Google Apps is 3% of Google’s Stock
We estimate that Google’s (NASDAQ:GOOG) Apps business contributes about 3% to Google’s value, or $7 billion. This makes Google Apps more valuable than YouTube (2%) and Gmail (<1%) combined.
Google Apps refers to Google’s web-based word processing, spreadsheet, email, and collaboration programs that is an alternative to Microsoft’s (NASDAQ:MSFT) dominant Office suite of productivity software used by businesses and consumers.
We estimate that Google will earn slightly less than $500 million in revenue from Google Apps in 2010 and that this will increase to about $2.2 billion in revenue by the end of our forecast period. Below we highlight two of the important revenue drivers for our Google Apps analysis:
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1. Price per Paying Google Apps User will Reach $61
Individuals and small organizations can access many of the applications included with Google Apps for free. Businesses, government agencies and schools pay Google about $50 per user each year for access to a premier edition of Google Apps that includes more storage, better reliability and more administrative IT controls over user accounts.
We estimate that Google’s pricing will increase to around $61 per user over the Trefis forecast period once Google establishes a larger customer base and includes more features within its Apps offering. You can modify our forecast for pricing below to see how Google’s stock is impacted in different scenarios.
2. Number of Google Apps Users will Exceed 80 million
We estimate that there are about 20 million Google Apps users currently and that 25% of them are paying users. We estimate Apps users will exceed 80 million with 40% of them paying users by the end of the Trefis forecast period.
In comparison, we expect Microsoft Office to sell more than 300 million business software licenses and over 70 million consumer software licenses by the end of our forecast period.
You can modify our forecast below to see how Google’s stock would be impacted if the number of Apps users grew to be comparable to the number of Microsoft Office business licenses sold.