Last Updated Apr 16, 2010 12:02 PM EDT
Clearly something has been going on at Google, because there has been additional -- though still small -- movement away from the long-standing dominance of advertising in its overall revenues. Look at these numbers from the earnings release:
This is the first time that non-advertising revenue has hit 4 percent of the company's total. Although not a huge movement, it's a good sign for a one-trick pony. Although overall revenue grew by 23 percent, "other revenues" grew by 68.5 percent, or three times as fast. Given the current run rate, Google's non-ad revenue will easily break past the $1 billion mark by the end of the year.
But what contributed to this comparatively big jump? Hard to say on the surface, as Google doesn't release details of what goes into its "other revenues" category. But we can make some guesses. Last month, the company noted that it had a total of 25 million Google Apps users -- a two-thirds jump in eight months. Based on previous conversations with the company, I've estimated that between 3 and 6 percent of the users use the paid version, so at the top end that would be 1.5 million paid subscribers, or $75 million. Roughly amortized over four quarters, that's $18.7 million. Given the growth rate, I doubt that first quarter of 2009 saw even $11 million in revenue. Even if it were nothing, though, that would be only $18.7 million out of total growth of $122 million.
Now consider the Nexus One. According to the estimate of mobile analytics company Flurry, Google in its first month; 74 days after introduction, Flurry thought the number hit 135,000. Those are only estimates, but they're the best numbers we have available of what sold shortly before the close of Google's quarter.
At $529 a phone, that's just over $71.4 million, so the combination of Google Apps growth and introduction of Nexus One account for $90.1 million of the $122 million non-ad revenue growth, or almost three-quarters of it. And that's with Google's terrible marketing.
The company does have two problems. There's only so fast it can grow the paid Apps revenue because Google has to convince IT people that they can trust Google. Additionally, too many Nexus One sales could tick off many of Google's manufacturing partners. A pity, because if they could ramp it up to what other smartphone companies do in volume -- and deal with the product line's significant problems -- the Nexus One could become a great way for the company to begin seriously diversification of its revenue base. But instead of doing something that could provide a clear return on investment, Google continues to give away Android in hopes that one day mobile ads will pay off in a significant way. Why Google doesn't articulate a clear business case for Android remains a mystery -- and makes the company sound like Twitter.
While we've seen a statistically significant year-over-year jump on Google's non-ad side, it's unclear that the company will sustain that growth without some major changes in marketing and in strategic direction.
Image: RGBStock.com user Ozetsky, site standard license.