It's almost impossible for an internet user not to know about Google. Google is the search engine for most casual users, but it's not what you think. For instance, according to the research of Forbes, Google isn't only a search engine company that owns some other companies, it's a giant monopoly, and this company dominates the internet and covers about forty of the tasks of an average internet user.
However, have you ever thought about how Google makes money? The company spends about 136$ million a day to run its services like Google, YouTube, Google Adwords, PLayStore, Gmail, and other operations under the control of Google. So, how do they earn money and generate profit? It's not Government funded or any charity.
At first glance, Google is 100% free for vendors and customers, but they still generate over 256$+ billion in a year. How?
This article has written a complete case study on Google and how they generate profit. Continue reading the article:
About Google (in terms of stocks and technicalities)
If you want to read more about "Google" read The google Story
Google (GOOG, Nasdaq listed name) is an American technology company that focuses on making SaaS services and hardware consumer products + enterprises services. Their 85% of business and profit comes from their online services and digital business based on the internet, 10% from the B2B digital services, and 5% from the consumer hardware.
Nasdaq listed the company in Nasdaq with a share price of 85$. Today, as of 21 February 2021, the current share price of GOOG (Google) is 2,609.35$. Google earned about 220$+ billion in 2021, +20% up compared with the last year and 185% up from the year 2011.
How does this Multi-Billion Dollar Company Earn Money?
If you want to learn How "Google" work read "How Google Work"
You'll notice that Google does everything for free. Their every service is free, and they don't charge any money from you. On the vendor side, it's also free. They don't trust their creators or publishers for using their services.
But still, this company generates about 220$+ billion in a year. How? Here’s the case study of how Google earns money:
Most of the revenue of the Google comes from the advertising section. They earn a lot from the ads that you see on YouTube, Android applications, Google Maps, and Google Adwords. A lot means a lot!
Google is the #1 company in terms of the advertising network and the most grossing advertising network group globally. And the publishers do pay them a lot of money compared to other advertising networks.
The main reason for the publishers to pay a hefty sum of money to Google is because of their target audience base and micro-ads technology. The micro-ads offer extremely high conversion rates, and the network only shows the publisher's ads to the customer interested in the publisher's service or product.
In the end, the publishers get conversion rates of at least 30%-40% due to a vast audience base and extremely high conversions due to the micro-ads technology.
Ad-free experience (YouTube Only)
This method may not add a considerable % of revenue out of the total income of Google, but it is one of the earning methods for Google. YouTube, which is a subsidiary and is operated by Google. YouTube's primary revenue comes from viewers' advertisements on the creator's videos.
However, YouTube also offers a YouTube Premium which offers ad-free YouTube but charges the money. This YouTube premium is also one of the ways by which Google makes money, although it adds a negligible % to the total revenue of Google.
If you live in Europe, North America, and India, you may know about Google Pixel. Google also makes their consumer hardware products like smartphones, earbuds, and notebooks which they call "Pixel."
Although their Pixel series aren’t so successful in the market and very few or limited people purchase the hardware consumer products of Google, still it’s the way of earning for Google.
B2B Digital Services
Google also sells some B2B digital services like G Business Suite, storage and hosting for enterprise, Android licenses, Adwords, and Adsense. All these services add a considerable % of revenue to the total income of Google.
Other Business Projects
Google isn't only limited to its digital services. It's a giant of business, and they have invested a lot of money in their other projects, which are currently in the development stage. Some projects like Alphabet, Metaverse, Fiber, Google Earth, Neura link (shareholder), Mars projects, and many other projects you have invested a lot than you can think of.
Android is another big successful project of Google which covers about 30% of their business and adds 20% of their revenue. Android OS is a smartphone OS that covers about 95% of the smartphone OS share, and they earn a lot from their Android.
Not from the customers but the smartphone manufacturers in a license. For example, suppose Xiaomi wants to use the new and latest version of Android. In that case, they'll have to pay a large amount of money to Google to obtain the CC license and source code of their latest Android so that Xiaomi can use the latest Android on their smartphones.
A Deep Look into Google’s 150$+ Billion Advertising Network
According to CNBC, more than 80% of the revenue of Google comes from the Advertising side. How does this channel work? Below is the complete guide:
Google's advertising network is based on Micro-ads. Micro-advertising refers to display ads to potential users based on their past activities, tracking, and interests. For example, if you like a car and are looking to purchase a vehicle, you'll see advertisements related to car dealers and car companies. If you are looking for gaming consoles, you'll see advertisements related to PS4s, Xbox, Nintendo Switch, and other console gaming-related ads. And Google's advertising network is solely based on micro-ads.
Channels for Data Collection
As soon as you connect yourself to the internet, Google starts tracking you. In fact, according to researchers, Google knows more about you than you know about yourself. The channels by which Google tracks you aren't limited to one, and surprisingly, you can't disable the data collection factor of Google.
- Google has access to your phone photos through Google Photos.
- They got access to your email through Gmail.
- They got access to your files through Google Drive
- They got access to your entertainment interests through YouTube
- They got access to the questions and queries appearing on your mind through the Google search engine.
- They know where you live and your daily traveling routing through Google Maps.
- They know your smartphone activities and what you do through the Android OS.
- They know your events through Google Calendar.
- Your application interests and preferences through the Play Store.
So, did you notice that Google has control and access to all of your interests, preferences, and things, and they use it to track your claims, actions, and future predictions about what you'll do in the future?
Platforms of Advertisement
Google then shows you personalized advertisements according to your interests. Google uses these platforms to display their advertisements:
- Applications that use Google Adsense
- Google Maps
- Google Search Engine (AdWords)
- Websites that use Google Adsense
YouTube, application, and website ads collaborate with the creator/developer and with Google. For that purpose, Google shares 51%-68% of the advertisement bid with the creator and keeps the rest to themselves. E.g., if the per advertisement CPI is 1$, Google will give the creator 0.51-0.68$, and they will keep the rest.
However, in the case of Google Maps and Google Adwords, Google keeps 100% of the bid per CPI. It's because, in Maps and Adwords, there's no 3rd party like vendor/seller/creator is involved, so Google takes all the profit.
After all these long strategies, the results from Google's advertising platform are highly beneficial, as expected. The advertising network of Google offers a higher number of conversions and CPR % compared to other advertising channels like Facebook ads and InfoLink's. Because Google only shows those advertisements to the users in which they might be interested, it increases the chances of conversions by up to 69%. This results in high charges for the publishers if they want to start their advertising campaign on Google, and Google earns money!
A monopoly of Google
There's no wonder that Google is running a monopoly on the internet. No other tech giant can beat Google's advertising network in terms of sales and tracking. The business model of Google is designed to make people bound to use Google's services if they use the internet. You are redirected to this article from Google.
Can you use the internet without using YouTube? Can you stop using an Android smartphone? Can you stop using Gmail for any sign-in and sending or receiving emails? Can you stop using Google search engine? (All for the year). 95% of internet users can't, they are bound to these services, and Google earns money from this business model!
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