Covering the digital giants, by Jon Fortt
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July 22, 2008, 6:20 pm

What’s Google News worth? $100 million

Google vice president Marissa Mayer says Google News might not make money on its own, but it drives $100 million worth of search. Image: Google

HALF MOON BAY, Calif. – Google News is free and has zero ads. So what’s it worth to Google? About $100 million.

That’s the figure Google (GOOG) vice president Marissa Mayer, who heads search products and user experience, threw out during a Tuesday lunch session at Fortune’s Brainstorm Tech conference in Half Moon Bay, Calif.  How does she put a value on a product that doesn’t directly make money? The online giant figures that Google News funnels readers over to the main Google search engine, where they do searches that do produce ads. And that’s a nice business. Think of Google News as a $100 million search referral machine.

Mayer’s observation about Google News sheds some light on the company’s broader strategy for driving traffic to its search engine – a strategy that has helped the company build a dominant market share lead over rivals Yahoo (YHOO) and Microsoft (MSFT). It’s not all about the search engine itself. Google is happy to build popular products that don’t make any money on their own but tie users into a broader Google ecosystem. It’s like Vegas casinos that offer cheap buffets to get people into the building, knowing a lot of them will end up playing slots.

Mayer said that’s the way Google thinks about monetizing digital consumer health records. The company is one of many working to make it convenient for people to store and access their medical records online, a move that proponents say will improve health care by empowering consumers. But Mayer said that after some internal discussions, Google brass decided not to put ads on health record pages.

Salesforce.com (CRM) CEO Marc Benioff, who was sitting in on the lunch session, challenged the decision: Why not let consumers opt into health record ads? Mayer said it’s not worth it. For one, the inventory of health record ads wouldn’t be sizeable enough to draw serious ad dollars. Add to that the criticism Google would draw from privacy advocates, and there’s not much point.

But that doesn’t mean Google’s doing health records as charity. Mayer and the rest of Google leadership are counting on the Google News model: If people come to Google for their health records, they’ll end up using the search engine to buy prescriptions, find doctors, whatever. And in the process, Google will cash in.

Google’s advertising and marketing teams are geniuses. This strategy really works for a strong and familiar brand.

I would like to read more about Google’s strategies in advertising.

Alicia
The Wall Street Survivor
http://wallstreetsurvivor.com

Posted By Alicia : August 4, 2008 12:57 pm

Dear Google…how about cuil.com

Posted By Imam Mulyadi,Magelang Jawa Tengah Indonesia : July 29, 2008 4:34 pm

The elephant in the room is how much of the $100M is taken out of newspapers pockets?

In theory, Google News should drive traffic to the newspaper sites but in some cases, the excerpts may be enough.

Posted By Steve, Los Angeles, CA : July 25, 2008 2:34 pm

KK, I am an indian american and I am not sure what point you are trying to make. I am sure the Intel Pentium chip wasn’t “invented” by one person. It was probably a collaborative effort involving many many people. There may have been a single engineer of Indian decent who played some lead role. So what? welcome to the human race and welcome to America and stop thinking in terms of race and nationalities.

btw according to wikipedia the hilltop algorithm was patented by two people: Krishna Bharat and George A. Mihăilă

Posted By Prasad, San Francisco CA : July 24, 2008 2:43 am

Rebecca, your argument is a bit confusing. Are you saying that in order for Google to make money from Health users then using Google to search, they have to review your health info? That is absolutely false. Yes, they will be storing your search logs (which no human will ever be analyzing closely), but the health data is completely separate. It is true that Google as a whole is not a subject matter expert in health info management, but if you think that they didn’t do their due diligence in hiring people that are, then you don’t know much about Google. They are cocky enough about wanting to be the best at everything, that they invest a lot in bringing in the right people. The goal of Health is to do something that privatized medicine has never put the time, energy and money into – making universally accessible health records. Google has the cash in hand to do it, and even if this isn’t the be-all-end-all product, it will probably be copied and iterated on by others, and could end up getting us to a system where you don’t have to have your shots records in a little book in your filing cabinet, and you don’t have to have your archaic doctor’s office copy your records at $.10/page.

Posted By KC, San Diego : July 23, 2008 11:13 pm

Josh,

Unlike many other immigrant community, Indians in the America who make it big are those who are born and educated in India, spend good 20-25 yrs in India before migrating to US.

