Year after year, Google boasts impressive financial results. But where does this vast revenue come from?
With billions of dollars in revenue generation, the question that everyone’s asking is – How does Google make money?
While Google boasts a diverse portfolio encompassing hardware like Chromecast, Pixel smartphones, and the venture capital arm Google Ventures, its bread and butter lies in display advertising.
This dominance has been achieved through strategic evolution, evident in the shift from sidebar ads to prominent top-of-page placements, coupled with ongoing experimentation with innovative ad formats.
Simply put, ad revenue.
Google is currently one of the most valuable companies in the world with a net worth of $1.75 trillion in 2023.
Companies pay Google to have them flash their advertisements on the screen or prioritize their sites on search results. Every time you see a sidebar ad or a commercial played before the YouTube video you clicked on, Google makes a fraction of a cent.
Many sites also make money selling the data they collect to other advertisers.
Google’s method of business is to get you to interact with google, in whatever way they can — and to a lesser degree, prevent others from being in any business google is doing, because, why compete if you don’t have to?
The more time you are with google, the more ads they can show you and the more ways they can show you ads. Anything that adds you more time interacting with google is good for them, because that means they can make more money on you by showing you more and more specific advertising.
Google’s business is ads, anything that lets them show you more ads is good for them.
Alphabet (GOOGL) Earnings Q3 2023
Google’s parent company Alphabet Inc. posted revenue growth of 11%, as part of their Q3 2023 earnings report. This marks the first time the company has reached double-digits in year-on-year growth since Q2 2022.
Alphabet saw growth in advertising revenue, reporting $59.65 billion, up from $54.48 billion a year ago.
Figures for YouTube Shorts also drastically improved, with the social media platform’s short-form video feature receiving 70 billion views per day, up from more than 50 billion views per day at the start of the year. As far as cloud revenue goes, the segment didn’t meet the expectations, bringing in $8.41 billion instead of a forecast of $8.64 billion, although this is still a 22% increase from the same time last year.
Google’s Business Model
Google, the undisputed king of the internet for years, has always kept its gaze on the horizon. Adapting to stay relevant and innovative, it has transformed its core business model multiple times.
At its heart, Google is a search engine powerhouse with a vast portfolio of free services and products, dominating the online landscape.
Understanding Google’s money-making magic boils down to its revenue structure. Think of it as a three-legged stool: advertising, product sales, and licensing & research services. Ads, the hefty contributor, fuel the free services we all enjoy.
Product sales, like Pixel phones and cloud storage, offer another avenue for income. Finally, licensing and research services bring in revenue by sharing Google’s expertise with other businesses. This diversified approach ensures Google’s continued reign, keeping it at the forefront of the ever-evolving digital world.