In 2023, Google generated 237.85B in revenue in advertising, which represented over 77% of its total revenues of $ 307.39 B. In 2022, Google generated $224.47B in revenues from advertising, which represented almost 80% of the total revenues, compared to $282.83B in total revenues. Therefore, most of the revenues from Alphabet, the mother company of Google, come from advertising.
For instance, successfully integrated into Google’s advertising machine, YouTube is a powerhouse that generates $31 billion in ad revenue annually.
By 2023, YouTube generated $31.51 billion in advertising revenue.
To appreciate the complexity of Google’s advertising machine, you can see the various moving parts of Google’s businessmodel.
In 2023, Google generated $307.39 billion, comprising $175B in Google Search, $31.51B in YouTube ads, and $31.31B in Google network revenue. $34.69B in other revenue, $33B in Google cloud, $1.53B in other bets.
Indeed, Google, rebranded as Alphabet, is a company that now has other important segments.
Indeed, Google other comprises revenue from things like the Play Store, hardware, and YouTube Prime.
Google also invests a massive amount of money into bets that might turn into moonshots.
For some context, in 2023, these bets generated 1.5 billion dollars in revenue, yet they reported a net loss of over $4 billion. In short, each year, Google sinks billions into these bets.
How can Google afford this?
Of Google’s (Alphabet) over $307.39 billion in revenue for 2023, Google also generated for the first time, well over 1.5 billion dollars in revenue from its bets, which Google considers potential moonshots (companies that might open up new industries). Google’s bets also generated a loss for the company of over $4 billion in the same year. In short, Google is using the money generated by search and betting it on other innovative industries, which are ramping up in 2023.
That’s thanks to its advertising cash printing machine.
Indeed, today Google is a key player in digital advertising, generating more than $250 billion in revenue between Search, Network, and YouTube Ads.
This advertising machine runs at very fat margins.
To appreciate how these margins turned Google into one of the most prominent tech businesses in the world, you can look at its TAC Rate or how much Google spends each year to keep generating traffic to its web properties.
The traffic acquisition cost represents the expenses incurred by an internet company, like Google, to gain qualified traffic – on its pages – for monetization. Over the years, Google has been able to reduce its traffic acquisition costs and, in any case, to keep it stable. In 2023 Google spent 21.39% ($50.9 billion) of its total advertising revenues ($237.8 billion) to guarantee its traffic on several desktop and mobile devices across the web.
In 2022 alone, Google paid about $49 billion into the publishing ecosystem to keep it running so that Google itself can be the most valuable search engine on earth!
For some context, for each dollar spent on traffic acquisition, Google makes $4.6!
That also explains why many tech players are trying to attack Google’s businessmodel.
While the digital advertising industry is more fragmented, the search engine industry is monopolized by Google.
To appreciate that, look at the second most popular search engine, Bing, and the difference between Google and Bing!
In 2023, Google’s search advertising machine, generated over 175 billion dollars. Whereas Microsoft’s Bing generated 12.2 billion dollars. Thus, as of 2023, Google’s search advertising machine is over 14x larger than Microsoft’s search advertising machine.
That also explains why Microsoft partnered up with OpenAI to bring Google down.
OpenAI and Microsoft partnered up from a commercial standpoint. The history of the partnership started in 2016 and consolidated in 2019, with Microsoft investing a billion dollars into the partnership. It’s now taking a leap forward, with Microsoft in talks to put $10 billion into this partnership. Microsoft, through OpenAI, is developing its Azure AI Supercomputer while enhancing its Azure Enterprise Platform and integrating OpenAI’s models into its business and consumer products (GitHub, Office, Bing).
In a world where Google transformed anyone into a content developer, thus publishing blogs on the web.
OpenAI is instead transforming anyone into a product developer, publishing applications with AI in them.
OpenAI has built the foundational layer of the AI industry. With large generative models like GPT-3 and DALL-E, OpenAI offers API access to businesses that want to develop applications on top of its foundational models while being able to plug these models into their products and customize these models with proprietary data and additional AI features. On the other hand, OpenAI also released ChatGPT, developing around a freemium model. Microsoft also commercializes opener products through its commercial partnership.
Revenue Streams: In 2022, Alphabet generated revenues from various sources, including Google Search & other ($162.45B), Google Network Members ($32.78B), YouTube ads ($29.24B), Google Other ($29B), Google Cloud ($26.28B), and Other Bets ($1B).
Advertising Dominance: Despite the rebranding of Google as Alphabet, the company still primarily generates revenue from advertising. In 2022, Alphabet earned a significant portion of its revenue from advertising sources like Google Search, Network members, and YouTube ads.
Google’s Advertising Machine: Google’s advertising model is complex, with different moving parts. YouTube, integrated into Google’s advertising ecosystem, generates around $30 billion in annual ad revenue.
Diversified Revenue: While advertising remains a core revenue driver, Alphabet has diversified its revenue streams over time. Google’s Other category includes revenue from the Play Store, hardware, and YouTube Prime.
