a back of the envelope calculation.

World population:6.5B

World population using internet: 1.14 B
Assume 75% of world population using internet accesses internet every day = 75% of 1.14B = 0.855B

Assume every person accessing internet accesses 20 pages on an average with Google ads everyday. Therefore number of pages accessed = 17.1 B

Suppose Google’s conversion rate is 1% :
Clicks leading to revenue = 1% of 17.1 B = 171Million clicks per day

Assuming the average pay Google gets per click as $0.2, revenue per day = 171 * .2 = $34.2 Million

Yearly Revenue = 34.2 * 365 = $12B approx.

This is really a perfect example of the old saying that every drop makes an ocean. Now imagine the growth prospects. Suppose internet usage increases by 10% and penetration increases by 2%, this itself guarantees Google a revenue increase potential of 12% continuing doing what it is doing now. Google already has many things in pipeline apart from Google labs. Also the engine is becoming more intelligent increasing the potential to charge more per click. Google revenue is bound to increase more than 20% given most conservative numbers.

What can slow this enormous growth?

There are different ways to compete in this space:

Create an engine superior to that of Google with faster crawlers gathering information of billions of web pages (Use Google itself to create such list). Are thee any brains remaining in this space that think of challenging the Google algorithm (at least for intellectual curiosity)?

Now a more disruptive alternative, make web search extinct. Now this is a project that Google needs to start to work on for its own long term survival. If one comes with a model where search is no longer required this can make Google unhappy, unless Google diversifies its revenue stream by then. It might sound a dumb idea, but I am sure it wont be long that cyberspace will become virtual again.

Until then a big lesson for the Google competitors: “Every Click Matters”.