Google's 2007 Revenues: The UK's Single Largest Advertising Channel

| About: Alphabet Inc. (GOOG)

Google's (NASDAQ:GOOG) 10k for 2007 was out at the weekend (see Paul Kedrosky) and, as usual, UK revenues are handily broken out.

The search giant generated UK revenues of $2,530m ($2.5 billion) or £1,265m (£1.3 billion) during the whole of 2007, 15% of their global total $16.6 billion. That's a (sterling) increase of 45% on the £872m they made in the UK during 2006 - much slower growth than 2005-2006, therefore, when UK revenues rose 80% from £483m but still likely to have been the primary driver of online ad spend growth last year. (We'll know for sure when the IAB/PwC figures come out.)

Of course, Google pays out approximately 30% of these ad revenues to other publishers in the form of Traffic Acquisition Costs [TAC] for running Google AdWords on their sites - assuming UK TAC were the same as the global average Google retained £884m and paid out £381m to publishers in the UK in 2007. Amongst other things, that means that - adding in a little bit of additional TAC for publishers running Yahoo Publishers Network or other distributed search ads - UK publishers will have generated around £400m just for running search ads on their sites in 2007, a figure only slightly smaller than the £450m they made from display advertising in 2006.

It seems almost certain that, as predicted last year, Google therefore overtook ITV1 in 2007 revenues. ITV has yet to release full-year figures for 2007 but having generated "net advertising revenues" of £595m from ITV1 during the first half of the year (pdf) it's unlikely to have caught up with Google's £1.3bn by the end of the period. Hence my - admittedly possibly premature - claim that having overtaken Channel 4 to take the number two spot in 2006 Google overtook ITV to became the UK's single largest advertising channel in 2007.

(Some methodological notes. I've assumed for the $/£ conversion that revenues were accrued evenly over the course of the year at the average daily 2007 Interbank conversion rate provided at OandA.com. Technically the true sterling value of Google's 2007 revenues will differ from this calculation slightly, though perhaps not materially - it's hard to say without access to Google's books. TAC isn't broken out on a regional basis in Google's 10k so I've assumed that the global figure of 30.1% can be simply mapped onto the UK. Again, there's no reason to suppose this is perfectly accurate but difficult to improve without more data. The above should be read with these caveats in mind.)

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