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July 02, 2012

Google earns $9.7 billion from online ads while Microsoft loses $9 billion

Microsoft took a $6.2 billion charge for the purchase of performance of aQuantive, an online advertising service that it bought in 2007 for $6.3 billion. Since it bought aQuantive, Microsoft's online division has reported losses totaling nearly $9 billion.

Google spent $3.2 billion to acquire DoubleClick, an online ad service that used to compete against aQuantive. Google last year earned $9.7 billion on nearly $38 billion in revenue, with most of the money coming from online ads.

In 2011, Google's search and advertising tools helped provide $80 billion of economic activity for 1.8 million businesses, website publishers and non-profits across the U.S.



The Google estimate is comprised of a limited part of our business and relies on conservative calculations. For example, it doesn't include the economic benefits of search results for consumers, the impact of our hiring or employees, or the impact of products like Google Maps or YouTube. They hope to be able to include these sources in future reports.

How did Google determine that the value of AdWords is $2 for every $1 spent?

The Google Chief Economist Hal Varian based his estimate of the economic value provided by AdWords on observed cost-per-click activity across a large sample of their advertisers. Assuming advertisers are maximizing profits, Hal estimates the value enjoyed by advertisers is between 2 and 2.3 times their total expenditure on AdWords. They use the lower end of the estimate to be conservative.


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