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 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.
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.
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.
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.