How much revenue did Gmail make from ads in the USA last year?

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How much revenue did Gmail make from ads in the USA last year?

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productmanager1644 · Answer 1 · 2021-01-31T21:38:44+0000

CLARIFY:
1. Are we sticking to a certain channel: mobile v. web? Assume no / include both.
2. Can we assume that we only want to include direct revenue from Gmail? Ex. would not include an email that linked to a Youtube video that also ran advertisements? Assume yes.
3. Can we assume we only want to include revenue for AdSense (not a competitor)? Assume yes.
4. Could you confirm that Gmail only makes money through ads when clicked? Assume yes.
GMAIL AD REVENUE OVERVIEW: Gmail makes money from advertisements done through AdSense. Google earns money through clicks on ads, though it also pays publishers for impressions.
EQUATION: # Gmail Accounts in US * # of Ads / account in year * Revenue / Ad = Total revenue from Gmail ads

BREAKDOWN UNKNOWNS:

# GMAIL ACCOUNTS IN US:
1. What # of people use Gmail:
  1. US Population Stats:
    1. Total Population in US: ~330M
    2. Average Life Expectancy: ~80 years
    3. Total People / Age Year: ~4.125M
      1. Assume even distribution of people 0-80 years old.
      2. 330M / 80 = ~4.125M people in each year
  2. Total People Who have Any Email Address:
    1. Total People Who have Any Email Address: 167M
      1. AGE RANGE:
        Assume ages 15-65 MAY or MAY NOT some email address. (We want the age group most likely to use an email regardless of whether they use one now.)
        65-15 = 50 years
        50 years * 4.125M people in each year = 206.25M people
      2. INTERNET CONNECTIVITY:
        ~90% of US has Internet.
        206.25M people * .9 connected to Internet = 185.625 M
      3. HAS EMAIL ADDRESS:
        Assume 90% of people connected to Internet have an email address. (May not be Gmail.)
        185.625M people * .9 = 167M
    2. # of Gmail Users of Email Address Holders: 117M
      1. Given that Gmail is a popular email provider, assume 70% of email users use Gmail. (Anecdotedly, I think it's rare for people I know to use other providers like Yahoo or AOL, etc.)
      2. 167M email holders * .7 gmail emails users = 117M
  3. What # of Gmail accounts are there:
    1. Average user likely has 1 Gmail address but some may have more than 1. Most of these accounts are personal. Let's assume on average if someone has more than 1 Gmail, they have 2. Additional Gmail could be another personal account or a small business account.
      1. PERSONAL ACCOUNT: 140M personal Gmail accounts
        Let's assume 1/5 people have a second personal account.
        117M Gmail users (1.2) = 140M Gmail personal accounts
      2. SMALL BUSINESS:
        Gmail is generally for personal email use, but there are a small percentage of small businesses that may use a second Gmail as a business account.
        Total Small Business in US: ~31M
        Small Businesses Using Gmail Account:
        Assume 10% of small businesses use a gmail account.
        31M small businesses * .1 = 3.1M Gmail business accounts
    2. TOTAL GMAIL ACCOUNTS: 140M personal accounts + 3.1 M business accounts = 143.1M Gmail accounts (round to 143M)

# ADS / ACCOUNT IN US IN YEAR: The number of ads / account will vary based on the number of emails that account sees.

ACCOUNT TYPES:

Type of Account	Total Emails / Day per Account	Emails with Ads per Account
Few # of Emails	5 emails / day	1/5 emails - i.e. 1 ad / day
Moderate # of Emails	20 emails / day	10/20 emails - i.e. 4 ads / day
High # of Emails	50 emails / day	10/50 emails - i.e. 10 ads / day

TOTAL ADS IN DAY / ACCOUNT: Note, we assume each email with an ad only contains 1 ad and that ad is run by Google Adsense.

Type of Account	% of Gmail Accounts	Total Gmail Accounts	Total Ads / Day by Account Type
Few # of Emails	25%	.25(143M) = 35.75M	35.75M accounts * 1 ad = 35.75M ads in day
Moderate # of Emails	50%	.5(143M) = 71.5M	71.5M accounts * 4 ads = 286M ads in day
High # of Emails	25%	.25(143M) = 35.75M	35.75M accounts * 10 ads = 357.5M ads in day

