What To Make Of Google’s $8 Billion “Mobile Run Rate” Figure

A year ago Google said it had a “mobile [advertising] run rate” of $2.5 billion. That was impressive. But yesterday on the Google Q3 earnings call CEO Larry Page announced a much larger number — $8 billion:

This time last year, I announced that our run-rate for mobile advertising hit $2.5 billion. That seemed like a pretty big number even for Google. But now we have built up additional mobile revenue from users paying for content and apps in Google Play. Including these new sources grossed up, I can announce our new run-rate for mobile is now over $8 billion. That’s quite a business.

CFO Patrick Pichette said that the “vast majority” of the $8 billion figure was mobile advertising. Android app sales are “booked” on a net basis (the 30 percent Google gets) but Google Play content sales (movies, books) are included on a gross basis.

It’s a bit frustrating that Google isn’t giving us an “apples-to-apples” comparison. However the company is under pressure to show mobile revenue so it’s throwing in everything.

What does “vast majority” mean? It certainly means more than 50 percent and probably something more like 70 percent or 75 percent.

Last year I speculated that if Google’s mobile ad revenue growth continued it might see a run rate of up to $6.25 billion in 2012. In January this year Piper Jaffray analyst Gene Munster projected that Google mobile revenues “could top $4 billion.” And Cowen & Company analyst Jim Friedland estimated (based on a per-device revenue calculation of $7) that Google would make $5.8 billion in mobile advertising revenue in 2012.

Annual revenues is different from annualized “run rate,” which presents a more upbeat picture of revenue. However the $4 billion-ish estimate of Google’s actual 2012 mobile ad revenues is probably close. Seventy five percent of Google’s $8 billion run rate would be $6 billion (which wouldn’t all be realized in 2012).

Just under half of Google’s ad revenue comes from the US market. But probably something more than half of mobile ad revenue is currently coming from the US.

According to IAB figures for 1H 2012, US mobile ad revenue is on track to hit about $2.5 billion in 2012.