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At first thought, you think of Google as an internet company, a tech company, or just a search engine.
The parent company of Google called Alphabet is one of the biggest companies in the world worth over $2 Trillion dollars. Everyone knows Google, but have you ever looked into where their money comes from? Let’s take a look...
1. Google Ads. When we think of Google, we should be thinking of the biggest advertising company ever. Google makes about 80% of their revenue from ads which accounts for more than $147 Billion!
If you aren't familiar with how Pay-Per-Click ads work in the Google search engine, it looks something like this: Let's say you own a pizza restaurant and want to run ads to sell more pizzas. You set a marketing budget and will bid on search terms you think are relevant to whatever you're selling.
Anytime someone searches the term "pizza near me" and is within 20 miles of your restaurant, you bid $1 to show up in the Google search results. You are charged if the person clicks your ad, but not if they don't. This is called a Pay-Per-Click ad.
There are many more nuances to how these ads work, but that is a very basic explanation of the core revenue driver for Google. There are about 8.5 BILLION Google searches per day. It starts to quickly add up and make sense for how they make so much money even if only 1 out of 100 people are clicking an ad.
2. Google Cloud Services. File storage is free, but space is limited. They charge for additional space you need over the free 15 GB they offer. Google Cloud was on pace to earn about $19 billion in revenues in 2021.
3. Google Hardware. That’s everything from their phones like the Pixel, to tablets, laptops, and home products. They were tracking to hit $20 billion in revenue for 2021.
4. Google Playstore for Apps. They will charge fees on both sides of the transaction for the developers and the users. So there's a charge for developers to put their apps in the Playstore, and then users can buy passes from Google to remove ads from apps. Plus, any apps that users buy in the Playstore, Google will take a 30% cut.
5. YouTube. Last but definitely not least. They make money from ads and subscriptions to YouTube TV and Music. They topped $20 Billion in revenue for 2020 and are still growing rapidly. Crazy that the #1 most visited website, Google, also owns the #2 most visited website with YouTube.
And the craziest stat about Google of all, if Google Cloud or Google Hardware spun off into their own separate entities, they would probably be worth more than $100 Billion, and YouTube more than $500 Billion!
That’s how Google rakes in the big bucks, follow for more plain easy analysis!
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