I’ve always assumed that Google was the best–and biggest–example in history of a business model based on free, but until today I hadn’t actually run the numbers. Before I get to those, let’s definite what “built on free” means.
Until the advent of the Web, the biggest companies built on free were broadcasters in radio or TV (“free-to-air” services, where a third party–the advertisers–pay for content to be free to consumers). In the rabbit-ears broadcast era, these were pure free plays: virtually all their revenue came from direct advertising payments or syndication revenues from their local affiliates, who were just passing along their own advertising revenues.
This is what’s commonly referred to as “the media business model”. Sometimes it means that advertisers subsidize 100% of the content costs, other times they subsidize just 70-80% of those costs, as in the case of magazines and newspapers.
Since the advent of cable TV and satellite radio, the media business model has evolved. TV broadcasters are bigger but they’re also more diversified, with a mix of revenues from traditional ad-supported free media and paid content, from DVDs to pay-per-view. Only terrestrial radio remains purely free.
Meanwhile, the pure free-to-consumers media business model has moved to the Web, but mostly in the shape of companies that don’t fall neatly into traditional definitions of “media”, such as Google or Yahoo.
So to properly see how the Web free companies compare to the broadcast free companies, we’d have to carefully tease out just the free parts of the broadcasters’s revenues. Fortunately, we don’t have to bother because it’s really no contest.
Google, at $17 billion in annual revenues last year, is larger than any broadcaster in history, free and non-free elements combined. The biggest broadcasters, ABC, CBS and NBC, are all in the $14-$15 billion range. The biggest radio network, Clear Channel, had revenues of $7 billion. Meanwhile, on the Web, Google’s closest free competitor is Yahoo, at $7 billion.
So congrat, Google. You are indeed the all-time biggest company built on free. And a good thing, too, given how much time I’ve been spending at the Googleplex of late.
via The Long Tail by Chris Anderson on 9/8/08