This is a really long message, but it's worth the read. (Oh yeah, and please visit my website I list below... it has a goto affiliate box on it and everything)
Why I'm high on Goto-
I did my own revenue projections. This took a few hours to do, but was well worth it and I encourage every one of you to do the same thing. I did these projections on April 26, but the numbers have only gotten better since then.
Goto lists the top 100 non-adult search terms. I ran a query for each of the top 30 and noted the average bid on the top 10 URLS.
Goto also has a tool designed for advertisers which tells you how many of each query were run in the previous month. So I counted the number of hits for each of the top 30 query terms. Here's a sample of the type of information I then had (top 5 only to save time):
travel: 423520 queries, avg of top 10 = $0.65
game: 213033 queries, avg of top 10 = $0.95
computer: 187255 queries, avg of top 10 = $0.65
music: 171431 queries, avg of top 10 = $0.60
map: 159882 queries, avg of top 10 = $0.20
and so on. Some of the top 30 ("hotmail" for instance) had almost no bids. Others had real high bids ("casino" was average of $3.45 at the time.). I then averaged the averages (should technically have taken a weighted average, but I don't think it would have changed much) and found that the average of the top 10 bids for the top 30 search terms was right at 50 cents.
The top 30 terms accounted for 2.8 million queries. Goto was averaging 50 million queries/month at the time, so this accounted for 5.6% of Goto's traffic. Round it down to 5% to be conservative.
If you assume that each person who runs a query selects exactly one item, then 5% of the queries generate 50 cents each. Some people will click on no items, some will click on many, assuming one makes life easy. I did a search engine research project at school (I'm a grad student in computer science) and my (pretty informal) research showed that the average user clicks on 1.08 items out of a hit list. So 1 is a reasonable guess.
At 50 million hits/month (which is much lower than they have now), 5% would be 2.5 million hits/month, which would be $1.25 million.
Now figure that the other 47.5 million hits are going to generate something. Some of those hits are for unbid terms. Some are for terms in the top 100 that aren't top 30. I conservatively estimated 1/2 cent on average for these 47.5 million queries. That's another 250K/month.
So 1.5Million/month time 12 months = 18 Million/year. And that's based on 50 million queries and outdated bid amounts. Someone has already posted here that the casino bids are up to $5.00 or so... traffic is also up to what, 80 million hits/month? If the bids stayed the same but the traffic went up to 80 million hits/month, then the revenue jumps to $28.8 Million/year.
Now, this doesn't take into account costs of getting the revenue. I tried to dig into Inktomi to find out what they charged various customers, but best I could figure out is that they take what appears to be 3 cents per 1000 queries. But they claim to take 7% of total advertising (it just works out to be close to 3 cents/1000 queries). So figure I did my math wrong and take out 7% of total revenue AND 3 cents/1000 queries and for Inktomi and it runs $2 Million/year. Then there are the costs for the affiliate program, where they pay out 2 cents/query.
Let me just say that the affiliate program rocks. I use it myself at holymarket.com (I put together a mini-portal with stock research and car research and shopping, mostly for kicks). I like getting 2 cents per query. You may think, the more affiliate queries the more money goto is paying out, right? True. But what is Goto's incremental revenue per query?
5% of queries earn 50 cents
95% of queries earn 0.5 cents
So the average query earns (.05*50) + (.95 *.05) = 2.975 cents. So Goto is making money on each affiliate query. The more the merrier.
Plus, there's also the advertising/mindshare benefit.
I've had people tell me they don't like goto and they prefer hotbot, but then I tell them that hotbot uses the exact same search engine (inktomi) as goto, so they can do the exact same stuff. So for generic queries, goto is no worse than hotbot, and for specialized (one word mostly) queries, goto is much much better because people will only pay for their site to be listed if it's relevant. Even people like me can get listed on goto cheaply (do a search for "christian jewelry" - I'm "the holy market," listed between 5 and 8 randomly... it's a small business I run out of my house selling my stepfather's jewelry. My goto ad of 1 cent/clickthrough has more than paid off).
One other thing these numbers completely ignore are the adult search terms. "sex" for example had 281152 queries which would place it #2 in the non-adult list, with an $0.20 average bid. This may lower the average bid for the top 31 URL's, but it also increases from 2.8 million to 3.0 million queries the number of queries that are in the top 31... so my point is that more than 5% of the queries are the "high bid" items, which would increase the revenues.
With 28-30 million in revenues and rising, and expenses limited to advertising, equipment maintenance, and salaries, I fully expect the company to be profitable in the short run. I ignored what they said in their IPO filing about how they may never be profitable. They have to say that to cover their butts in case something goes wrong. I think their advertising expenses are a little high, and I think the success of the affiliate program will allow them to ease off a bit.
Anyway, visit my site at holymarket.com and do a goto search to give me 2 cents to pay me for the time I spent doing the research, search for a "high bid" item, click on that to give goto some money, and we'll all be happy :-).
Even if you don't visit my site, do keep these numbers in mind. I'm very optimistic about the future of Goto. I think that it has the best chance of all the non-yahoo search engines of raking in some serious dough. You guys know what profit can do to an internet stock's price...
-Mike |
