Google is one of the most well-established technology company in the world, which is best known for its internet-based services like web search engine, email service, video sharing portal, mobile operating service, among many others. But have you ever wondered, that when almost all the Google services are free, how does the company earn billions of dollars in revenue? As of 2019, the company recorded USD 160.74 billion in revenue, which is a sharp rise from USD 65.67 billion from five years ago in 2014. In this article, we will shed some light on the business model of Google, highlighting how the company makes money and how it has been so financially successful in its business.
Advertising: Primary Source of Revenue
Over the years, Google has diversified into various fronts, in order to create more revenue sources. However, the primary source of revenue comes from advertising. Yes, Google is essentially an advertising company and it earns the majority of its revenue from selling advertisements. Google caters to business owners, offers them digital marketing solutions to reach out to a large audience base.
The internet-based services that people use for free, such as the search engine, and YouTube, act as platforms for digital marketing. The free services bring users to the platform, which gives Google the opportunity to show them ads from its clients. In the search engine, the ads show in form of sponsored search results or shop listings. However, it should be noted that Google explicitly mentions which search results are organic and which ones are paid advertisements. According to an expert essay writing service, Google is the market leader when it comes to search engine usage, with close to 90% market share worldwide. The high popularity of the search engine attracts a lot of users, allowing Google to show ads to a much wider demography of audience. Thus, the company earns money from the business clients, who pays for the digital marketing services offered by Google.
The same business model is also followed in YouTube, which is a video sharing platform owned by Google. Business owners can place their ads in the platform, for a fee which adds to the revenue source of the technology giant. However, in order to maintain, the attractiveness of the platform and appeal to the content creators, YouTube also provides an incentive for them, thereby encouraging them to create more video content.
The ad revenue is earned from the marketers who uses Google’s platforms for their digital marketing needs. Google usually charges the fees for the ads by the pay per click model. As I was writing my paper on digital marketing, I found that a marketer is not billed unless an audience clicks on the ads shown in the platform. Based on this model, the marketer is charged based on individual clicks made by the audience. The cost per click varies from less than a dollar and can go up to USD 30, based on the popularity of the keywords and nature of advertisement.
Google Play Store
Google’s Android operating system comes with its own digital store for applications. It allows users to choose and purchase from a library of close to 2 million applications. Whenever, a user purchases an app from the Google Play Store, the company takes 30% of the purchase value and the developer gets the remaining 70%. Considering the fact that Android is the leading mobile operating system worldwide, it caters to massively large customer base. This as a result, allows the company to take advantage of high economies of scale, by offering its Play Store services and earning 30% from each app purchase.
Hardware
Google is traditionally known as a software company; however, it has started to diversify its business venture by offering hardware products such as smartphones, smart home devices, Chromebook, etc. The sale of these devices also contributes to the revenue of the company. A professional research paper writer would highlight that the rising popularity of smartphones has presented a potential opportunity for Google to manufacture its own hardware and compete with the likes of other smartphone manufacturers such as Apple, Samsung, Xiaomi, etc.
Cloud Computing and Cloud Gaming Service
Google also offers cloud computing services for business clients. It offers services like serverless computing, application platforms, application containers, virtual machines, cloud storage and database services. These services are highly scalable and bills customers based on their usage, thereby allowing both small and big enterprises to take advantage of Google’s cloud computing services.
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As a recent venture, Google has also entered the cloud gaming industry with the introduction of Stadia. It allows gamers to play their favorite titles, without the need to purchase expensive hardware. These cloud services also play a significant role the revenue generation of the company.