Total Ads in Day on Gmail: 35.75M + 286M + 357.5M = 679.25M ads on Gmail / day

TOTAL ADS IN YEAR ON GMAIL: 679.25M ads / day * 365 days / year = 248B

REVENUE / AD: Assume that Google makes $0.10 / click.
TOTAL REVENUE ON GMAIL: $2.48B / year
1. TOTAL CLICK THROUGHS / YEAR:
  1. Assume that only 10% of users click on each ad.
  2. 248B ads / year * .1 = 24.8B click throughs
2. TOTAL REVENUE / YEAR:
  1. Assume Google earns $0.10 / click.
  2. 24.8B clicks / year * .1 = $2.48B

CHECK:
1. Number of total Gmail accounts in US is ~130M. Assumption that 1/5 users have a second personal Gmail address is likely a little high. Perhaps closer to 1/10.
2. Total Google Ad Revenue in 2019: ~ $133B. US was ~$41.8B of that revenue. Includes revenue from Search, Youtube, etc. Guess most of the revenue is from Search. Answer seems fairly reasonable.

PM Team · Answer 2 · 2019-05-23T10:37:39+0000

Start with simple equation

Revenue = # click in US per year * revenue per click

# Click in US per year= Number of users * # clicks per users per year

Number of users = Number of gmail users = US population* % internet users * % internet users using gmail

= 300 million * 80% of population has internet * 50% uses gmail = 120 million

# clicker per users per year = Number emails received per users * number of ads per email * Clicks per ad

= 60 per month * 12 months * 2 ads per email * 2% ctr

= 720*.04 = 30 clicks per user per year

Revenue = 120 mn users * 30 clicks per user * $0.1 revenue per click

= $360mn per year

Having an equation help interviewer to understand what are you calculating and why are you calculating

PM Team · Answer 3 · 2019-05-13T00:23:42+0000

Based on information given in this estimation interview question:

Calculations restricted to the US region.
Annual revenue required.
Calculation is strictly limited to the Gmail product.

Assuming this is revenue based on advertisements displayed at the very top of the inbox when the user is in their gmail account.

US population = ~300 million
Number of people who have access to the internet = 80% of the population = 0.8 * 300 million = 240 millon
Assuming 50% of the email market is cornered by Gmail = 0.5 * 240 million = 120 million users
Assuming advertisements shown per email = 2 ads
Number of emails per user per month = 30 emails
Number of adverts shown per user in a year = 2 * 30 * 12 = 720 ads
Click through ratio of advertisements = 20%
Number of ad clicks = Number of ads shows * User pop * CTR = 700 ads (rounding) * 120 million * 0.20 =16.8 billion
Assuming cost per click = 10 cents
Revenue from advertising on Gmail = 16.8 billion * 10 cents = $1.68 billion

Potential source of errors:

Underestimating the user population
Underestimating ads shown per email
Underestimating number of emails accessed per user/permonth

Feedback welcome.

SuperUser14 · Answer 4 · 2022-03-17T19:10:36+0000

1. Clarify and layout the scope

For US, GMAIL users, can access gmail through phone or desktop or any other device. Considering consumers (B2C) and not corporate users (B2B). B2B users will be heavy users and assumptions would be different so I will focus on the B2C segment. I will calculate the revenue per year in in USD. I am assuming that revenue is generated only when a user clicks on the ad

2. Equation:

GMAIL revenue from ads in US from B2C users = [# of ads per user per year] * [# of users per year] * [$ revenue per ad]

3. Calculation

1. Calculate # of ads per user per year

Divide users into 3 segments

Power - they read 5 emails per day of all emails that they receive, that is 35 emails per week

Average - they read 2 emails per day of all emails that they receive, that is 14 emails per week

Low - they read 1 email per day of all emails that they receive, that is 7 emails per week

Assumption - each email has 3 ads, and there is 50% chance of a user clicking on those ads, I will calculate the # of ads clicked per week for each user

Power = 35*3*50% ~50

Average = 14*3*50% ~20

Low = 7*3*50% ~10

2. Calculate # of users per year

Total Population = 300M, 70% have internet access that is ~200M. Target email users are in the age-group of >12 to 80 (assuming life expectancy is 80 years). With a uniform distribution, that's ~170M users. GMAIL market share is ~85%, thats is ~150M

Low (12-18) ~15M

Power (19-65) ~100M

Average (65-80) ~35M

3. $revenue per ad - I don't have any information on how much revenue google makes from a single ad, I am going to assume it is $0.01 (1 cent) per ad that a user clicks

Plugging back the numbers into the equation,

GMAIL revenue from ads in US from B2C users = ((10*15M+20*35M + 50*100M)*52) * $0.01 = ~$3.2Bn per year

