(Note: The ideal measurement would use profit instead of revenue and payroll instead of employee headcount. But those are tougher numbers to find for obvious reasons.)
After the jump: The story behind this chart.
The Calacanis/DHH discussion touched on the idea that web companies should pay more attention to unique visitors per employee. The theory: That ratio forces you to get away from talking sheer size/traffic and instead focus on efficiency.
Now a while back we posted about this idea. Back then (2006), Craigslist was the king of getting traffic while keeping employee count low. The Top Sites landscape has changed since then though. Let’s take a look at some notable sites and how many employees they have today.
| Rank | Site | Employees |
|---|---|---|
| 1 | 19,835 | |
| 2 | 1,200 | |
| 4 | yahoo | 13,900 |
| 11 | 175 | |
| 21 | amazon | 24,300 |
| 25 | ebay | 16,400 |
| 36 | craigslist | 30 |
(Site rank via Alexa. Employee headcounts via Yahoo! Finance except where otherwise linked.)
But how important is site rank really? Amazon may get less traffic than a media site, but they’re actually selling something and making more money. The bottom line should be the bottom line.
So let’s take those same companies and add annual revenues into the picture:
| Rank | Site | Employees | Revenue |
|---|---|---|---|
| 1 | 19,835 | $23,650,000,000 | |
| 2 | 1,200 | $1,100,000,000 | |
| 4 | yahoo | 13,900 | $6,460,000,000 |
| 11 | 175 | $25,000,000 | |
| 21 | amazon | 24,300 | $24,510,000,000 |
| 25 | ebay | 16,400 | $8,730,000,000 |
| 36 | craigslist | 30 | $100,000,000 |
(Revenue figures via Yahoo! Finance except where otherwise linked.)
Dividing revenue by employee gives us a better look at which companies are the most efficient. And that’s what you see in the chart at the top of this post.
Andrew
on 21 Apr 10I still don’t get why you’re posting these top line numbers…
Kris
on 21 Apr 10Wouldn’t a profit/pay check ratio be a bit weird as calculating the profit has already subtracted the pay checks from the revenue?
Matt B
on 21 Apr 10Why track these seven companies in particular? There are lots of other tech companies that are plenty successful but which aren’t as focused on their web presence (i.e. companies that sell products; Adobe, Microsoft, Apple, etc).
Ahmad Alhashemi
on 21 Apr 10Redrawing the graph using profits instead of revenue would significantly widen the gap between Google and Amazon.
Matt Henderson
on 21 Apr 10I think I may have missed the point of this post.
Per-employee efficiency is interesting, but are you suggesting that craigslist is somehow doing better than Google, because they earn $3.3M per person on $100M revenue, instead of $1.2M per person on $24 BILLION?
Assuming craigslist’s profit is infinite (i.e. all $100M is profit), and Google’s profit is 10% of revenue, I think I’d still rather be Google. :)
ML
on 21 Apr 10Andrew: They’re the numbers we have access to.
Kris: It’d show you a different sort of efficiency.
Matt B: Other companies could certainly be included here. Kept the list short for the sake of brevity.
Matt H: It does seem that Craigslist is somehow doing better than Google. How much doing better in this way matters depends on your priorities.
Matthew Latkiewicz
on 21 Apr 10So where you guys at? ;-)
Alexandr
on 21 Apr 10Just you wait! :D
Twitter has just started a monetization process. ;)
http://blog.twitter.com/2010/04/hello-world.html
Nano
on 21 Apr 10Does this take into account the current trend among big companies to “hire” contract workers? Do the finance sites take into account these workers in their employee counts?
Joe W
on 21 Apr 10I wonder where Plenty of Fish ranks here then. Until relatively recently wasn’t it just one guy?
Romain
on 21 Apr 10To me it looks like Amazon makes a pretty efficient use of its employees considering it is the only company of the list that needs people to actually shift physical stuff around.
Craiglist certainly appears to do extremely well.
guy
on 21 Apr 10One thing to consider: Googles employees are mostly highly paid technical and management folks with college degrees, many of which are Phds. The majority of Amazon’s employees are people working in the distribution centers picking merchandise, packing and shipping boxes. Most of them don’t have college degrees. It seems that looking at this way that Amazon has found a magic formula to make a high school graduates have nearly the same revenue generating capacity as a Phd. Pretty neat trick!
