Google Revenue Breakdown

	Alphabet’s Google Revenues (2022)
Google Search & other	$162.45B
Google Network Members	$32.78B
YouTube ads	$29.24B
Google Other	$29B
Google Cloud	$26.28B
Other Bets	$1B

Alphabet generated over $282B from Google search and others, $32.78 billion from the Network members (Adsense and AdMob), $29.2 billion from YouTube Ads, $26.28B from the Cloud, and $29 billion from other sources (Google Play, Hardware devices, and other services).

google-advertising-revenue — While Google has been rebranded as Alphabet, back in 2015, in reality, the company still primarily makes money from advertising. Indeed, in 2022, Alphabet generated over $162 billion from Google searches, $32 billion from Google Network members, and over $29 billion from YouTube ads. In total, Google made over $224 billion in advertising revenue from Search, Network members, and YouTube Ads combined. This represented almost 80% of Alphabet’s total revenue. Instead, Google search represented over 57% of its total revenues.

	2022
AdWords	$162B
AdSense	$32.8B

In 2022, Google generated $162 billion from AdWords and $32.8 billion from AdSense and AdMob.

Within Google, there are many moving parts.

For instance, successfully integrated into Google’s advertising machine, YouTube is a powerhouse that generates $30 billion in ad revenue annually.

youtube-ad-revenue — YouTube, by 2022, generated over $29 billion in advertising revenues.

To appreciate the complexity of Google’s advertising machine, you can see the various moving parts of Google’s business model.

google-revenue — In 2022, Google generated over $282 billion in revenues, of which over $162 billion from Google Search, over $29 billion from YouTube Ads, and almost $33 billion from Network Members’ properties. In addition, Google generated over $29 billion in other revenue, over $26 billion from Google Cloud, and over a billion dollars from 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 2022, these bets generated a billion dollars in revenue, yet they reported a net loss of over $6 billion. In short, each year, Google sinks billions into these bets.

How can Google afford this?

google-other-bets — Of Google’s (Alphabet) over $282 billion revenue for 2022, Google also generated over a billion dollars from a group of startup bets, which Google considers potential moonshots (companies that might open up new industries). Those Google’s bets also generated a loss for the company of over $6 billion in the same year. In short, Google is using the money generated by search and betting it on other innovative industries. Of Google’s (Alphabet) over $282 billion revenue for 2022, Google also generated over a billion dollars from a group of startup bets, which Google considers potential moonshots (companies that might open up new industries). Those Google’s bets also generated a loss for the company of over $6 billion in the same year. In short, Google is using the money generated by search and betting it on other innovative industries.

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.

traffic-acquisition-cost — 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 2022 Google spent 21.75% of its total advertising revenues (over $48 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 business model.

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!

That also explains why Microsoft partnered up with OpenAI to bring Google down.

openai-microsoft — 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.

how-does-openai-make-money — 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.

Key Highlights

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.