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How Does Google Make Money? Google Business Model Explained - YouTube
Channel: Neil Patel
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- Hey everyone, I'm Neil Patel,
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and today I want to walk you through
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how Google makes their money.
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In other words, I'm going to
explain Google's business model.
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(bright music)
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Before we get started,
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make sure you subscribe to this channel,
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and if you're on YouTube,
click the alert notification.
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Did you know that Google's
parent company, Alphabet,
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in spite of owning several companies
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in many different industries,
besides Google itself,
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got as much as 85% of its
revenue from advertising in 2018?
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That would account for
roughly $116 billion
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according to Statista.com.
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That's a lot of money,
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but how does Google make all
its money in advertising?
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Well, let's dive a little bit deeper.
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If you had to break it down,
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Google relies on three key players.
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Users, businesses and publishers.
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For users, Google has a simple,
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but powerful value proposition.
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I can find the answer to anything.
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If Google didn't have
an amazing search engine
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that millions of people would
use each and every single day,
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well, you wouldn't be
compelled to use it then.
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The secret here is how they
organize the information
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that is available on the web
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and they made it through simple search.
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They can scan millions of
webpages in less than a second
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and deliver that search to
literally anyone in theory,
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and it will be relevant
to whatever search phrase
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that you entered in the browser.
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That makes your life easy
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because you don't have to
keep searching different
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and different browsers and websites
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to find the information
you're looking for.
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So in essence, users
don't have to pay anything
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in order for Google to make money,
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which is where I'm getting to next.
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For businesses, it doesn't
get much more complicated.
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The value proposition is I get more sales
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through targeted ads.
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As Google makes a bulk of its
revenue through advertising
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and that revenue is generated
from two types of advertising,
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search ads and display ads.
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Search ads are the ones that you see
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when you do a search on Google.
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These ads are extremely powerful
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because it allows a business
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to pay a certain amount of money
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to get in front of
precisely the right audience
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that they want to sell to.
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Whether user is a searching
financial information,
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product comparisons, want
to buy something specific
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in their local area,
businesses are willing to pay
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a lot of money to get in
front of the right customers,
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and advertisers pay Google each time
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a visitor clicks on that ad.
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In other words, it's a
cost per click model.
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A click could be worth
anywhere from a few cents
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to over $50 for a highly
competitive search term
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like auto insurance or loans
or other financial services.
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Now display ads are a bit different.
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Google has many places where
it can show ads to users.
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Gmail, YouTube, Google Maps,
even Google Adsense Partners,
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heck, even mobile apps,
and the list goes on and on
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as Google acquires more
companies and innovates
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just like how they acquired Waze.
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The big thing about this
form of advertisement is
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Google analyzes the context
of every single webpage or app
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as well as matches what
you're looking to get
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from a customer standpoint to your ad.
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So they're marrying the two together.
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They're not just putting
your auto insurance ad
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on a random site, they want to make sure
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its relevant to that site,
and the users also looking for
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the product or service
that you're selling,
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and for publishers, the value
is the money that you can make
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by monetizing your content,
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your organic traffic
through Google as well.
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Website owners have the
chance to insert Adsense Ads
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on their websites and make money
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every time someone clicks those ads.
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Mobile app developers have the chance
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to monetize their app
in the same kind of way.
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Not only that, but each
time they're putting out
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more and more content on Google,
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you can also make more money
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by getting more organic traffic,
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and some of those people will
potentially click on your ads.
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Google's revenue is still
largely growing at a fast pace
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just like it did over 10 years ago.
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The tech giant still reports
revenue growth around 20%,
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and that's kind of crazy
considering how big the company is
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and they're already doing
over $100 billion in revenue.
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But Google is not willing
to rely on ads alone.
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They've gotten revenue
from other bets as well,
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other subsidiaries that they've acquired
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and developed over the years.
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From .8 billion in 2009 to
over 20.5 billion in 2018.
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It went from 3.2% of the revenue in 2009
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to over 15% in 2018,
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and that number is continually growing
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from 2019 to 20 and 21, et cetera.
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Expect that number to continue to rise.
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Google's app store alone
has had revenue growth
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of over 27.3% over the previous year
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according to Sensor Tower.
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Now, Alphabet is a massive corporation
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that encompasses everything
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from internet beaming hot air balloons
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to self driving cars to Google Cloud.
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As long as people keep using Google,
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more and more to find information online,
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it will continually grow their revenue,
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which in turn, will help other areas
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of all the other business
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plus you as business owners
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because the more people Google
attract to their ecosystem,
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the more potential you
have to drive more people
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to your business from both paid listings
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and organic as well.
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If you enjoyed this video,
make sure you like it.
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If you have any questions on Google,
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leave a comment below and I'll answer it.
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Thank you for watching.
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Make sure you subscribe
and have a wonderful day.
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