Google Business Model | An Insight on How Google makes money

Anamika Mahapatra Anamika Mahapatra
Jul 20, 2021 6 min read
Google Business Model | An Insight on How Google makes money

Me: Ok Google whatโ€™s the best TV show?

Google Assistant: Thatโ€™s not a question. Itโ€™s F.R.I.E.N.D.S.

Just kidding Google might not say that, Iโ€™m just a F.R.I.E.N.D.S. fan. We all have different preferences and I respect that.

We all use Google for a variety of purposes, including shopping, keeping up with new web series, assignments, and projects, among others. It provides you with the most relevant search results at no cost. So, what makes this a tech behemoth? Is there some sort of magic that allows them to make money? The answer is they operate on a hidden revenue model and there is no magic trick.

In a hidden revenue model, customers aren't charged for Google's services; instead, businesses pay for advertising to reach their target audience.

We'll go over it in more detail later, but first, let's look at how Google came to be.

Google Insights
Business Model of Google
Revenue Model of Google
Is Google safe to use?
FAQ

Google Insights

On August 10, 2015, it was decided that Google would have a new public holding company called "Alphabet Inc." Google and other bets (which includes Calico, Nest, Fiber, Verily) are among Alphabet Inc.โ€™s many subsidiaries, but Google is the most important. Sundar Pichai, Google's product chief, is now the company's new CEO, while Sergey Brin and Larry Page, the company's original co-founders, have taken over the job for Alphabet Inc.

Business Model of Google

Google's business strategy is based on advertising. It relies on three key players i.e. users, businesses, and publishers. These players are intertwined. Let's have a look.

Users:

Google's USP is its feasibility. Google provides you with appropriate search results whenever you search for something. It can scan billions of pages for you thanks to its incredible search engine. You donโ€™t even have to pay for the information you need. Isnโ€™t it amazing?

Businesses:

Google makes money from two sorts of advertisements: search ads and display ads. Businesses pay a lot of money to get their products in front of the right customers.

If you search for sneakers online or near your location on Google, it not only gives you relevant websites or stores but also offers you advertising linked to your search, which helps businesses identify their ideal target audience. When you click on an ad, the advertiser pays Google a particular amount. This is how they make money from search ads.

The next type is display ads, in which Google can place ads on a variety of internet platforms such as Gmail, YouTube, mobile apps, and more, resulting in a more diverse source of revenue for them. In other words, they learn what their audience wants from these ads and display appropriate ads accordingly, which benefits both businesses and Google.

Youtube Ads
YouTube Ads

Publishers:

On Google, we notice a lot of blog pages about skincare, health, fashion, and a lot more. Let's assume there's a fashion blog. Google will include ads (40% off at H&M) to capture your attention, and when you click on that ad, it will take you to that shopping website, where you will eventually buy something.

As a result, Google, businesses, and publishers all benefited (for website traffic i.e. more views on that blog).

Revenue Model of Google

Take a look at this pie chart below. As you can see, ads are Google's primary source of revenue. Google ads account for over 83.29% of its entire revenue. Google Cloud contributes 5.51% , Google others contribute 10.51%.

Revenue of Google
Revenue of Google

You might be wondering how they make money from adverts alone. Are there any other divisions? Allow me to assist you.

Detailed information about Google advertising revenue:

Google Revenues
Google Revenues

This chart illustrates Google's advertising revenue over the last three years, which has risen steadily from $95577 to $134811. What a jump in revenue! Now, what caused the dip from 86.5 to 83.9 percent? It means that if Google's total revenue was $100 million in 2017, 86.5 percent of it came from ads alone.

If Google's total revenue was $100 million in 2019, Ad revenue accounted for 83.9 percent of overall revenue, while other revenue streams also contributed to the total. Nonetheless, 83.9 percent is a significant portion of total revenue.

How do they get money from Google search and other sources (the first one)? The amount of money earned rises from $69811 to $98115. Letโ€™s understand this step by step.

Most of us have done online shopping at some point in time. You come out of that website after seeing a product you like, whether you buy it or not. The next thing you are doing is surfing and an ad appears indicating that you were seeking this item and that you intended to purchase it.

This is where Google's AI comes into play, as they analyze people's purchasing habits and ensure that you don't forget about the goods and that you buy them. This is how they show ads and make money from Google search ads.

A skippable or non-skippable ad appears whenever you watch a YouTube video. Ads presented while watching a YouTube video generate revenue for YouTube, and because YouTube is owned by Google, a portion of that revenue goes to Google.

Revenues are increasing for Google Network Members' properties, as well. You might see AdMobs or AdSense in this section. Iโ€™ll give you an example for AdMobs. Assume I have an app and I enable the AdMobs functionality. Ads will begin to display on my app, generating income for Google, with a portion of that revenue shared with me. Similarly, AdSense comes into play if it's a website.

That is how they generate revenue from a variety of sources, such as Google search ads, YouTube ads, and Google network member ads, which all contribute to their overall revenue.

Google Q3 update:

Google Q3 update
Google Q3 update

People would have consumed a lot of content during the lockdown, which is why YouTube ad revenue and Google search revenue will also increase. That's why, in 2019-2020, revenue increased by about 10%, from $24741 to $26338. It's a significant increase from $3804 to $5037 for YouTube ads. All of these figures are in millions of dollars, so it's a significant sum.

If you sign up for a Gmail account, you get 15 GB of free storage (google drive space). When you receive more emails, upload more documents, or do anything else, the drive space fills up.

Our mindset is to create a new or several Gmail accounts. Why would you want to pay for that? So if you pay for a Google Cloud or Google Drive subscription, you receive 2 TB of storage, i.e. you are paying rent to use their drive space, that's how they make money.

YouTube's non-ad revenue is included in Google's other. When you don't want an ad to appear on YouTube, you can pay for a YouTube Premium. As a result, both YouTube and Google make money from premium subscriptions i.e. what it means by Google others revenue.

Cost Structure:

Two major costs are the Traffic acquisition cost and the other cost. Employee costs and a variety of other expenditures are examples of other costs.

For Traffic acquisition costs, assume you're an Apple customer who uses iPhones or other Apple devices. So, to acquire traffic, Google paid Apple to keep them as their primary search engine on their web browser, which is why it's termed "Traffic acquisition cost" .

Is Google safe to use?

As Google accumulates more data, many people are concerned that their information will be exposed, putting them in danger. Even queries like what are the risks of using Google were raised. As a result, users may lose faith in them and would switch to other privacy-focused search engines. If Google does not take action, this could be a threat.

Final thoughts

When you look at Googleโ€™s business model it generates its revenue from multiple sources. They are distinguished by two factors: innovation and motivation. It functions not just as a business, but also as a research institute and a university.

It has done an excellent job in its primary business while also giving back to the community and being environmentally conscious. Google has been acknowledged as the first corporation to be carbon neutral during its entire corporate history, according to a global sustainability study.

In terms of security, I believe Google will be able to tackle this issue as well. Whatever the situation, Google has always been able to adapt thanks to its ability to innovate and take chances that no one else would ever take, in todayโ€™s business world.

FAQ

Who is the founder of Google?

Larry Page, Sergey Brin founded Google in 1998.

What is the revenue of Google?

The parent company of Google, Alphabet generated almost $183 billion revenue in 2020.

How does Google generates its revenue?

Google generates its major revenue from AdSense and Ads.

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