Saturday, February 18, 2006

Timeline: Employee Headcounts for Google, Yahoo, and Microsoft

It's good to keep an eye on headcount when comparing companies. The number of employees you have pretty much defines what you can do: How many products can you develop and maintain, and how many shrink-wrapped software boxes or click-through banners can you sell?

I went out and collected some statistics for the three major Internet players: Google, Yahoo, and Microsoft.



All of these companies have been in exponential growth mode since the year they started. It's surprising to me that Microsoft is more than 6 times bigger than Yahoo and 11 as big as than Google, at least in terms of employees.

Also, Microsoft has been around for ages and consumes much of the timeline. Here's a graph for just Google and Yahoo:



Google is growing much faster than Yahoo these days. Over the last two years, Google's average employee growth rate has been 100%, while Yahoo's was at 34%, and Microsoft's was at 10%. If the current growth rates continued,
  • Google would surpass Yahoo's headcount in 2007, and
  • Google would be bigger than Microsoft in 2010.
This seems a little too optimistic to be true: It will likely become harder and harder for Google to double its headcount every year. Microsoft grew 80% on average in the 1980s (49% percent if you don't consider 1981, when the company more than tripled in size). For the 1990s, its average yearly headcount growth dropped to 24%.

An easy way to grow fast is to acquire companies. All three players have bought plenty of smaller businesses along the way. For example, Yahoo grew by 1000+ employees when it acquired Overture in 2003, thereby increasing its headcount by more than one-third.

Lastly, let's have a look at how Wall Street values the employees of each company. With yesterday's market caps,
  • each Microsoft employee is worth $4.3 million,
  • each Yahoo employee is valued at $4.7 million,
  • and each Google employee is valued at $19 million.
Update in March 2011: If you have similar headcount timeline numbers for Facebook, shoot me an email so I can update these charts.


Sources: Some of this data was hard to come by and I had to use different sources for the data points. You can find all references and underlying data in this Excel spreadsheet.

27 comments:

Dan said...

Interesting stats. Must have been a lot of work to get all the data.

Gabor said...

From a friend's e-mail who reviewed this post:

"I'm not sure the comparison with Microsoft is valid, ideally you'd have numbers just for msn, not all of Microsoft. Microsoft is very different than most companies. One of my profs described it as 'A bank that happens to also make a bit of software' because they have so much cash."

I agree that a comparison to MSN would be better. However, the numbers are hard to come by. Also, isn't Google seen as "the next Microsoft", i.e. shouldn't it follow the MS growth curve? :-)

Anonymous said...

So I guess that means that for GOOG to come to parity, it would have to go down 75%... which leaves it at about ($350 * 0.25)= $87.50.

Gabor said...

An alternative interpretation is that GOOG can hire another 15000 employees before it has reached the right size :-)

getmehome said...

I think it would be cool to analyse this data on an equivalent basis - i.e. Year 1, Year 2 etc for each company. It should show how each company is growing quicker than the one before it and give an idea of how long it should take for google to overtake Microsoft based on a shorter but more intense growth period.

Gabor said...

I agree. Unfortunately, I have very little data about the first couple of years of Yahoo. There's just nothing to be found about that on the Internet. I posted a question regarding this on Google Answers a couple of days ago, but so far no answers.

Google and MS aren't really that comparable because MS really only took off in 1981, which I think coincided with the introduction of MS-DOS.

Anonymous said...

in its first two years yahoo was still under two hundred employees, i think #100 started in august 96. also i think your number for them now is low, i know 13,000 christmas gifts were bought this year, not sure how many extras, temps, contractors and outsiders got these....

Anonymous said...

Your numbers are a bit off because Microsoft and Google employ a lot of contractors (Google is chock full of contractors), and they are not listed as "employees".

Gabor said...

Dear Anonymous (#2), thanks for the data point you provided (Yahoo: 100 employees in August 1996). I added it into the Excel chart and it fits nicely with the other data. Didn't update the charts in the blog, though.

Yes, the contractors not being counted is a huge problem, and would probably make growth rates seem even higher.

Anonymous said...

good post...wall street does not care much about market value per employee. Much more relevant are revenues and profits per employee, and their trendlines.

Kiltak said...

Great post dude,

Where did you get all the numbers?

Cheers!

Kiltak
[Geeks Are Sexy] Tech. News

Gabor said...

Kiltak: All sources for the numbers are in the Excel spreadsheet I linked to.

Anonymous (#4): I agree that Wall Street doesn't care that much about market cap / employee. The valuation is, indeed, determined by future and current profits. Plus maybe a bit of substance value e.g., for a real estate company owning half of Manhattan.

I listed market cap / employee because it's very interesting in comparison to YHOO and MSFT, not because it's interesting for Wall Street.

Anonymous said...

