How Does Google Make Its Money?

It’s fair to say that Google has a number of ways to generate revenue far beyond selling stock shares or private investment.

In fact, Google uses many methods of partnering up with advertisers and merchants including Google Pay, Google AdSense, Google Analytics and Google Ads among others.

So, what should you know about these? And how does Google use them to make money? Let’s take a closer look.

The Google Business Model

Google processes more than a trillion searches each year, and each one of those searches gives Google the chance to display adverts and make more revenue. Around 83% of the company’s total revenue comes from advertisements since its main business model centres around online advertising. There are two types of advertising used by Google – brand advertising and performance advertising. Let’s look at both of these more carefully.

What Is Performance Advertising?

Adblocking is something that has had a dramatic effect on online advertising. Almost a fifth of people using the internet today now have ad blockers installed, and that means that a lot of money can be wasted when advertising online. Performance advertising is the solution. It allows advertisers to connect with users, all the while driving up measurable results.

Cost Per Click is a performance-based form of advertising that involves the company that is producing the advert only paying when customers take action. When links are clicked, they are tracked and CPC measures the average cost for each click over the period that the ad runs. The final CPC in Google AdWords is determined by the Quality Score of the advert as well as the company’s Ad Rank and maximum CPC bid.

What Is Brand Advertising?

This form of advertising helps to enhance the user’s awareness of advertisers’ services and products and increases their affinity to them. It uses text, videos, images and interactive ads across several devices.

Advertisers pay Google for CPM (cost per impression) as they’re keen to expand their audience reach. Advertisers typically bid for CPM when they target the Display Network since this allows them to improve and increase their brand’s visibility.

AdWords

Almost every time a Google Search is carried out, users see ads that dominate the top of the search results. These adverts are paid for. Every time a user clicks on the ad, Google earns some money. The amount they earn depends on the keyword’s value and the amount of competition.

Google Shopping enables consumers to find, compare and buy physical products from a range of retailers who’ve paid to have their products advertised. Advertisers use AdWords to set up Google shopping campaigns.

AdSense

Many online publishers sign up to show Google ads. Once they’ve signed up to AdSense, they add the code to their website and Google displays targeted adverts that are relevant to the users’ former searches as determined by its algorithms.

Admob

Advertisers sign up in order to display adverts on their apps. This is a way of Google helping app developers to earn more revenue from their applications.

YouTube

YouTube advert revenues have increased enormously in the past 4 years. There are almost 2 billion YouTube users out there and 500 hours of video content are uploaded each minute of the day. Over a billion hours of videos are watched on YouTube each day – that’s more than Facebook video and Netflix combined.

YouTube users see adverts before the beginning of videos and during them depending on the video’s length. Advertisers pay Google to have their video placed on the highest volume videos relating to their service or product.

Google Analytics

Although it isn’t an advertising tool, Google Analytics allows the metrics connected to websites to be analysed so that business decisions can be made more effectively. Invented back in 2006, it has empowered more data-driven decisions to be made about websites. The tool works by tracking all of the traffic on a specific social network, blog or website than giving the user reports which can be customized to suit the metrics that are most useful.

 Yes, it’s a free tool, however since it comes with excellent AdWords integration, it can help to increase revenue for adverts. This is because Google Analytics reports allow the results of AdWords services to be seen. Once users see how effective their use of AdWords is they will almost certainly want to spend more money on advertising and this is where Google can cash in.

Google’s Other Revenue Sources

Google owns a host of other products, projects and companies that also bring in vital revenue streams. Google Maps for example can earn money by partnering with organizations that can benefit from tracking and navigation. Trucking companies and ride-share companies are just two of the examples of organizations that pay Google for the use of their maps.

Google Drive is another well-known Google product that virtually everybody has used at some point. There is an upgraded version of Google Drive which is, of course, payable, thus bringing in more money for Google as a monthly fee comes in from every upgraded user.

Let’s not forget Android either. 2.5 billion devices around the world are using Android today and this popular and well-known operating system is an excellent revenue maker for Google, albeit an indirect one. Android allows Google to learn users’ mobile use patterns and Google Chrome can come preinstalled on devices so that users’ search habits can be discovered and used to Google’s advantage to show them tailored adverts.

Also, Google can sell users apps via the Play Store. Since 2008 it has been estimated that Google has made over $30 billion from Android.

With all of these revenue streams in mind, it’s very easy to see how Google is one of the world’s top 4 digital companies. By tapping into the power of advertising amongst other possibilities, Google has opened up a world of opportunities to make as much money as possible while offering services and products that are popular with consumers all over the globe.

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