Impact on Google’s stock if Google can monetize YouTube at levels similar to Google Search

by Trefis Team
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Google’s stock price based on Trefis estimates would be close to $700, if in the long term, Google could monetize YouTube at levels similar to monetization of Google’s Search business today.

Google’s search business is dependent on the number of searches conducted on Google and makes money from contextual advertising known as keyword advertising that is shown based on the type of search a user conducts.  For example, a user searching for “NYC restaurants” would be shown a variety of ads on the right-hand side of Google’s search results pertaining to restaurants and food services in New York City.  Google’s YouTube depends on the number of user page views on YouTube and makes money from advertising within videos as well as on the YouTube pages.

Based on Trefis forecasts for Google Search and YouTube, the implied number of page views on YouTube in 2009 will be approximately 712 billion while over 421 billion searches will be conducted on Google.  Despite the higher number of page views on YouTube, Google Search Ads constitutes 78% of the $528 per share Trefis price estimate while YouTube constitutes only 2%.

The difference in value is attributable in large part to the higher level of monetization on Google search.  We estimate Google’s Revenue per 1,000 Searches (RPS) to be $36 today compared to $0.97 of Revenue per 1,000 Page Views (RPM) for YouTube.

Within Google’s content on our platform, you can see how initiatives like content partnership with video content owners, improved targeting, and increased use of video advertising instead of static ad formats will help YouTube monetization. You can modify Revenue per Page View for YouTube to see how Google’s stock price estimate would be impacted, if YouTube monetization were to increase from the current levels of meagre $0.97 Revenue per 1,000 Page Views.

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