Now, name one dutch who was born and educated in one of those dutch lands and made it really big ?

Posted By SS, New York : July 23, 2008 11:10 pm

KK,

Welcome to the melting pot of America. You don’t see my work being credited to the American Dutch heritage.

By the way, I work with many Indian Americans and they are all exceptional people.

Posted By Josh, Denver Co : July 23, 2008 5:17 pm

“If people come to Google for their health records, they’ll end up using the search engine to buy prescriptions, find doctors, whatever. And in the process, Google will cash in.” In order for Google to achieve above and optimize the appropriate $/advertisement then you have to monitor the individuals search- the process of searching then reviewing your health info – will not protect your privacy – it will invite the tracking of your subject matter. Since Google is not a subject matter expert in the managment of health information – they will not spend the resources to provide a quality product that actually provide value to a patient/individual

Posted By Rebecca Saltiel, Westmont IL : July 23, 2008 3:49 pm

Better news at http://www.cwebnews.com
International selections are amazing.

Posted By technistar– los angeles, ca : July 23, 2008 1:32 pm

Another search engine flying under the radar:

Trendy Newz

Posted By banglo, beverly hills, ca : July 23, 2008 12:51 pm

A great and useful search engine that is exploding across the country is
http://www.searchtheentirecraigslist.com

The # of searches being done is climbing tremendously as people see how well it woks to help them find what they are looking for.

Posted By Paul South Florida : July 23, 2008 12:32 pm

Goolge news was invented by an Indian American named Krishna Bharat. His Hilltop Algoritmn is what allowed the existence on Google News…

Never seen any American Media Educating its ordinary citizens about these facts which could change the preception and hence foreign policy towards a country…

By the way the Intel’s Pentium chip was invented by another Indian American named as Vinodh Dham…

Posted By KK Fairfax, VA : July 23, 2008 10:54 am

Another search engine to check out is eZanga.com. eZanga offers high grade search as well as customized PPC ad campaigns. With eZanga’s anti-click fraud technology, Traffic Advisers, fraud is detected real time rather then after the fact, therefore increasing ROI.

Posted By Tom Middletown DE : July 23, 2008 9:18 am

I think Google’s revenues and stock prices are more speculative than actually real, the stock is pretty overvalued when its above 500 right now. $100 million in revenue per year eh? That’s another drop in the big Google profit bucket.

Posted By Mike, Baltimore, MD : July 23, 2008 9:05 am

Actually David, depending on what method is used to value a company for a sale, a single year’s income could be a valid benchmark. Since the news site’s stock is the same as the search engine, you can’t use shareholder valuation. So, a year’s revenue might be the best method of determination.

Posted By Marc, Phx : July 23, 2008 7:41 am

@Matt see cookies – they just count how many people go there from the news site
It’s probably possible to work out how much they get paid for the ads they serve to those specific people, so they probably have it to the cent ;)
– imma

Posted By Imma, York, Uk : July 23, 2008 4:55 am

I think she’s saying that the news site generates $100M per year for Google. The value of the site itself is therefore a lot more than that.

Posted By David, Burlingame CA : July 22, 2008 8:43 pm

For the person above (Matt), Do you not think that Google the company that makes billions knowing where people go on the web doesn’t spend millions finding out how many people actually use the Google search engine from Google News? They probably have an entire team that just tracks and studies how many people that use Google News go off to use Google and then go off to click on advertisements.

Posted By John, Hinckley Ohio : July 22, 2008 8:30 pm

They funnel people to Search because the Search is right at the top of the News page.

Posted By Omar, Foster City, CA : July 22, 2008 8:20 pm

After reading this article my big question is, “how do they know that Google news is funneling visitors to Google search?” Did anybody at this conference ask them that important question?

Does that mean that Yahoo’s news site is worth $100 million also?

Posted By Matt, San Diego California : July 22, 2008 7:24 pm
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Jon ForttA senior writer for Fortune, Jon Fortt focuses on technology and innovation in Silicon Valley - a subject he's been reporting on since his days as a rookie reporter for the Lexington (Ky.) Herald-Leader. Before joining Fortune in 2007, Jon had reporting and editing stints at Business 2.0 magazine, and the San Jose (Calif.) Mercury News, Silicon Valley's hometown newspaper.
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