Saturday, February 18, 2006

Timeline: Employee Headcount 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 market caps as of 02/16/2005,
  • 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.

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 Google Sheet.