how-big-is-google

How Big Is Google?

Google is an attention merchant that – in 2021 – generated $209 billion (over 81% of revenue) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $28 billion segment), and Google Cloud ($19 billion). Over $31.5 billion went toward R&D (12.3% of its revenues).

What’s the Google (search engine) key monetization strategy?

A hidden revenue generation business model keeps users out of the equation, while it lets other parties finance – in part or entirely – the product or service offered. This kind of model works if the value proposition is appealing to several stakeholders.

For instance, Google has created a sustainable business model based on hidden revenue generation, by creating a compelling value proposition for businesses and publishers. The former can bid on keywords and generate sales through targeted ads. The latter can effectively monetize their content.

When Google went public in 2004, Larry Page and Sergey Brin put together a letter which clarified:

Sergey and I founded Google because we believed we could provide an important service to the world-instantly delivering relevant information on virtually any topic. Serving our end users is at the heart of what we do and remains our number one priority.

Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious. For example, we make our services as widely available as we can by supporting over 90 languages and by providing most services for free. Advertising is our principal source of revenue, and the ads we provide are relevant and useful rather than intrusive and annoying. We strive to provide users with great commercial information. (Source: abc.xyz)

You might think that since Google is the best search engine out there, that is why it makes 88% of its revenue from advertising. However, for how a marvelous Google search algorithm is, what makes Google the tech giant that is today; is its business model

AdWords and AdSense together create a win-win-win. Companies can sponsor their products for much cheaper, and track their results with no effort.

Online publishers can easily monetize – something is better than nothing – their content. Users get relevant answers to any question they might have.  A great product is a little part of the equation. The rest is about business modeling

To make money Google has to spend money. That is why an important metric to look at to understand the efficiency of the Google business model is its TAC.

TAC stands for traffic acquisition costs, and that is the rate to which Google has to spend resources on the percentage of its revenues to acquire traffic.

Indeed, the TAC Rate shows Google’s percentage of revenues spent toward earning traffic toward its pages, and it points out the traffic Google acquires from its network members.

In 2017 Google recorded a TAC rate on Network Members of 71.9% while the Google Properties TAX Rate was 11.6%.

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Related To Google Business Model

Google

how-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, this comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

Amazon

amazon-business-model
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services,  Amazon AWS, Subscription Services, Advertising revenues and Physical Stores.

Microsoft

microsoft-business-model
Microsoft has a diversified business model, spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $168 billion in revenues, of which over $52 billion came from Server products and cloud services and $39.8 billion came from Office products and cloud services. Windows generated over $23 billion, Gaming generated over $15 billion, LinkedIn over $10 billion, and search advertising (through Bing) over $8.5 billion. 

How Big Is Google?

how-big-is-google
Google is an attention merchant that – in 2021 – generated $209 billion (over 81% of revenue) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $28 billion segment), and Google Cloud ($19 billion). Over $31.5 billion went toward R&D (12.3% of its revenues).

Google Traffic Acquisition Costs

what-is-google-tac
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, keep it stable. In 2021 Google spent 21.75% of its total advertising revenues (over $45.56 billion) to guarantee its traffic on several desktop and mobile devices across the web.

How Does Google Make Money

how-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, this comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

YouTube Business Model

how-does-youtube-make-money
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 generated more than $28B in revenue by 2021. YouTube also makes money with its paid memberships and premium content.

Google Organizational Structure

google-cloud-business-model
In 2021, Alphabet’s (Google) Cloud Business was an over $19 billion unit within Alphabet’s Google overall business model; to gain a bit of context; Microsoft intelligent cloud netted $60 billion and Amazon AWS netted over $62 billion in the same year.

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