Almost every single person wonders how Google makes money. Well, in this article, we will tell you everything there is to know about this topic.
How Google Makes Money: Google’s Income & Revenue by Segment (Jump To Section)
Google, the tech giant, is now the doorway of internet usage and surfing. It is an American multinational technology company with its headquarters at 1600 Amphitheater Parkway, Mountain View, California, the U.S. This place is known as Google plex, which is the combined complex of Google and its parent company Alphabet Inc. This multinational company works on basically artificial intelligence, search engine technology(SEO), online advertising, cloud computing, computer software, quantum computing, e-commerce, and consumer electronics.
As of 2022, Google is the most powerful and influential company globally. Apart from this, Google is also considered the most valuable brand worldwide because of its superior data collection methods, market dominance, and of course, the best artificial intelligence in the era of technological advancements.
Right now, a total of five companies are leading our planet: Google, Amazon, Apple, Meta, and Microsoft. You may already use many Google products and services like navigation, language translation, video calling, productivity, smartphones, music streaming, machine learning APIs, AI chips, email, video on demand, etc. These products are used by various business entities and educational institutions like schools, colleges, universities, etc. People also make use of these services for their personal usage.
Google is one of the world’s most visited websites and is known as the best service provider for the mobile operating system, web browser, ML framework, and AI virtual assistance. Google has ranked second by Forbes on the list of most valuable brands worldwide. Also, it is ranked fourth by Interbrand on the list of valuable companies.
Well, in this piece of article, you will know how Google makes money. But before that, you should know a little about Google’s history first.
History of Google
In 1998, the miracle of Google took place on the 4th of September. However, the main journey started in January 1996 as a research project. Two young computer engineers, Larry Page, and Sergey Brin were Ph.D. students at Stanford University (California). Another person was behind most of the code running the original Google Search engine. He was Scott Hassan. Scott was about to start his robotics career and started the journey with his company, Willow Garage.
Both Larry and Brin theorized about an improved system that could analyze the relationships among websites that could help improve search engine rankings. This new age algorithm is known as PageRank. With the help of Page Rank, a website’s relevance by the number of pages that linked back to a website can be determined. Not only that but also the significance of the web pages that linked back to the original site could be found easily.
When they were done with the page ranking system through the algorithm, they named it googol. Googol is a big number written as 10^100 (1 followed by 100 zeros). This name was chosen to signify that the search engine was made to provide a huge amount of information to all. Eventually, they changed the name to Google, becoming the company’s common name. The company’s main domain(www.google.com) got the registrar and patent on September 15, 1997, and the company started its journey on September 4, 1998.
The first office was just a garage that belonged to Susan Wojcicki. This place was based in Menlo Park, California. The first employee of Google company was Craig Silverstein, a PhD student at Stanford University.
Two Young Minds Behind Google – Larry Page and Sergey Brin
Larry Page, originally known as Lawrence Edward Page, is a computer scientist and internet entrepreneur. Larry started his higher education at the University of Michigan, receiving a bachelor’s degree in computer engineering. Later he went for the PhD program in computer science at Stanford University. In an interview, Larry Page mentioned that he was very interested in computers and related machines from early childhood.
This thing led him to study computers. While studying at the University of Michigan, Larry made an inkjet printer of Lego bricks. At the University of Michigan, he was a member of the 1993 “Maize & Blue” University of Michigan Solar Car team. While doing the PhD program, Page started with a “dissertation theme” and considered finding the mathematical properties of the World Wide Web. It was his main research topic under his mentor Terry Winograd. Page started his research work by focusing on the problem of finding out which web pages linked to a given.
The other founder was Sergey Brin, formerly Sergey Mikhailovich Brin. Brin is also an American business magnate as well as a computer scientist. He was the president of Alphabet Inc., the parent company of Google. He also started his higher education journey at the University of Maryland in 1990.
He received his bachelor’s degree in computer science and mathematics in 1993. He also joined an internship program at Wolfram Research that was the developer of Mathematica. Later, he started his PhD program at Stanford University on a graduate fellowship from the National Science Foundation. However, Brin did not complete his PhD program.
Larry Page and Sergey Brin were given the name of a World Economic Forum Global Leader for Tomorrow by the Massachusetts Institute of Technology (MIT). They also received the Marconi Foundation’s prize. Like Brin, Larry received the Golden Plate Award from the American Academy of Achievement. In the year 2005, both Brin and Page were selected as Fellows of the American Academy of Arts and Sciences.