Bastian Nutzinger
on 21 Apr 10@Kris: Yes indeed. profits/paycheck doesn’t make sense. profits/employee is an interesting number.
@Matt: If you’re going to headline the article “tech companies” why is Apple missing in the chart? With a revenue/employee ratio of 1.1M they should be somewhere between Amazon and Google.
tommy
on 21 Apr 10curious, where does 37signals rank on the revenue per employee chart?
Dave
on 21 Apr 10Is there a reason that Microsoft with $58.4B in top line revenue didn’t make the cut as a “tech company”? With 93,000 employees and #5 on Alexa’s top sites, I think they might qualify. My back of the envelope calculations show that they have top line revenue of $627,957/employee.
steve
on 21 Apr 10Do like that as a way of looking at employees effectiveness on the bottom line.
Would be interested by microsofts
Gregory
on 21 Apr 10@ML
Google, Yahoo, Amazon and eBay are public companies and their profitably is made public.
I’ve linked above to each of their income statements.
Please rework the the graph for profit per employee since it’s much more meaningful.
Also, linked below is a 2008 chart of profit per employee for the companies above.
2008 Profit per Employee for Tech Giants (Google, Yahoo, Amazon, etc)
Tyler
on 21 Apr 10Say, I am a partner in a 2-person business generating $300,000 of revenue annually. We’re incredibly profitable, but on your chart, would be at (pitifully low, twitter-level) numbers.
When I first read this post, as a detached observer, it felt like you were mocking twitter, but that’s still a pretty good place to be.
I guess my point is, is running the most efficient company the end all, be all?
I can argue that team slugging percentage is a better measurement of success than the number fans who watch games on TV, but I’d rather be a player for the Royals than the Yankees.
I’d much rather being doing what I am now than earning $100k as a consultant, or working as CEO of ebay, as long as I’m playing baseball.
An interesting perspective nonetheless, thanks!
Christopher
on 21 Apr 10Why are Facebook’s numbers not underlined? They’re a private company and haven’t released any of these numbers. It would be more honest if you pointed out that Facebook’s numbers are speculation (like you did with twitter and craig’s list).
Gregory
on 21 Apr 10@Tyler
Does the article I linked above help put your company in comparison?
On the low side, Sun profit per employee is around $12k and on the high side, Google’s profit per employee is around $210k.
It’s now just all a matter of scale.
James
on 21 Apr 10The difference in employees between craigslist and ebay is astounding (16,400 vs 30). I wonder what ebay would be like if it was run by 30 people.
ML
on 21 Apr 10Why are Facebook’s numbers not underlined?
Good point, forgot to include source for Facebook data. Updated the post with links.
Chad
on 21 Apr 10Wow. That is flipping amazing. What this really tells me is who has the best business model. It’s a story of efficiency, too, but that will only take you so far. Cudos to Craigslist—I always wondered how they made their money, but now I know. Great post!
Colin Devroe
on 21 Apr 10Where does 37signals fit?
Anonymous Coward
on 21 Apr 10+2 for Colin question
Mike
on 21 Apr 10Not just who has the best business model, but who has the most productive employees!
Keith Mancuso
on 21 Apr 10Yea, like tommy said I’d love to know 37signals revenue per employee.
JF
on 21 Apr 10We don’t share our revenues so you won’t see us on the list.
Graham
on 21 Apr 10I wonder where tumblr would be on this list, especially in light of their 1bn pageview milestone.
Ryan.theJenks
on 21 Apr 10I think Wolfram|Alpha might be a handy tool here.
If “profit” is too hard a number to come by, what about Net Income / Employee? Using that measurement, we get:
Google: $328,711.87 /employee Amazon: $37,119.34 /employee eBay: $145,670.73 /employee Yahoo!: $10,492.65 /employee
Ryan.theJenks
on 21 Apr 10P.S. I’m not sure where that article got the “Twitter has 175 employees” number. They just announced a couple weeks ago that they have 140 employees. I really doubt that they’ve hired 35 more since then. (Maybe it’s counting contracted workers? If that’s the case, should all the other company’s numbers be modified as well?)