Moonshots and Innovative Bets: Alphabet invests a substantial amount in “Other Bets,” which are considered potential moonshots – ventures that could open new industries. While these bets generated about a billion dollars in revenue, they also resulted in a net loss of over $6 billion. Google uses the revenue from advertising to invest in innovative industries.
Margins and TAC Rate: Google’s advertising business operates with high profit margins. The Traffic Acquisition Cost (TAC) rate measures how much Google spends to acquire traffic for its properties. Google has managed to keep its TAC stable or reduce it over the years, spending about 21.75% of its advertising revenues in 2022 to guarantee web traffic.
Competition and Monopoly: Google’s dominance in the search engine industry has led to its business model being targeted by competitors. While the digital advertising industry is fragmented, Google maintains a monopoly in the search engine space.
Partnership with OpenAI: Microsoft has partnered with OpenAI to compete with Google. Microsoft’s partnership with OpenAI aims to leverage AI technologies, including large generative models like GPT-3 and DALL-E, for developing applications that integrate AI capabilities into various products, such as GitHub, Office, and Bing.
Transformation of AI Industry: OpenAI’s initiatives, like GPT-3 and DALL-E, are transforming the AI industry by providing API access for businesses to develop applications on top of these foundational models. This has shifted the focus from content development to product development with AI integration.
Google is primarily owned by its founders, Larry Page and Sergey Brin, who have more than 51% voting power. Other individual shareholders comprise John Doerr (1.5%), a venture capitalist and early investor in Google, and CEO, Sundar Pichai. Former Google CEO Eric Schmidt has 4.2% voting power. The most prominent institutional shareholders are mutual funds BlackRock and The Vanguard Group, with 2.7% and 3.1%, respectively.
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2023, Alphabet generated over $175B from Google search, $31.51B billion from the Network members (Adsense and AdMob), $31.31B billion from YouTube Ads, $33B from Google Cloud, and $34.69B billion from other sources (Google Play, Hardware devices, and other services). And $1.53B from its other bets.
Google is an attention merchant that – in 2022 – generated over $224 billion (almost 80% of revenues) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $29 billion segment), and Google Cloud ($26.2 billion).
Of Google’s (Alphabet) over $307.39 billion in revenue for 2023, Google also generated for the first time, well over 1.5 billion dollars in revenue from its bets, which Google considers potential moonshots (companies that might open up new industries). Google’s bets also generated a loss for the company of over $4 billion in the same year. In short, Google is using the money generated by search and betting it on other innovative industries, which are ramping up in 2023.
In 2023, Alphabet’s (Google) Cloud Business generated over $33 billion within Alphabet’s Google overall businessmodel, and it was also profitable, with over $1.7 billion in profits. Google Cloud is instrumental to Google’s AI strategy.
Google is an attention merchant that – in 2023 – generated $237.85 billion (over 77% of its total revenues) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $31.5 billion segment), and Google Cloud (over $33 billion).
The traffic acquisition cost represents the expenses incurred by an internet company, like Google, to gain qualified traffic – on its pages – for monetization. Over the years, Google has been able to reduce its traffic acquisition costs and, in any case, to keep it stable. In 2023 Google spent 21.39% ($50.9 billion) of its total advertising revenues ($237.8 billion) to guarantee its traffic on several desktop and mobile devices across the web.
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, and it reported more than $31B in revenues by 2023. YouTube also makes money with its paid memberships and premium content.
In 2023, Google’s search advertising machine, generated over 175 billion dollars. Whereas Microsoft’s Bing generated 12.2 billion dollars. Thus, as of 2023, Google’s search advertising machine is over 14x larger than Microsoft’s search advertising machine.
Google makes most of its money from advertising. Indeed total advertising revenue represented nearly 78% of Google’s (Alphabet) overall revenues for 2023. Google Search represented nearly 57% of Google’s total revenues. Google generated $307.39B in revenues in 2022, and $73.79B billion in net profits.
In 2023, Google generated $307.39 billion, comprising $175B in Google Search, $31.51B in YouTube ads, and $31.31B in Google network revenue. $34.69B in other revenue, $33B in Google cloud, $1.53B in other bets.
In 2023, Google generated 237.85B in revenue in advertising, which represented over 77% of its total revenues of $ 307.39 B. In 2022, Google generated $224.47B in revenues from advertising, which represented almost 80% of the total revenues, compared to $282.83B in total revenues. Therefore, most of the revenues from Alphabet, the mother company of Google, come from advertising.
At the end of December 2022, Google had over 190,000 employees. On January 20, Google announced the layoff of 12,000 employees within the company, thus bringing the number of total employees by December 2023 to 182,502 full-time employees.
Google generated $1,684,332 per employee in 2023, compared to $1,486,779 per employee in 2022. As of January 2023, as the company announced a mass layoff, it brought back its revenue per employee at $1,586,880, still behind the peak in 2021, for $1,840,330.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
