The pandemic brought people even closer to virtual space. With the development of technology, more and more people in the world have connected to the Internet. Today, you will meet very few people who have not heard of such giants as Google, Facebook, etc. The company Google is known for its popular search engine and e-mail service, web browser, and online tools that I use every day at home, at work, or during any activity. Most of Google’s essential services are free. So how does Google make its money?
Google’s parent company, Alphabet, reported revenue of $46.075 billion in the fourth quarter of 2019. According to the website, these numbers range from October to December. They include a busy holiday shopping season thanks to the efforts of Made by Google technology. However, what is Google’s primary source of revenue? Let’s dive in.
It turned out that the bulk of Google’s revenue in 2019 came from its advertising service, Google Ads. When you use Google, you check for any data from economic news to local weather, you get an archive of search outcomes generated by Google. The algorithm tries to provide the most relevant results for each user request. With these results, you can find suggested pages related to your Google Ads ad placement.
To get first place in Google ads, advertisers must be superior to each other. The thing is, higher quotes tend to be higher on the list, while lower sections may not even be displayed. Advertisers allowance Google each time a user clicks on an ad. Clicks can cost from a few cents to $50. This includes insurance, highly competitive search terms, loans, and other financial services.
In addition, Google AdSense software and search advertising allow Google non-Google websites to include Google display ads on their pages. AdSense ads work like ads on Google site; However, it is displayed on Google-approved sites anywhere on the Internet.
When users tap on an ad, they pay a part of the revenue to the owner; Google retains part of the amount. Due to the area of corporations advertised through the company, the full business banks on AdSense as the main source of income.
A huge part of Google’s revenue comes from ads. In 2020, the company received $146.9 billion from advertising alone. And last year’s total annual turnover was 181.69 billion US dollars.
The rest of the revenue is generated by Google from non-advertising projects. These initiatives include a variety of projects from both online and offline businesses. Other revenue streams include revenue from media, online, and cloud computing businesses: Chromecast, Play Store, Google Apps, Chromebooks, Android, and Google Cloud Platform.
Mistakes of Google
Google’s advertising business is lucrative. However, the company, like everyone else, has its flaws and mistakes. Google’s most significant financial mistake in recent years was made in 2011. It was a $12.5 billion acquisition of Motorola Mobility by the company.
By that time, Google had become the owner of the world’s leading smartphone platform, thanks to the success of the Android operating system. However, despite the company just starting as a software dealer, Google has placed $13 billion on Motorola Mobility. The company thought it could increase the Motorola phone business with the Android software development team.
This deal turned out to be the most unsuccessful in the history of Google. This resulted in a significant loss of $9.6 billion. Then Lenovo bought Motorola from Google for $2.91 billion. However, with great effort, Google retained most of the 17,000 patents obtained due to the acquisition.
Alphabet has been a parent company to Google that has caused almost all its revenue and profits since 2015. Google has been the irrefutable market champion in online advertising for more than a decade. It is expected that by 2021 it will account for almost 29% of global digital advertising spending. It is followed by Facebook with an estimated 24% and then Alibaba, with less than 9%.
Over the years, Google has created and purchased numerous advertising technology tools. This allows content creators to make money through advertising. And let advertising buyers find people in front of whom they would like to place a specific ad on specific platforms. The company’s YouTube advertising business grew by 50% in the first quarter compared to the previous year.
In 2020, the company generated $104 billion in search and other revenue. This is 71% of Google advertising revenue; And accounts for 57% of Alphabet’s total revenue. Advertisers who use Google products can offer search keywords that rank their ads in relevant search results to appropriate users.
Any advertiser can choose from a variety of bidding strategies. If they want to generate site traffic, they can opt for a tender price per click. Users can choose the maximum amount they will pay for specific clicks. The auction then determines whether the ad will appear and in which position.
According to digital marketing specialist Joe Balestrin, the more competitive the industry, the more expensive the offer.
At the same time, Amazon is increasingly competing with Google for search. Amazon’s 19% stake is growing steadily. As experts suggest, the dominance of these two giants in the competitive market is most noticeable.
Analysts optimistic about Google’s search business point out that the company has been growing over the years and will continue to do so. The rise of Amazon will not prevent it from introducing and developing innovative products.
Also, products like Maps are becoming increasingly strategic in terms of advertising. Using Google Maps, advertisers can place ads on local business listings on SeiZinon. Maps only started accepting ads in 2019. It has 1 billion monthly active users and is updated very many times a day. Google does not specify how much its Maps business will generate. However, this is one of the least monetized products of Google. The benefit from it by 2023 could reach $11 billion.
Google and Youtube
YouTube is one of Google’s three primary sources of advertising revenue. Its revenue in 2020 was close to $20 billion. This is about 13% of Google’s total ad revenue.
However, YouTube is growing faster than the company’s other primary advertising sources. Ad creators donate a portion of their ad revenue to YouTube. However, YouTube can also run ads. A marketer who wants to buy advertising on YouTube has plenty of alternatives.
In the last few months, YouTube has also announced experimental features. This is another way to generate great potential money. Experts suggest that such product updates will help personalize ads and increase YouTube monetization. This will help the company to better compete with Facebook.
Despite the growing competition, Google is not giving up its leadership in the field of advertising. The news that the company has implemented is very impressive for the customers. In 2022, it is interesting what other surprise the company will offer us.
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