Andreas Dantz
on 21 Apr 10@JF why not?
Matt
on 21 Apr 10@Andreas…I won’t answer for Jason, but would “it’s none of your business” be an acceptable answer? (I’m not accosting, just curious).
Donny V
on 21 Apr 10@Dave For some reason 37signals hates Microsoft. They can’t stand them. Not sure why?
elai
on 21 Apr 10Even if your not as ‘employee efficient’, there is something to be said about having 2 orders of magnitude of revenues/profits more., and thus making that much more with the business.
Andreas Dantz
on 21 Apr 10@Matt one could argue, that sharing revenues might be part of beiing open.
JF
on 21 Apr 10Andreas Dantz: We don’t share revenues because there’s nothing to gain from sharing revenues. There’s often plenty to lose, though.
Anonymous Coward
on 21 Apr 10So if 37signals isn’t going to share there numbers … what’s the point of this post?
Also, I noticed recently that 37signals removed all reference to the # of employees they have (though I do believe it up near 18 people now)
Sean L
on 21 Apr 10But JF, you’d satisfy our burning curiosity. Is that not enough gain? ;^)
Alejandro Moreno
on 21 Apr 10I would guess 37signals to be somewhere around (or above) Google-level in that chart.
Aaron
on 21 Apr 10I am not a quant, but I ran a model of revenue per employee for tech sector stocks yearly since 1996 compared against 6, 12 and 36-month returns. Over 1500 companies, it just doesn’t correlate. So while revenue per employee might be an interesting indicator to lead to another analysis (getting into how/why they do it at that margin may indicate a well run company), and while it might combine well with other factors, it’s probably not a very good basis for a ranking on its own.
David Andersen
on 21 Apr 10Has anyone asked 37s to share their revenue ‘cause I hadn’t noticed. But really guys, why stop there? We want your source code, payroll data, credit card PINs and deepest personal secrets too. To quote Tom Waits, “we have a right to know.”
Eric Timmer
on 21 Apr 10“Over 3,000,000 people use our web based apps” from the front page X $24 a month for Basecamp lowest plan = rough ball park figure to start with :-) ($72,000,000 give or take)
Now that is a business model!
JF
on 21 Apr 10Eric: Just to clarify, the 3MM number is user accounts, not separate accounts that pay us. Plus we have free versions of our apps.
GeeIWonder
on 22 Apr 10This is very interesting. The discussion too.
I actually am not so sure about this statement though
I think there are arguably better, correlated, metrics to one using those measures that already exist and are quite widely available for these companies.
There’s value in not using those ‘ideal’ measurements. Maybe.
Jamie O
on 22 Apr 10Nice. This post is very much representative of the fun that we had in B-school. It’s true that 37Signals is quick to trash MBA’s in their books and even posts on Twitter. I find it fascinating that so many of your commenters used the word ‘interesting’ or the like to describe the post/conversation.
I have an MBA, and read ‘Rework’. Just so you know. :-P
Dylan
on 22 Apr 10Great post.
Amazon.com however have to pay for inventory out of their revenue so their profit per employee is likely to be tiny in comparison?
Henrique Carvalho Alves
on 22 Apr 10Interesting metric.
Good to see companies under a “Marine’s Special Forces” light, where some have a small workforce capable of achieving objectives with efficiency, while others work in big platoons to achieve comparable absolute numbers.
Doug Clinton
on 22 Apr 10The focus on this graph and article seems to be that the primary measure of “goodness” of an organisation is how much revenue (and by implication profit) they can make from how few employees.
In terms of a nationwide economy, though, perhaps another way of looking at this is to ask “what is it costing to create jobs for people?” On that scale, Craigslist looks pretty inefficient. It’s costing $3.3M to create each job, whereas Twitter is managing to cost only $142k for each job.
Of course, this is a wildly oversimplistic model, the profits get spent and go back into the economy to create jobs elsewhere, but the point I am making is that we tend to focus very heavily on the amount of profit an organisation can generate rather than the benefit it brings to the individuals who work in those organisations. That unbalanced focus, I’d argue, is a big part of what led us into the recent worldwide financial crisis.
