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asked in Estimation by (21 points) | 279 views

2 Answers

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Based on information given in the question:

  • Calculations restricted to the US region.
  • Annual revenue required.
  • Calculation is strictly limited to the Gmail product.

Assuming this is revenue based on advertisements displayed at the very top of the inbox when the user is in their gmail account.

 

  • US population = ~300 million
  • Number of people who have access to the internet = 80% of the population = 0.8 * 300 million = 240 millon
  • Assuming 50% of the email market is cornered by Gmail = 0.5 * 240 million = 120 million users
  • Assuming advertisements shown per email = 2 ads
  • Number of emails per user per month = 30 emails
  • Number of adverts shown per user in a year = 2 * 30 * 12 = 720 ads
  • Click through ratio of advertisements = 20%
  • Number of ad clicks = Number of ads shows * User pop * CTR = 700 ads (rounding)  * 120 million * 0.20 =16.8 billion
  • Assuming cost per click  = 10 cents
  • Revenue from advertising on Gmail = 16.8 billion * 10 cents = $1.68 billion 

 

Potential source of errors:

  • Underestimating the user population
  • Underestimating ads shown per email
  • Underestimating number of emails accessed per user/permonth

 

Feedback welcome.

answered by (28 points)
0 votes

Start with simple equation

Revenue = # click in US per year * revenue per click

# Click in US per year= Number of users * # clicks per users per year

Number of users = Number of gmail users = US population* % internet users * % internet users using gmail

= 300 million * 80% of population has internet * 50% uses gmail = 120 million

 

# clicker per users per year = Number emails received per users * number of ads per email * Clicks per ad

= 60 per month * 12 months * 2 ads per email * 2% ctr 

= 720*.04 = 30 clicks per user per year

 

Revenue = 120 mn users * 30 clicks per user * $0.1 revenue per click

= $360mn per year

Having an equation help interviewer to understand what are you calculating and why are you calculating

answered ago by

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