Google features prominently in practically every walk of our life now.
Be it Google Search, Maps, Gmail or even YouTube, life is almost unimaginable without them.
But the interesting aspect is most of Google’s services are for free.
So, how does Google make money?
After all, in terms of revenue, it is one of the highest grosser globally.
In 2018, its revenue soared north of $31 billion, and its parent company Alphabet too clocked over 20% profit.
The question then is how does Google make all the money?
With practically most of its services coming across as free, the revenue source for Google is intriguing.
Common sense often tells you that chances are if you are not paying for a product that you are not the customer.
So then what are you?
Are you the product and is Google making money from you?
Well, Google has simply capitalized on the services it provides.
The huge global pool of users is helping Google’s huge revenue.
On an average, Google clocks close to 1 billion searches.
All Google has to do place adequate ads around it.
The scale at which operate internationally is what drives revenue for them.
Tracking User Trends
On a day to day life, we use numerous Google products.
Google simply follows your surfing habits on all of these.
These are embedded on the search engine and other web pages.
As a result, they track your interests and serve up ads that match your inclinations.
The chances are at least 50% of the time you are going to click on at least one of these ads, and that is how Google makes money.
The moment the ads match your specific interests, the chances of users clicking is much higher.
Now simply multiply this by the sheer number of users that Google uses daily.
Google has two primary Ad channels, AdWord and AdSense.
Between these two, it spreads out its own and accepts ads from myriad products.
Its advanced algorithm then tracks user specifications and interests and dishes up the ads accordingly.
This tracking inevitably shores up the chances of users actually clicking on ads.
So, the money bells keep ringing for Google .
But to say that Google makes money just by tracking customer trends is a simplistic explanation.
It is a combination of several factors that brings in the revenue.
Tracking trends is one of the channels.
When this tracking is combined with a series of other factors, Google gets the appropriate result.
It is more of the basic foundation that helps Google shore up revenue.
It has prepared the ground and the eventual revenue target.
The broad revenue collection is a function of many elements based on this fundamental factor.
Use Targeted Advertising To Make Money
Google AdWords is responsible for nearly 70% of the revenue that Google generates.
So it surely makes sense to understand how Google Makes money using it.
As we explained in the previous point, Google’s advanced algorithms help in identifying customer interests.
So as a result, they make strategic ad placement.
So, for example, I am a new mom, and inevitably I am getting ads about baby products on Google.
However, this may not be useful for a 60-year old user.
But interestingly, they are not seeing the same ads when they log onto the same page.
Google makes money only when you click on these ads.
So it makes sure, it offers relevant options that you are sure to click on.
The huge volume of online users helps shore up the numbers.
These ads make sense for companies too.
Unlike TV ads, these are not very expensive, and the relative exposure is much higher.
Moreover, with Google, these often get international exposure.
Their ads are not just limited to a specific zone or area.
As a result, advertising with Google literally makes adsense for corporates.
So the targeted advertising becomes a symbiotic arrangement that helps both parties.
Most importantly, it allows Google to keep its basic service, search engines absolutely free of cost.
No wonder, Internet search has become synonymous with Google.
Mobile Advertising- A Source Of Google Revenue
Mark up in volume and diversification are the two fundamental catalysts for Google.
So, mobile advertising revenue is another crucial contributor to Google.
Whether it is the Android apps or the Apple apps, Google receives commission against them.
Every time an app develop sells a unit of the app, Google gets a commission.
The commission against every app installation is close to 30%.
With over 1.5 million apps in the Android App play store, you can easily deduce the likely amount.
But that is not all.
You have a plethora of other services as well.
From paid music to books and movies too, there is a huge range of paid services.
Most times, subscribers don’t mind this amount because it is a very nominal amount.
But like we know, many a penny make a pound, many a drop make an ocean.
So Google’s kitty keeps filling up in a slow and steady fashion.
So, it makes money by offering you additional service on your mobile.
It addresses necessities in a constructive and continuous way.
So, users are also increasingly opting for these, and that boosts the collection.
Moreover, mobiles also offer scope for basic advertisement.
Whether you are accessing a range of apps or you are surfing the internet, traditional ads are there too.
Increasingly as our lives are becoming more dependent on mobiles, these ads are becoming more prevalent.
Needless to mention that the resultant revenue from these is increasing as well.
The range of mobile applications is on the rise as well.
Data suggests that in the US alone, mobile ad revenues are likely to comprise 43% of total ad spending by 2020.
That number will surely have favorable ramification on Google’s revenue collection too.
Google’s Stamp Of Credibility
The goodwill in the market is the basis of any successful business.
Google is no exception to the rule.
From emails to maps to video records and every time of documentation, our lives are closely linked to Google now.
Apart from the search engines, its maps and cloud computing are extremely dependable.
This creates a sense of credibility amongst users.
Increasingly, you see Google products getting relatively better acceptance.
Though individually these services are expensive to run, Google has consistently let volumes rule.
Its revenue from Youtube alone is set to reach $4 billion mark.
People post all types of videos, and this mass usage comes from a sense of security.
Most users believe that their personal information is safe with Google.
Moreover, they can use Google to their advantage in a meaningful way.
This breeds a symbiotic arrangement with most Google users.
That, no doubt, fans a growth in ad sales and you see even advertisers flocking for Google like other users.