4. Sanity check

Google makes about 1.3Bn from Gmail every year, 80% comes from ads so its ~1Bn. Calculation is off by a factor of 3x which could be due to incorrect assumption

Click rate will vary per user group, will be lower for Low and Average

# of users may have been overestimated, did not consider that there may be internet users who don't use email at all.

Assumptions on number of emails read per day needs to be validated with a reliable source

amendezp · Answer 5 · 2019-08-08T06:19:41+0000

Gmail ads are is charged by click, each click has an average CPC. The equations needed would be:

Gmail revenue in a year=Monthly clicks * Avg. CPC*12

Monthly clicks= Monthly Impressions * avg CTR

Monthly impressions= Avg. Impressions per session * Monthly sessions in the US

Monthly sessions in the US= Avg. daily sessions*30 * #active users in the US

#active users in the USA= US population * Internet Penetration in the US * Gmail e-mail market share

Secondly, I enlist my assumptions:

Assumptions:

Avg. global cpc=$0.1 USD

Avg. CTR (impressions that ended up in a click) =10%

Avg. Impressions per session = 2

Avg. daily sessions per account= We can split into 2 main buckets, heavy users (business accounts, internet proffessionals, etc) and light users (personal accounts).

Heavy Users (40% of total) = 20 daily sessions
Light users (60% of total) = 5 daily sessions

US population = 300M

US Internet penetration = 80%

Gmail Market Share = 50%

Substitute numbers:

#Gmail active users in the us= 300M*.8*.5=120M

Monthly sessions in the US = 120M*(.4*20+.6*5)*12=15,840 M

Avg. Monthly Impressions = 2*15,840M = 31,680M

Avg. Monthly clicks = 3,168M

Yearly revenue = 3.2B (rounded) * 12* $0.1= $3.84 Billion

Sanity check, possible mistakes:

Gmail has over 1.2B active users. I assume that more than 10% of them are based in the US, perhaps that number is understimated.
There might be even lighter users who check their mail once a day or every two days, avg. daily sessions could also be overestimated.
Googles yearly revenue is around 1.3 Billion. Around 80% comes from ads, so that leaves a business of $100B yearly. Perhaps only 4% coming in from Gmail Ads might suggest an understimated final answer

Roys · Answer 6 · 2019-06-14T02:59:15+0000

Context

Gmail is a product people use to exchange information. The product is free as far as I know. However, ads are shown in Gmail. When the user is using Gmail, they are signed in and they are ads invarious parts of the experience. These ads I assume are personalized when google has information about preferences and interests about the user, contextual based on the email content. The types of ads that are shown can be broken up into following varieties; untargeted, targeted based on demographics, based on interests, content based. The type of ad content is usually text assumption.

Ad revenue = price x volume, where volume is the average number of times an ad unit was sold.

Volume = number of times a Gmail experience was shown to a user x average rev earned

Number of times and content shown (let's calculate daily) = function of number of users x average ad content views per session

Number of users visiting Gmail every day = not sure of exact number but let us start from MAU, Gmail is dominant afaik except perhaps China. Let's say dominance is around 70% penetration for North America, Europe, India - North America roughly 500m population, let us assume that 80 percent are eligible adults, let's assume Europe is 250m people, again assume 80 percent eligible, in India assume 400 m people have access and 60 percent are eligible.

So, users in developed countries around 600m with Gmail accounts, India and rest of the world - another 600m.

Consider that habits are same, people check email daily - almost all of the monthly users. Let's say 80 percent uses check daily.

So roughly 480m users or round to 500m check daily from each bucket

Consider, mobile is dominant say 80 percent of visits and 20 percent on desktop on developed countries.

Consider 5 visits a day per user, with 3 ad content experience on mobile, 1 on desktop.

So if ads are sold based on cost per impression, then there are roughly

500x5x3,=7.5 billion impressions a day

1.5 billion impressions a day on desktop

Let us assume, that we have 50 cents per 1000 impressions = 3.75 b / 1000 = 3.75 m dollars per day, assume higher rate for desktop but less audience so 20 percent audience but 30 percent higher rate. So, 3.75m + 1m = 5m dollars per day.

So, 150m dollars / month, so 150x12= 1.8 billion dollars a year. Assume ad rates are lower in not developed countries, say 50 percent, then 0.9 billion or roughly 3 billion dollars.

We have possibly considered a much lower baseline rate appropriate for non targeted ads, higher quality targeting mix will push this higher 2-5 times. So revenue could be that much higher.

Other factors, users opt out in Europe and audience could be smaller.