The disproportionate weight of US/UK income and the low growth of income from rest-of-world vs. the far faster growth of usage outside the US/UK means that the toughest nut for Google to crack is not penetration but emerging market monetization.
The disparity is enormous. US/UK revenue is on average $86/user/yr (2012) and rising. The rest of the world only manages $12/user/yr. That Rest Of World includes many wealthy countries such as all of Europe and Japan. So the problem for Google is that it has an order of magnitude less income per user in the part of the internet which remains unpenetrated and the trends show that they are not narrowing the gap.Horace Dediu
Google’s problem is exacerbated by the fact that its market share in Europe is effectively 100% (more precisely between 92 and 93% according to StatCounter), the search engine giant is completely dominating the market, yet still unable to effectively monetize it. This is a more general trend for US-based companies though, which usually focus on US users; to cite a recent example, Apple’s iTunes Radio launched in the US only a couple of months ago and still hasn’t expanded much, except in Australia. Also, Microsoft’s search engine competitor Bing has a tiny market share outside the US. Google’s results are simply much better internationally and I get the impression that the Bing team was focused on breaking Google’s dominance in that key market and silently ignored the rest of the world.
The underlying issue in my opinion is a vicious circle of increasing development costs and diminishing returns: adding support for competitive local results in smaller countries requires similar investments to a larger country (like taking into account local culture and regulations), but generates far less revenue, both because of fewer potential customers and less profit per transaction. At some point it doesn’t make sense economically to launch services in anything but the largest markets. In the end, despite joining the European Union, there are still significant differences and most countries need to be treated separately, making Europe as-a-whole a less lucrative market than the US, despite having a larger population and growing economic power.