- Hey everyone, I'm Neil Patel,
and today I want to walk you through
how Google makes their money.
In other words, I'm going to explain Google's business model.
(bright music)
Before we get started,
make sure you subscribe to this channel,
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Did you know that Google's parent company, Alphabet,
in spite of owning several companies
in many different industries, besides Google itself,
got as much as 85% of its revenue from advertising in 2018?
That would account for roughly $116 billion
according to Statista.com.
That's a lot of money,
but how does Google make all its money in advertising?
Well, let's dive a little bit deeper.
If you had to break it down,
Google relies on three key players.
Users, businesses and publishers.
For users, Google has a simple,
but powerful value proposition.
I can find the answer to anything.
If Google didn't have an amazing search engine
that millions of people would use each and every single day,
well, you wouldn't be compelled to use it then.
The secret here is how they organize the information
that is available on the web
and they made it through simple search.
They can scan millions of webpages in less than a second
and deliver that search to literally anyone in theory,
and it will be relevant to whatever search phrase
that you entered in the browser.
That makes your life easy
because you don't have to keep searching different
and different browsers and websites
to find the information you're looking for.
So in essence, users don't have to pay anything
in order for Google to make money,
which is where I'm getting to next.
For businesses, it doesn't get much more complicated.
The value proposition is I get more sales
through targeted ads.
As Google makes a bulk of its revenue through advertising
and that revenue is generated from two types of advertising,
search ads and display ads.
Search ads are the ones that you see
when you do a search on Google.
These ads are extremely powerful
because it allows a business
to pay a certain amount of money
to get in front of precisely the right audience
that they want to sell to.
Whether user is a searching financial information,
product comparisons, want to buy something specific
in their local area, businesses are willing to pay
a lot of money to get in front of the right customers,
and advertisers pay Google each time
a visitor clicks on that ad.
In other words, it's a cost per click model.
A click could be worth anywhere from a few cents
to over $50 for a highly competitive search term
like auto insurance or loans or other financial services.
Now display ads are a bit different.
Google has many places where it can show ads to users.
Gmail, YouTube, Google Maps, even Google Adsense Partners,
heck, even mobile apps, and the list goes on and on
as Google acquires more companies and innovates
just like how they acquired Waze.
The big thing about this form of advertisement is
Google analyzes the context of every single webpage or app
as well as matches what you're looking to get
from a customer standpoint to your ad.
So they're marrying the two together.
They're not just putting your auto insurance ad
on a random site, they want to make sure
its relevant to that site, and the users also looking for
the product or service that you're selling,
and for publishers, the value is the money that you can make
by monetizing your content,
your organic traffic through Google as well.
Website owners have the chance to insert Adsense Ads
on their websites and make money
every time someone clicks those ads.
Mobile app developers have the chance
to monetize their app in the same kind of way.
Not only that, but each time they're putting out
more and more content on Google,
you can also make more money
by getting more organic traffic,
and some of those people will potentially click on your ads.
Google's revenue is still largely growing at a fast pace
just like it did over 10 years ago.
The tech giant still reports revenue growth around 20%,
and that's kind of crazy considering how big the company is
and they're already doing over $100 billion in revenue.
But Google is not willing to rely on ads alone.
They've gotten revenue from other bets as well,
other subsidiaries that they've acquired
and developed over the years.
From .8 billion in 2009 to over 20.5 billion in 2018.
It went from 3.2% of the revenue in 2009
to over 15% in 2018,
and that number is continually growing
from 2019 to 20 and 21, et cetera.
Expect that number to continue to rise.
Google's app store alone has had revenue growth
of over 27.3% over the previous year
according to Sensor Tower.
Now, Alphabet is a massive corporation
that encompasses everything
from internet beaming hot air balloons
to self driving cars to Google Cloud.
As long as people keep using Google,
more and more to find information online,
it will continually grow their revenue,
which in turn, will help other areas
of all the other business
plus you as business owners
because the more people Google attract to their ecosystem,
the more potential you have to drive more people
to your business from both paid listings
and organic as well.
If you enjoyed this video, make sure you like it.
If you have any questions on Google,
leave a comment below and I'll answer it.
Thank you for watching.
Make sure you subscribe and have a wonderful day.