Larry also received the Communication Award from Prince Felipe at the Prince of Asturias Awards. This award was given on behalf of Google company. Both of them also received the EY Entrepreneur of the Year Award title. Both are on the list of the top 10 richest people worldwide.
How did Google get the funding to run their company?
Well, before learning how Google makes money, you need to know how Google got all the funding to start and run this company in its early days. This idea of Google was funded primarily by Andy Bechtolsheim, who invested $100,000 in August 1998. Brin and Page mentioned that this first investment motivated them to work properly for the company. David Cheriton, a start-up expert, also invested $250,000 after a brief look at the website demo.
Another two angel investors for Google were Jeff Bezos and Ram Shriram. Ram Shriram invested $250,000. Apart from these, Google made it possible to raise around $1,000,000. That made Google pay for a new and original shop in Menlo Park, California.
On June 7, 1999, Google got another investment of $25 million from major investors, including the venture capital firms Kleiner Perkins and Sequoia Capital. After settling their main goal, Google’s new office was started in Palo Alto, California. In 2000, Google started its advertisement selling journey connected with search keywords. However, the advertisement was completely text-based so that it could be uncluttered. In the same year, Google started its journey as the default search engine provider for Yahoo! It was one of the most popular websites at that time.
By the end of 2003, Google got its way of running, and its huge popularity and convenience made the verb “google” to be added to the Merriam-Webster Collegiate Dictionary and the Oxford English Dictionary. On August 19, 2004, Google started its journey as a public company with an initial public offering. Larry Page, Sergey Brin, and Eric Schmidt started working together for Google and will continue working until 2024.
As a company, Google had to offer a total of 19,605,052 shares for $85 per share. Google was able to get a sale of $1.67 billion, through which Google got a market capitalization of more than $23 billion. Google took over YouTube for $1.65 billion in Google stock on November 13, 2006. They also acquired Double Click for $3.1 billion. After these tremendous funding sessions, google just started to produce amazing services and make money.
Google’s New Journey
By the end of 2011, it was officially reported that Google was handling approximately 3 billion daily searches. To handle this much data with ease and convenience, Google needs to build 11 data centers around the globe. All of these data centers are equipped with several thousand servers in each. These data centers help to make the search engine journey easier. By the end of 2011, Google experienced its first monthly one billion unique visitors.
Slowly, Google started acquiring various companies like Motorola Mobility, Waze, DeepMind Technologies, etc. Google became the second most valuable brand in the world in the years 2013, 2014, 2015, and 2016. It holds a valuation of $133 billion.
On August 10, 2015, Google planned to be a conglomerate named Alphabet Inc. It became the largest subsidiary and the umbrella company for Alphabet Inc. When the whole plan was sorted out, Sundar Pichai took the position of CEO of Google. He replaced Larry Page, and Larry Page became the CEO of Alphabet Inc.
This huge tech giant started its new gaming journey with a cloud platform called Google Stadia. This was started on March 19, 2019. After a few months, in December, Google got Bill Ready as its new commerce chief. Bill Ready was the former PayPal chief operating officer.
Products and Services Offered by Google
- Search engine
- Consumer services
- Enterprise services
- Internet services
Here are the details of these services and products provided by Google.
- Search engine
Google has included billions of web pages that allow users to search for specific topics they want. This search is based on keywords and operators. As of now, Google search engine is the default search engine in the United States market and holds a market share of 65.6%. In 2017, Google created a specific personal tab unique to individuals. This personal tab helps users to find their content on Google, like emails, photos, videos, profiles, contacts, etc.
Google has also launched Google News facilities that summarise various news articles from many websites. Another facility is Google books which enable users to find any preview of specific books, or sometimes it can show a whole book if that is allowed to be shown.
No doubt, advertising is one of Google’s biggest revenue sources. Advertisement helps Google make money effortlessly. It includes sales of apps, purchases made in-app, digital content, Google clouds fees, Android and licensing fees, etc. Nearly US$109,652 million was gained from cost per click in 2017. A total of three methods work here: AdMob, AdSense, and DoubleClick Ad Exchange. Google has also launched AdSense for Mobile so that it can be helpful to gain profit from the mobile advertising market.
You can also take help from Google Analytics to track where and how people use your website. Google Ads enables you to display advertisements in various Google content networks. Besides, Google Ad Manager, Google Marketing Platform, and Tag Manager are quite noticeable. You can make use of some statistics tools like Google Surveys, Google Ngram Viewer, Google Public Data Explorer, TensorFlow, Google Trends, Google Data Studio, Google Activity Report, etc.
