-By Scott Cleland
In addition to delivering another spectacular quarter of revenue growth, Google provided some new and current information that is highly relevant to the FTC and EU review.
First, compelling evidence of Google’s market power is mounting.
Google continues to take massive market share rapidly, which is evidence of market power and network effects
- Google’s over all revenue growth of 57% was more than double the already torrid 27% growth of the online advertising industry overall per IAB.
- Google’s revenue growth from its pure Google.com sites was even higher, 68%, or 150% faster than the industry at large.
- That amazing amount of out-performance and separation is far from normal and is not found in competitive markets of this size — indicating that market power and network effects are at work.
Google’s pricing power is increasing
Google’s reported numbers and answers to questions told us indirectly that Google is effectively raising prices on its Adsense customers. While Google uses the euphemism “Traffic Acquisition Costs,” TAC is also conversely a proxy for the price that Google extracts from its Adsense customers.
Google said in its earnings release and in Q&A, that TAC percent of revenue share fell — indicating that Google is having to share less of its collected revenue with its customers, in other words, Google’s Adsense price is going up. To take massive market share quickly like Google is currently doing, would normally require deep price discounts to accomplish.
The fact that Google is taking massive market share while it is also raising prices is pretty compelling evidence of Google market power.
Moreover, if you look at Google’s 3Q07 earnings slides they show that Google traffic aquisition costs have fallen 20% in less than 3 years; conversely that means the price they have been able to exract from their Adsense partners has increased 20% in less than three years.