Grazen
on 22 Apr 10You should track them by gross profits rather than revenues.
David Andersen
on 22 Apr 10“It’s costing $3.3M to create each job, whereas Twitter is managing to cost only $142k for each job.”
???
So company that loses money, job creation is free?
GeeIWonder
on 22 Apr 10Amen. Doug’s point is so backwards I’m still amazed it was made.
DL
on 22 Apr 10@Doug, it’s apparent that you’re not much of a capitalist. Government intervention into the private sector is what has caused the financial issues that we’re seeing unfold right now.
The success of a company should be based on how much revenue each employee can generate. Why have a company if the revenue generated per employee isn’t a large number. People do not start business to just barely make any money. They start business because they want to not worry about money, among other various reasons.
The idea that a company should be concerned with how much money they’re receiving from the economy and trying to make sure that they’re employing enough people to keep everything fair is asinine. If the product isn’t worth the money then people wouldn’t relinquish their hard earned dollars.
Check out The Science of Getting Rich. The idea is to create a product that is worth more than what you charge for it. The free market works out the rest. There is nothing wrong with making as much money as you can in this manner and I believe every company on the list has done just that.
George Morris
on 22 Apr 10Two thing. 1) So where is Twitter generating this revenue? Workshops, training…? 2) Why doesn’t 37Signals share revenue? You preach about being transparent and sharing what makes you great. Revenue is certainly relevant. Your revenue is partly what allows you to have the freedom to go where you want to go with the company. I personally would find great value in comparing the head-count/profitability of 37Signals to other companies… it might change the way I perceive the 37Signals brand. My guess is it would only be a positive benefit because I believe you are doing very well.
Just my 2 cents.
Lamasney
on 22 Apr 10Interesting post. I’m curious to see how The Drudge Report ranks against Craigslist. Is that data even available to you?
JF
on 22 Apr 10George: To put it bluntly, you aren’t entitled to know how much money we make just as I’m not entitled to know how much you make. “Transparency” has nothing to do with it. Money is a private matter. If you walk around telling everyone how much you make that’s fine, but we prefer not to. Some things are none of anyone’s business.
Nothing personal, just giving you the straight answer so you know exactly where we stand on this.
Mike
on 23 Apr 10Maybe they’ll go public some day, then they’ll have to tell us how much they make and the color of their underwear…
I see super profitable businesses as great, its proof they dont waste time. If I work for McBurgers and make 8 bucks an hour, part of it is because im probably only contributing 10 bucks an hour of value to the world.. If I can work somewhere that I can contribute 1,000,000 an hour… awesome
And to the fool who said the cost of creating a job, it is not a businesses job to create jobs. It is a employees job to create value. If a employee cannot create value, then no job is made.. If an employee creates more value than they cost, no brainer to hire them :) ...
Colin Devroe
on 23 Apr 10At LessConf in Jacksonville in 2010, during the Q&A after my presentation there, the host asked me a few questions. The first question was “How much money do you make?”
Although I get asked that question a lot, working for a reasonably well known brand as I do, I was never asked this question in such a public forum.
To this day I have no idea why that question was asked. I think they were trying to give the people in the audience some gauge to set for themselves. The better question probably should have been “How much should people pay themselves when they start their company?” – And that is a valid question that has some value to people and probably one I would have had an opinion on.
I grew up in a household where money “didn’t matter” and it was a very private issue. I’ll be turning 30 this year and after a lot of thinking I believe that is the proper stance. How much money one makes is far less important, and much less interesting frankly, than what they do.
Eric Timmer
on 23 Apr 10@JP I think I need to readjust my ball park figures :-)
Patrick
on 24 Apr 10I was actually very shocked by this. One thing though, I bet these revenue statistics were before twitter introduced their new sponsored tweets. That will definitely increase their revenue.
Michael
on 26 Apr 10Why does everybody like to know how much revenue 37s has? Just to tell everybody “If I’d find a business modell like them, I’d make x money”. I don’t think that works. It’s all about execution and that’s what they do well. And they even share almost everything about how they came to that point. That’s worth a lot more and I can learn a lot from that. What do I learn from knowing their revenue – nothing.
This discussion is closed.