The belief is that Google’s Midas touch will work wonders for them too.
Even across the mobile market, we have seen Google’s undeniable dominance.
With making the basic service generally free, the search engine major has consistently maintained its dominance.
So credibility directly impacts volume.
Through a number of examples, we have understood that Google’s revenue model is volume dependent.
They have been able to maintain this lead continuously by working on their credibility.
In fact, the Google browser, Chrome, is one of the most extensively used browsers today.
It holds over 30% of the overall market share.
That too directs a sense of credibility and the revenue inflow associated with it.
The core concept here is a function of creating value and boosting volumes as a result.
Enhanced Data Collection
You can ask that I am constantly talking about how Google makes money boosting volume.
But how exactly does this volume help?
Well, one part of it is that it generates higher clicks per page.
But with Amazon coming into the picture, the clicks per page revenue has seen a bit of a dent.
But surprisingly, Google’s revenue projection is on the rise.
So how is that happening?
Well, Google keeps collecting data.
It collects data from the Chrome user trends; it gets data from online searches.
Browsing habits of people and company are at Google’s disposal.
Google even collects information from your exact location and IP address.
There is hardly a way to escape Google’s reach.
It can make an average person like you or me nervous.
But the fact is for Google, this is a mode to generate revenue sustainably.
But that said, Google has all of this data without spending a penny.
Unlike Forefox or Safari, it is not making a huge investment to collect data.
That essentially means that you get a reasonable amount of savings.
In terms of revenue generation, that helps too.
No expense means the higher profit.
But the Google story does not end right here.
When you are keen about understanding how they make money, think of the myriad verticals they are expanding in.
Google has its eye on the future, and it is tracking every possible opportunity.
The Flight Box is one such option.
Don’t mistake it to be just another tool to get a realistic rate of the cheapest flight.
Well, it does that for sure, but there is more.
Google liaisons directly with the airline company to get you the best tickets.
Obviously, it gets a certain compensation from the company in return.
Additionally, Google makes money by simply sending you the airline site for on your email.
This is a part of the direct marketing initiatives from Google.
Though the exact agreement contours are not made public, Google’s revenue projections indicate the overall trend.
It is clear that Google has its eye on the money.
Google has started providing additional insights for customer’s convenience.
Calendar pricing is one of its biggest innovations.
The color-coded calendar days with prices tells passengers days when the ticket is cheaper.
You also get numerous filters to get to the most pertinent price for the tickets.
So whether you only want to fly first class or you want non-stop flights, it is only a matter of choice.
Google is further adding features to this like hotel booking and many other features.
Moreover, this is one of those Google products that is coming up as options with minimum ads.
Most times flight bookings and hotel bookings can be annoying just for this.
So here, you have a clean set up with minimum ads and best rates.
No doubt, that will add to the revenue on a sustained basis and help Google make money.
I keep all my data online on my Google Drive.
Google offered this service free to a certain amount.
Beyond that point, it still allowed me to keep that data but started charging a nominal monthly rate.
Do I stop storing my data on Google?
No, I don’t.
In a time and era when we are consistently scrambling for additional storage space, Google Drive is a gift from heaven.
In a matter of seconds, I can get access to gigabytes and terabytes of space.
I don’t have to keep shifting from one hard disc to another and fear losing data.
I prefer paying that monthly nominal amount to Google over losing sleep about losing data.
Now imagine the ramifications when my tribe increases.
I am not the only one in the world facing data crunch.
There are millions signing up on Google every day.
They are also subscribing for additional space just like me.
Even if it is less than $5 a month from per person, it is a huge amount.
You don’t have to be a mathematician to calculate the scale of revenue.
Moreover, this is a revenue channel that is not closing in a hurry.
People will keep needing space and keep subscribing for more.
Revenue From Hardware Development
Now, this is another lesser known channel, but Google does make money from here too.
Pixel and a plethora of home hardware that Google develops does keep the revenue channel ringing.
2018 data indicates that Google clocked an approximate gain of $3 billion in 2018 from its Google Home Hub.
Pixel’s popularity is gradually moving northwards.
Most interestingly, the hardware business gives Google the much-needed diversity.
Its profits are no longer centered around its software initiatives only.
That means that Google does not have to constantly worry about generating revenue either.
It is now no longer solely dependent on ads and clicks per page.
That means Google is not just increasing the revenue but is also better geared to tackle competition.
So unlike Nokia or other Global software majors, Google is also creating an aggressive revenue model.
That ensures that the profit stays in place and you get to explore profit opportunities from multiple channels.
The hardware business is poised to deliver a $10 billion-plus revenue in 2019.
That, in many ways, helps you get a realistic picture of how Google is using this medium to make money.
Therefore, it will not be wrong to say that Google makes money through multiple sources.
It primarily works with people and addressing their needs.
In many ways, its revenue model is built around public service and accommodating ads while doing so.
So, it not just identifies areas that need attention but also delivers superior solutions for the same.
As a result, people accept it with open arms and embrace it.
Another factor is the volume play.
Google will never ask you or me to shell out a huge sum.
Instead, it creates a battalion of the likes of you and me.
The dollars keep flowing in automatically.
Last but not least, Google stays a step ahead from competition to make money.
That is precisely what ensures that there is no saturation of revenue channels for Google.