- Consumer services
Google consumer services include Web-based services, software, and hardware that helps Google make money. Web-based services include Gmail, Google Calendar, Maps, Google Earth, Google docs, Google sheet, Google slides, Google Drawings, Google Forms, Google Photos, Google Keep, My Business, Stadia, Google flight, Google Travel, Google Videos, Google Dataset Search, Google Patents, Google Scholar, Google Arts & Culture, Google Jamboard, Google Alerts, etc.
As communication and publishing tools, Google provides a few tools like Blogger, FeedBurner, Google Chat, Google Collections, Google Classroom, Google Currents, Google Duo, Google Fonts, Google Groups, Google Meet, Google Voice, etc.
The software includes the Android mobile operating system, smartwatch, television, car, etc. Apart from these, the Internet of things based devices is also available. Google Chrome browser and Chrome OS are two major sections of Google. Apart from this, Cast OS, Glass OS, and Fuchsia are important operating systems from Google.
As a hardware variety, Google has launched Nexus One(the first Android phone under the Google brand), Pixel, Chromebook, Chromecast dongle, Nest(voice assistant smart speakers), Nest WiFi, etc.
- Enterprise services
Google workspace is the most demanding office suite that offers a monthly subscription. Organizations and businesses particularly use this. Through this workspace, any business entity can get the collection of all google consumer services in a business-based way. Additionally, administrative tools, unique domain names, and 24/7 support are provided.
- Internet services
In the year of 2010, Google proposed the Google Fiber project. This project aims to cater to nearly 500,000 customers in various American cities. Google has also announced a mobile virtual network operator known as Project Fi.
Apart from all of these products and services, there are a lot of developer tools like Accelerated Mobile Pages (AMP), Google App Engine, Google Developers, Dart (structured web programming language), Flutter, Go (programming language), Google PageSpeed Tools, Google test, Bazel, FlatBuffers, American fuzzy lop, Google Closure Tools, Google Guava, Google Collaboratory, etc.
Some security tools like reCAPTCHA, Google Safe Browsing, etc. Google also provides lots of desktop applications such as AdWords Editor, Drive File Stream, Google IME, Japanese Input, Google Pinyin, Google Toolbar, Android Studio, Google Web Designer, Backup and Sync, Tilt Brush, Google Trends Screensaver, etc.
How Google Makes Money: Google’s Income & Revenue by Segment
Here you will understand how Google makes money. It is true that Google is a huge tech player, but it is not difficult to understand how Google makes money. Here are the details.
Google has six basic ways of earning money. These are the following:
- Google Ads
- It gives 80% of its current revenue. It has accounted for $209 billion dollars in just 2021. This is one of the biggest sources through which google makes money.
- Google Cloud
- It earned $19 billion of revenue in just 2021.
- Hardware generated a revenue of $19.6 billion.
- Google Play Store
- Play store provides a play pass that is $4.99 per month or $29.99 per year.
- YouTube premium content
- It gives $600 million in revenue, approximately 8% of YouTube’s total revenue.
- YouTube TV
- This sector is quite new, though. It costs $64.99 per month for unlimited access.
Here we are going to make a table that will present the total revenue structure of Google. All of these numbers are indicated in millions.
|Google Search & other||104,062||57%||148,951||58%|
|Google Services total||168,635||92%||237,529||92%|
|Hedging gains (losses)||176||0%||149||0%|
|Hedging gains (losses)||176||0||149||0|
Year Ended December 31
|Parts of segments of the revenue||2019(in millions)||2020(in millions)||2021(in millions)|
|Google Search and Other||$98115(60%)||$104062(57%)||$148951(57%)|
|Google Services Total||$151825||$168635||$237529|
|Hedging Gains/ Losses||4$55||$176||$149|
Google’s annual revenue for 2021 was $257.637 billion.
Google’s annual revenue for 2020 was $182.527 billion.
Google’s annual revenue for 2019 was $161.857 billion.
Alphabet inc. is Google’s parent company that spent 31.56 billion U.S. dollars on research and development. These R&D expenditures were towards many properties of Google. Google makes money (a lot of it) but it also has to bear some expenses. The following is just the R&D expenses that google made in the last three years.
|R&D expenditure in millions of U.S. dollars|
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