Discover more from Growth Memo
Google Discover is a gold vein for publishers: hard to find but carrying copious cash potential.
Publishers are struggling. Like many gold diggers in the mid-19th century, they don't bring home an influx of cash. News consumption is declining across the board. When we consume news, 53% of us do it digitally compared to 5% of us who read print. The only one who reliably makes money is the shovel seller - in this analogy: Google. (source)
For users, the personalized newsstand with real-time updates (Discover) is a way to encounter new content they weren’t looking for - a counterbalance to Search. For Google, it's a way to compete against platforms like TikTok or Instagram, where serendipity is the glue that makes users stick.
Now, Google is testing the Discover feed on the homepage. A potentially new gold vein for publishers.
Getting Discovered (feat. Lily Ray)
According to Lily Ray, who has achieved outstanding results in Discover and was so kind to talk to me about it for this Memo, “some publishers see millions of clicks from Google Discover per month.“ When it strikes, it strikes hard.
Considering that the top publishers (definition: at least 10m visits over the course of 3 months) get an average of 28-32m monthly visits, a few million more matters. (source)
The biggest challenge with Discover: it’s highly volatile.
Lily Ray: “Google is extensively clear about this in its Discover guidelines, but this can often be a rude wakeup call for publishers who get used to receiving tons of Discover traffic and then lose most or all of it overnight. Sites are simply subject to the whims of Google, which can giveth and taketh away whenever and however it wants.”
What can you do? Not much. We still don’t know a lot about Discover.
Lily Ray: “If you're checking all the boxes in terms of technical and content eligibility in Discover, sometimes you just have to ride the wave and understand that for every high in Discover, there are almost always equivalent lows. This can be true of nearly every publishing site - including the most authoritative news publishers. No one is immune.”
Google updates can reward a site and punish it shortly after (see last week’s Memo), which sends mixed signals about quality. In 2020, I tracked my Discover feed and found Google understands your interests pretty well but might only show you a card (link to a website) for 12 days. Today, it’s even shorter. Google Discover can bring a flurry of traffic for a short amount of time and then stop.
It begs the question: why does Google invest in news content at all?
The value of news for Google
News content is a slippery eel. X struggles with fake news. Threads decided not to prioritize news on the platform (code for “we don’t want to deal with this mess”). Meta has heavily reduced news content in its feeds over the last few years.
Google is a sushi chef turning Eel into $8 a piece. The business value of News is twofold. On one hand, news still gets a lot of attention, and aggregators like Google News can harvest it to stay top of mind. Consider Google News a Michelin Guide-type of play.
On the other hand, feeding traffic to the news ecosystem is a way to protect and grow $32.8b in annual revenue for Alphabet. AdMob and AdSense, filed on quarterly reports under Google Network, drive about 11% of Alphabet’s revenue - and it has grown steadily. We don’t know the revenue contribution of each product, but together, they grew by ~50% since Q2 2020.
Companies that make $32b a year in revenue: 3M, Nvidia, Starbucks. Google makes the same amount with AdSense and AdMob alone. Even YouTube’s annual revenue hasn’t surpassed Google Network yet, though it could in Q3.
Think about it: the largest content platform on the web (YouTube) doesn’t drive as much advertising revenue as publisher and app ads.
AdSense allows sites to show display ads and other ad units that brands can bid on through Google’s ad marketplace (a constellation currently under review by the DOJ). Think Netflix running banner ads for The Witcher on imdb.com.
Over 2,000,000 sites use AdSense. Sites like HuffPost, Forbes, Buzzfeed, TechCrunch, Reddit, Glassdoor, Chegg, Twitch, IGN. What stands out? Most of them are publishers! Google's investment in News and developments in Discover are not just sticky push channels but a way to grow AdSense revenue.
The math checks out. Fandom.com gets an estimated 210m monthly visits through organic Search. According to the AdSense calculator, a site in North America in the Online Communities space makes ~$700k for 10m pageviews a month. Extrapolated to 210m monthly visits, fandom.com would make $14.7m a month or $176.4m a year just from AdSense. I assume Fandom gets less than that because Google likely tapers the payouts for very large sites, but it’s meaningful revenue nonetheless.
Google sells shovels, but some publishers find gold.
What it means
Google has several levers to drive more revenue: show more ads, make organic results worse, increase take rate, raise prices, and send more traffic to sites running AdSense or apps running AdMob.
The tension: over the last years, Google has boosted especially large (authoritative) brands / sites with the latest updates. Was the goal to push AdSense revenue? Are large brands truly always the better result?
If Google launches SGE (Search Generative Experience, a.k.a. AI search result) in its current form, it wouldn’t just cut into Search Ad revenue but also Network revenue since publishers would get fewer clicks. We (I) are concerned about the web ecosystem, but looking through the lens of $32b it suddenly seems more likely that Google won't launch an experience that cuts into its own flesh. At least not too deep. Maybe there is hope after all.
All these are internal conflicts Microsoft (Bing + OpenAI) and other contenders don’t have.