The Economics of Gator

A recent article estimated that Gator made $100M in revenue in 2002. That’s a lot of dough. And it got me wondering, how one goes about making $100M in a year. Here’s my back of the napkin math.

Users
35,000,000
Active Users
20,000,000
Ads Delivered Per Year Per User
1500
Ads Delivered Per Month Per User
125
Ads Delivered Per Day Per User
4.2
Total Ads Delivered Per Year
30,000,000,000
Click Through Percentage
2.25%
Clicks
675,000,000
Revenue Per Click
$0.15
Revenue Per Thousand Ad Impressions
$3.38
Revenue Per Year
$100,250,000

Users On Gator’s web site, Gator currently claims they have 38M users. As recently as March 2003, I recall seeing the number at 35M. There are two key points. First with over 30M users, Gator must make a little over $3 per user per year, in order to do $100M in revenue. Secondly, Gator is still growing.

Active Users Although Gator claims over 35M users, on any given day, Gator must have significantly less users that are available to serve ads. We are estimating that that slightly more than 50% of their users are unavailable on any given day on average.

Ads Delivered Per Day Per User Dave is still running Gator and he is averaging a little more than 10 ads per day. Dave is a broadband user and a very heavy internet user. Therefore, 4 ads per day per active user is much more realistic. V

Total Ads Delivered Per Year That’s right. It’s 30 billion ads per year. That’s with a capital B.

Click through percentage Gator claims click through percentages of over 10%. This analysis uses a conservative 2.25%. This is a critical statistic in Gator’s business model because they are compensated by the number of clicks not ad impressions. As a point of reference, typical banner click through percentages range from .01% to .05%.

Revenue per click PC Pitstop ran a test with Google AdWords and we were willing to pay up to $.20 per new visitor. This analysis has a very conservative $.15 per click for fully targeted pop over advertising.

Revenue per thousand ad impressions This is a reality check. The standard measure for advertising impressions is the cost per thousand ad impressions. Our analysis is that Gator is averaging $3.38 per thousand ad impressions. This is a great deal. Our advertisers at PC Pitstop are paying far more than this for pop under advertising.

Conclusion Gator is thriving. They have a growing user base, and their business model is attracting more customers. With a war chest of over $100M per year, Gator looks like it is a force to be reckoned with.

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