What Bing might cost Google (it's not peanuts!)

Part of the excitement over Microsoft's new Bing search engine has been the fact that it seems to be getting a pretty fair amount of traffic.

So far, it seems that Microsoft (MSFT) has gained search share at the expense of Yahoo! while Google's search share has remained relatively steady. If Bing's popularity grows, however, it's bound to make a dent in Google's dominance of search.

So what would be the impact if users began to give up Google (GOOG) in favor of Bing?

Here are a few numbers to consider:

Google derives 99% of their revenue from advertising.
Google derives 69% of ad revenue from "Google web sites". This means Google search and other sites owned by Google such as YouTube. The vast majority of the revenue is derived from search advertising.
According to the most recent annual report, advertising revenue from "Google web sites" was $14.4 billion.
Google's overall share of search according to ComScore's most recent measure for May is about 65%, a 0.8% increase over April.

If Bing begins to gain search share from Google, the financial impact to Google would look something like this:

A 65% search share equates to $14.4B in annual ad revenue for Google. So for every percent of search share that Google loses, it would cost the company roughly $220 million in revenue.

At this rate, Google will not take the Bing threat lightly. Look for Google to respond aggressively if Bing starts to really take off.

Disclosure: no positions

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