What comes to mind when you hear the word Google? Perhaps it's the number, the search engine,
or one of the most powerful companies in the world. Google's parent company Alphabet
is one of the richest in the world and owns nearly a third of the 50 most popular websites
in the U.S. In this video, we're going to break down exactly how Alphabet makes its
money and how its business model goes way beyond just delivering fast search results.
Google.com is just one part of a much bigger company known as Alphabet. Back in 2015,
the company created Alphabet to allow for corporate restructuring that put all of Google's internet
properties in one basket, and the company's nascent ventures -- including biotech, healthcare,
and artificial intelligence -- in another basket. Alphabet's Other Bets, like its self-driving
company Waymo and life sciences arm Verily, get a lot of headlines, but they don't really
do much for the business. In 2018, Alphabet brought in almost $137 billion. The company's
Other Bets segment contributed just $600 million in revenue. All told, the company made over
$30 billion in net income in 2018, and Alphabet's Google segment did the heavy lifting.
But Google is a free search engine, and consumers don't have to pay anything to use the company's
Maps or YouTube properties either. So where does all that money come from? Google has
turned the search for information and entertainment into an ad machine that prints money.
Here's how Google's advertising system works. 70% of Alphabet's revenue comes from Google Search
and user activity on platforms like Gmail, Google Maps, Google Play, and YouTube. The
vast majority of that money comes from ads. When you use Google to search for something
with wireless headphones, you're served up refined web results and advertisements. The
same goes for your Gmail inbox. These ads costs money to tailor and put in front of you,
and Google is cashing in on that process every time it happens on its properties and
on some other sites. Google works hard to make sure ads are as
relevant to their users as possible. The company allows for ad targeting using an auction process
based on several variables, like advertising bids, quality, and relevance. Bidding takes
place quickly and often. Many businesses are surprised to find that they need to increase
their advertising budgets just to keep up with demand. Naturally, this is good for both
Google and its paying advertisers. Ads vary in price depending on a keyword's popularity.
For example, a lot of people search for Google for professional services like insurance,
loans, and attorneys. The demand and the high dollar value of these searches allows Google
to charge more to advertise in these search results. Google will collect around $54 for
an ad with the word "insurance" included in the search, while the average ad spot comes
in at around $1. But Alphabet's business model isn't all about
lightning-quick advertising auctions. Since the company is built on an arsenal of highly
popular software and social sites, including YouTube, Gmail, and Google Play, the company
continues to gain new users and advertisers every single day. It's now estimated that
Google has about two billion monthly users, which translates to three and a half billion
searches every day. As of 2019, Alphabet has approximately 90% of search engine market
share globally. It might surprise you to learn that more than 50% of its revenue comes from abroad.
Even though international search engines like China's Baidu are successful in their
own right, most of the world uses Google. Alphabet's product popularity almost seems too big to fathom.
Google's Chrome remains the U.S.'s most popular web browser. Nearly two billion
people use Google's Android mobile operating system, and one and a half billion people
use Gmail, making it the world's most popular e-mail service.
Alphabet's family of powerhouse apps have shaped the way people find information and
consume content. The money they generate allows the company to test new technology that could
shape the future. Alphabet is working on everything from developing miniaturized continuous glucose
monitors to self-driving cars. So, advertising is the moneymaker for Alphabet,
at least for now. Thanks for watching! If you have a company
you'd like to see us break down, mention it in the comments section below, and be sure
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