Friday, May 4, 2007

The Most "Efficient" Brand

The potential of a Microsoft-Yahoo! deal is just too interesting to pass by, so I pulled together the data below from company filings and BusinessWeek's Top 100 Brands (Microsoft data is for the whole company because detailed numbers for its Online Services segment is not available, so it’s not exactly comparable to the other two).

To my surprise, Google’s biggest advantage in it’s profit margin comes from Sales & Marketing Expenses, at only 8% of revenue, compare to above 20% for both Microsoft and Yahoo!. Use BusinessWeek’s estimate, Google’s brand value is about 15 times its sales marketing expenses, while that number for Microsoft and Yahoo! are 6 and 5 respectively. This sure makes Google one of the most “Efficient” brand out there.

  Microsoft Yahoo! Google
Revenue 100% 100% 100%
Operating Expenses  
Cost of revenue 17% 42% 40%
R&D Expense 15% 13% 12%
Sales & Marketing 22% 21% 8%
G&A Expense 8% 8% 7%
Operating income 37% 15% 33%
BW Rank by Brand Value 2 55 24
Sales and Marketing Exp. 9,818 1,322 849
Brand Value 56,926 6,056 12,376
B.V./Sales & Marketing 5.80 4.58 14.58

If there is going to be a Microsoft-Yahoo! deal, would Microsoft be able to create synergy by cutting into Yahoo!’s marketing expenses?