How Google Makes its Money

Decoding Google’s Revenue

It’s easy to understand how much companies make their money. They sell a product or offer a service for a price. Google’s business strategy baffles most people because their service is free, but they are able to make billions of dollars. How are they doing it? It’s all about ad placement and strategic acquisitions.

Google's Revenue

Value

Google is one of the most successful companies in the world. Google’s revenue in 2012 was $33.3 billion. This makes Google more valuable than all of Panama. The search engine also has more money than the combined 31 poorest countries in the world. Most of this comes from advertising.

Advertising Revenue

Google offers two advertising platforms: AdWords and AdSense. AdWords is a program where companies pay to place ads on certain websites. AdSense is another platform where publishers can access those ads so that they make some money.

About 97 percent of Google’s wealth comes from this. That means that $32.2 billion is generated through this advertising platform. If you have read any books about paid online marketing, then you will always see someone mention AdWords.

Cost Per Click

Google charges on a CPC basis, which means that businesses pay whenever their ad is clicked. While most keywords cost about $1, there are some that cost much more. For example, “insurance” costs about $54 and “mortgage” is about $47. This should show you why AdWords is so lucrative.

Acquisitions

Google also makes money through strategic acquisitions. For example, Google has acquired the YouTube streaming site, Android OS, Motorola Mobility cellular network and WildFire social network marketing platform.

All of these acquisitions have helped Google make millions of dollars by selling products, like with the Android OS, or increasing their advertising abilities, like with YouTube.

Products

Google also offers some products outside of smartphones and the Android OS. Google recently released Google Glass, which had moderate success. Google is also experimenting with driverless cars and Google Fiber. Google’s search engine and Android OS are also commonly installed on many TVs, tablets, smartphones and even fridges.

While these products aren’t nearly as successful as AdWords, they still ensure that Google has a large reach when it comes to technology.

Google makes billions of dollars by helping businesses advertise their products and services to potential customers. While Google has also released many products and acquired successful online businesses, the bulk of Google’s money comes from AdWords, which is easily the most popular online advertising platform.

Source: Best Accounting Schools: Rankings and Reviews of Top Accounting Degree Programs

September 26, 2013

About Drew Barton

Drew Barton is president and founder of Southern Web Group, LLC. Southern Web Group has grown into one of Atlanta's fastest growing web design firms with clients throughout the country. While often associated with work for real estate companies, the firm boasts clients in nearly all industries. Much of Southern Web Group's recent work has been in the law, healthcare and manufacturing markets. As part of Southern Web Group's offerings, Drew frequently conducts customized seminars on website marketing, including email newsletters and search engine optimization. He has served on Keller Williams' Internet Mastermind group and has been quoted at the brokerage's Technology Mega camps. Drew also has been quoted as a web expert in articles in SmartBiz Magazine and on Microsoft's Live.com. In 2004, the Atlanta Business Chronicle named Drew one of the top 40 rising stars under 40 years old. In 2007, the International Association of Business Communicators presented Drew with its Silver Flame Award for an article he wrote about boosting Web site traffic. Drew, whose experience includes stints at Web.com and CNN.com, graduated from Emory University and resides in Atlanta.

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