Although it’s interesting I feel that you're using the wrong metric to value the employees of these companies. Market capitalization to employee count is interesting in that it shows what the investing public thinks of a company, but a more accurate depiction would be how much revenue (hence value) each employee is adding to the company. For instance Google does about $875,000 per employee, Yahoo! does roughly $483,000 per employee and Microsoft does about $630,000 per employee. All things being equal - Google seems to be proportionately (I didn't say accurately) valued but there's definitely a discrepancy with Microsoft.

Gabor said...

OOOH I GET IT! Digg has my post on the first page, with a strong emphasis on the market cap / employee number.

Again, I agree with the previous commenters: I realize it's not superimportant for Wall Street, but it's a very interesting metric in comparison to YHOO and MSFT.

Anonymous said...

Well, what matters most is not how many employees each has, but of what quality.
Like, MS has so much cash with them for so long time producing no real returns, Warren Buffet would have tripled it in 10 years;)

Dinesh K

Anonymous said...

One caution regarding headcounts - bigger is not aways better, particularly when it comes to legacy costs for retirees and other long term obligations. Bigger is only better if efficiency levels are compareable. For your model you are probably right though, "ceteris paribus."

Martin Roberts said...

Instead of graphing year vs staff, I used the data from the excel spreadsheet to graph the relative year (eg number of years since it had a staff population of, say 100 - June 2001 and June 1981 for GOOG and MSFT) and graphed it on a logarithmic scale. From this I noticed that all GOOG and MSFT are growing in a pretty similar manner, and YHOO is not too dissimilar. For example, putting an (expontential) line of best fit from the years they hit 100 to 10 years on, showed that Google, Yahoo and Microsoft steadily grew at 59%,37% and 57% resp.

Paul Youlten said...

"...For instance Google does about $875,000 per employee, Yahoo! does roughly $483,000 per employee and Microsoft does about $630,000 per employee. All things being equal - Google seems to be proportionately (I didn't say accurately) valued but there's definitely a discrepancy with Microsoft."

Any idea where craigslist and eBay would fit on this metric?

Meme chose said...

I believe Craigslist has about $25 million in revenues and 19 employees, so they would come in at more than $1,250,000 per employee.

It has been estimated though that their revenue will double almost overnight as a result of the latest move to charge realtors for listings in NYC (I don't believe this is likely to increase their head count at all).

They are an awesome company.

dustin said...

Very cool. Thanks for sharing the info.

Even though Google seems like a big company now, they are still just a gnat compared to the MS monster. I hope they don't get crushed.

Marc Mercuri said...

Interesting numbers, but as others have pointed out, this isn't the right way to approach the comparison.

Others have mentioned that there are valid reasons to compare MSN/Live.com and Ad efforts against Goog.

What you're also missing is that to support a company of this size, there are a number of non-engineering positions ranging from receptionists to facilities staff to security personnel to call center operators that are essentially commodity headcount and therefore would invalidate comparisons against smaller companies that are inherently more engineering and other IP generation centric roles.

Mercutio said...

I believe Y! #200 was in May of 97.

Gabor said...

Dear Marc (Mercuri),

you have some very good points.

Unfortunately, there is no publicly available employee count data on MSN or Live.com.

Still, I think the comparison is valid. Google is building an empire around the Internet. Microsoft, a generation before, built an empire around the desktop. In GOOG vs. MSFT, I'm comparing empire builders, not web companies.

Your second point is very interesting. But shouldn't the number of facilities people should grow proportionally to the total number of employees? 100 employees, 3 facilities people. 1000 employees, 30 facilities people.

Similarly, the sales force and call center staffing, probably grows in proportion to total revenues.

An exception are very small companies such as when Fog Creek was 2 people and Joel had to fight Michael Pryor about who has to take out the trash.

But I'm not really comparing small companies with large ones. Rather, I'm comparing the growth profiles of companies that have almost always been in growth mode.

Gabor

Gabor said...

Update: An article in Baseline magazine puts the "knowledge value" of each Google employee at $16 million, slightly less than my estimate of $19 million. The difference comes from their deduction of Google's tangible assets from the market cap, which is a good idea.

Gabor

mary branscombe said...

70K folk at MS means the company is the size of a town - and it can have the same gravity. The size of MS means that it is predisposed to apps that are suited for the individual user (lots of programmers at MS scratching their own itch), large enterprises and departments (MS is its own best customer), large teams of developers - and not much in between.

Max Ugaz said...

Hi Gabor. This is your most popular post! Congratulations! This is almost a brand! I read it on 2006 and used your information (quoted!) for a presentation about the MS vs Google endeavor. May be it's time for an information update, don't you think so? After 18 months may be you could find a trend.

Dimitri said...

Alos, it would be interesting, how many employees really have, Facebook or Twitter