Curriculum - How much money does the Play Store make in a year?

how much money does the play store make in a year [Music] hey everyone welcome back to another exponent product management mock interview on today's show we have selena and we're going to be doing an estimation question and before we get started selena do you mind telling the audience a little bit about yourself yeah for sure thanks kevin um and thanks for having me i'm celina i am a product manager at google currently i've been there about two years now and prior to that i was an apm at yahoo awesome so um for today's estimation question

we're going to be doing a question like a quantitative question just seeing how you break down a problem and the question is how much money does the play store make in a year okay how much money does the play store make in a year awesome um and just for y'all's record i'm looking at a doc and i can't see you all so um paula if you have a question um alright well i'm gonna start with a few assumptions and clarification questions um i'm assuming this is global revenue is that right yes we can do that

cool and then are we calculating before or after google might you know pay out to developers i'm totally up to you okay let's just do um before before paying out to developers sounds good um cool so at a really high level uh the way i'd want to approach this is um have a general formula on you know an equation to get to some monetary value i realize that says money twice and then draw on general knowledge public data and educated guesses to fill in that formula to ultimately come up with an answer so off the

top of my head something pretty high level we could do is the number of purchases on the play store times um like the price per purchase and if we broke that down a little more it might be something like the number of users times the number of users sorry purchases per user times again the price per purchase and um before we get too deep into it uh one way we can gut check what we come up at the end is you know we know that uh google makes i think this year is like 180 billion

dollars in revenue total and we also know um based off public data that um i think 80 percent of that so about 150 billion comes from ads which means that if our answer comes to anything you know more than 30 billion uh we're probably off does that make sense yes yep google has a very heavy ad um business so this makes sense awesome cool and then um now that i'm thinking about it uh you know it might be hard to calculate something for the whole year so what i want to do is just calculate um

a monthly revenue number and then uh don't forget to multiply by 12 at the end i think this just helps me sort of scale it down in my own head and i can just do this last step alrighty um cool so to get to the number of users on the play store um we know a few things about like the general smartphone market and the android market share and so um we know that there are about four billion smartphones in the world right now and that android has i think it's like a 75 market share

on that so if we multiply that out that's about three billion users um that you know might be using the play store and so that's sort of our our basis so are you assuming here that it's like a one to one for smartphone two owner yeah that's a good point i know uh some people do have more than one smartphone um but yeah let's assume this global number is just uh one to one for now and if it comes out to be off um you know we can we can revisit okay good question cool so

i'm gonna sort of just pull this down here to carry it over um and i think one way that this might get complicated is you know when you think about the number of purchases per user and the you know the price for each of those purchases uh you know user behavior might vary a lot in a way that the segmentation becomes sort of hairy here um so a way to actually abstract this might be um number of users times just the in general dollar spent per user because you can imagine you know scenarios where um

you know a user makes a lot of really small purchases or very few big purchases and at the end of the day that'll all just be captured here so i think i actually want to um reformat and use this as the base approach does that make sense so far okay yeah we can pivot this way okay cool um so using three billion users for now we'll just carry that down um cool and so now kind of getting into you know user behavior of course people are going to engage and buy at different rates on the

play store there's going to be people who you know only use free apps only really use what came with the phone they're going to be people who are you know very heavy users so we want to perhaps segment um different usages and uh see how see how that would affect the calculation so i can imagine maybe we have a few buckets um people that spend zero dollars okay i'm gonna sort of denote this as we're just focusing on this part of the equation right now okay so you know there's some people that spend zero you

know maybe there's some people that spend one dollar per month some people that spend five and on the high end some people that um spend ten because um play store encompasses a bunch of things you know not only uh apps but also in-app purchases subscriptions and um i could have stated this up front but i'm assuming that revenue would count all of those different types of transactions not just you know single app purchases um so now if i think about you know general behavior for for users um i would imagine most people out of you

know the billions and billions of folks that have an android phone don't actually buy you know many things per month um especially given that this is a global audience so i would say you know half or more probably don't actually buy anything per month on average um and you know i think you know 10 would be a pretty small number and you know five maybe a little more and then one you know maybe a little more than that and so um let's pick some numbers and and sort of see how it rolls up to our

gut check at the top so let's say 30 percent of folks might buy an app a month um or maybe they have like a game token and they you know buy dollars worth of um you know power ups in a game per month um let's say you know 10 and 10 of users are in these other buckets and so rolling it back up um and extrapolating that out that would be 3 billion users times um let's see zero plus point three so like 30 cents plus um 50 cents plus 10 cents all right and so

that would get us somewhere around uh three billion times um man i wish i had a white board yeah and so that off the bat uh you know going back to our gut check um here that already is high to me and so if i were to evaluate where this might go wrong i would say that uh going back to what i was thinking earlier i think maybe even more people might be spending zero dollars per month um given that you know half the global population are in places that um you know might have you

know not as much expendable income um at their disposal so if i were to update these numbers i might see something like more heavily skewed in this direction um let's see let's see um yeah probably more like 20 and then five and five and if i were to redo this calculation with those new numbers that would be something like this something like that okay and then this would be um point wait i think i did some yeah that that's fine we don't have to do that calculation here um i'm curious now if if you had

more time um what are some more accurate segmentations that you could have here rather than sort of like this um 70 25.5 other things that we might consider when segmenting down further um if we get to sort of user level characteristics um some things might be their geography so you know maybe people in you know european countries or the us um might be spending more money on apps um you know other other personal information such as age occupation you might imagine you know students are limited by having a credit card or not from their family

um whereas you know the head of household and adults are free to spend um as they would wish um let's see and you know things like total income level and having a fop-on file are things that you know big companies can look at but um yeah that's that's sort of a high level of how i could approach it awesome great well thanks for your excellent mock interview answer and i'd like to end by also having you give some self feedback um but before we do that i i did take some notes here you you did

a great job of clarifying in the beginning um what we meant i i think like in the middle you asked like oh like i could have asked if this included in apps or subscriptions um but you did a pretty graceful like backtrack there where you you mentioned that oh like i could have included this earlier in the clarification but it was good that you brought that up on your own also you also did a good gut check um looking at what might be the the ceiling and if it goes over that ceiling then we might

want to re re-look at the estimation um so all in all great great answer um this was a very structured approach and i'm wondering if you might have any um advice for the audience here yeah definitely and thanks for the feedback um i think something that uh that might help you is i wanted to call this out uh sometimes instead of trying to think of how a user might interact with something for a whole year just breaking it down to one smaller time frame and extrapolating it out at the end is helpful for me another

thing that's helpful is sort of combining the top-down and bottoms-up approach i think something that's common is um starting with a bottoms-up approach where you sort of take building blocks and see where you get to at the end but having this top-down gut check is is a good way to sort of check yourself throughout the process if you're on the right track um and then another thing that i find useful is for this portion here where we sort of pivoted um instead of trying to understand and you know honestly just guess at how many purchases

per user and how big those purchases are if you just use the average revenue per user at the base like that can sort of extrapolate a lot of the complexity and make the estimation a bit easier one bit of self-feedback i might give is uh i don't actually the mental math here is wrong but i think the approach is right right it's like what would this monthly number be and then um you know remembering to multiply by 12 at the end yeah and a really common follow-up question is like hey do you think this is

an underestimate or over us overestimate and if you can give some justification there and what you might do differently that would also be good to proactively give in your interview but other than that great mock interview answer and for the audience good luck with your upcoming pm [Music] interview