How do Google make their billions?

I was recently asked a question concerning Google. How do Google make their billions when their core service (their search engine) costs nothing for users? As of 2018, Google is the third most valuable brand in the world with a brand value of $120.9 billion. Although this figure has increased from last year by 10%, Google has been overtaken by Amazon and Apple in the rankings of most valuable brands in the world (where Google was number 1 in 2017). But how are Google able to compete with such large companies. The answer to this is advertisements.

Approximately 85% of Google’s revenue is generated through their advertising platforms. Next time you search for something on Google, you may notice several ads on the results page. These are essentially Google’s “money-makers”. Google’s two main platforms for advertising are Google Adsense and Google Adwords. Search engines can generate money from ads by working through a “pay-per-click” scheme, where they are paid a percentage of money every time someone clicks on an ad they have displayed.

Companies will bid for the advertisement rights of specific keywords or phrases that are searched on Google in order to grab the attention of their target markets. When these words/phrases are searched on Google’s search engine, the ads of the company that have won the bids will be displayed. For example, JD sports might own the rights to the keyword “trainers”, so every time someone searches a phrase like ‘new trainers’, ads from JD sports will be displayed around Google’s search results. So essentially Google earn revenue just by displaying ads from advertisers, earning more when users actually click on the ads.

However like every other wealthy business creator, the owner of Google and his team have looked for other ways to earn its revenue with successful results. An example of this is the ‘Google Play Store’ on android devices. Google receives at least 30% commission on all app sales that are generated by app developers on the Play store. The number of installations that occur on this store is increasing every day and it’s no surprise that Google’s 30% share of sales is generating an insane amount of revenue for the company. In 2014, Google reported that it had earned $10 billion from Android apps and that number is obviously a lot larger today. However apps aren’t the only thing. Google also make profits from movies, E-books and music on the Play Store.

Furthermore, Google also delved into the technology sector with particular focus in the hardware industry. Their most successful output from this business venture was the release of their line of Nexus and Google Pixel gadgets. The first gadget by Google was the Nexus one, which was released in early 2010 and the popularity of this smartphone brand increased exponentially with there being 8 new phones released in the next 5 years. However the Nexus brand was eventually discontinued in 2016 and replaced by the new Google line ‘Pixel’, which has been a great success with the release of phones, tablets and laptops.

But what next for Google? It’s almost certain that the new innovations from Google will not stop here with the brand showing glimpses of their future projects involving robotics, self-driving cars and even space exploration. Maybe these new business ventures can help get Google back into that number one place in the rankings for most valuable companies.