That’s what Bill Bishop and Tom Crampton are trying to figure out on Tom’s blog. I’m a couple of days late noticing this post; apologies to all.

Some months ago over a Mexican food lunch with me, Bill (a founder of MarketWatch, now CEO of Beijing-based game company Red Mushroom and an all-around Internet biz-savvy dude) floated a simple idea. He suggested we simply tally up the quarterly ad revenue that the major portals and search engines–Sina, Sohu, Tencent, Baidu, et. al.–were reporting and see how it meassured up against the total size of the market. Neither of us had seen the number anywhere. He wanted to test his theory that together, this handful of listed companies account for some horrifyingly large portion of total ad online ad spend as commonly reported.

I did the exercise for 2006, using the same top six Internet ad earners, and (what with my mad math skilz) came up with the same $407 million number that he did–nearly 70% of the $600 million number that is commonly bandied about as the total size of the ‘06 market.

Now Bill has set out to show that, even if the share of ad rev which the majors account for isn’t as big as he suspects, the total size of the market is still being routinely exaggerated. He took issue in particular with the $1.3 billion figure that Nielsen Online/AdRelevance have put the Chinese online ad market at for 2007, reported by Tom in an earlier post. He makes a compelling case. With the 2007 numbers from the top six (five now that Tom Online’s no longer listed) coming in at $591 million, is it possible that their total share fell to only 45%? Not likely. Did verticals in the hot sectors–IT, auto, real estate etc.–really grow their ad sales by that much? Again, not likely. Google and Yahoo China, for which China-specific ad numbers aren’t available, can’t make up that much of the difference. Bill’s very critical of the Nielsen Online/AdRelevance methodology, as described in the comments section on Tom’s earlier post. Bill writes,

They are counting the number of ads they see, multiplying by some discount off of rate card, and extrapolating the size of the whole market. Unless they disclose what discount to rate card they are using, whether they apply it universally or have site-specific discounts, I think their numbers are not too credible.

My own stab in the dark as to total ad spend this year–and this is loosely based on speaking with better-informed people in the industry–is that it’ll just cross the $1 billion mark this year. Yes, that still has the Top 5 total falling to about 60% if you use Bill’s Q4 numbers. But a drop like that wouldn’t be unreasonable by my lights, given that the verticals have gained ground this year and adding in the mystery numbers for Google, Yahoo and the rest. One wry commentor put this whole debate in rather stark perspective:

So in other words, if you take all of the most optimistic projections of Chinese internet ad revenue you still get about one month of the Guangzhou province print market.

Yep, that’s about the size of it.