There are so many reports floating online showing how Google gets its revenue. But this article can be labeled as a simple layman's article to help understand how all this works.
We all know that Google search, the most prominent of Google Products is completely free. So how does Google make so much money? Of course, it has other products like Gmail, Google Maps, Google News, Google Earth, Google Drive, but all these are free too. This is where the smartness of Google comes in to play.
A tactic which was adopted early in the scene by Google – after their initial Venture Capitalists played that pivotal role in making Google launch their search engine brain to work. These services offered by Google take immense investments and time. But these are all offered for free to majority of its users (others being corporate users who pay for certain upgrades and services). These also demand extensive resources, space and bandwidth. However, this makes the user spend more time on Google, clicking on ads - thus the resources, money and time well spent on part of Google.
Targeted Advertising
What is it that makes this giant become an even bigger one with every passing day?
Advertising. Yes. Advertising is what makes Google make so much money. It's the revenue from ads which is the highest among Google's entire revenue stream.
Regular Updates
So what do they do to make this magic happen?
They continue to drive constant innovation and new techniques. Frequent and regular updates are made to the way Google displays its ads in Google searches made by billions of people worldwide – and all those are mostly done as a silent update, never known visibly to the end user who is making a simple Google Search using their computer or in a Smartphone.
Clutter-free design with non-obtrusive approach
Google strives to help people find ads which are relevant and useful. They do this by separating ads from the regular Google search results. This way the regular or 'organic' searches are displayed without getting mixed up with 'paid' links which are the ads.
This is the revolutionary business model created by Google which the other early players in the Search Engine arena failed to accomplish. If there is one word that can summarize Google's combined search and ad aesthetics – it's 'Relevance'. Being relevant is what helps Google stand out from the other players.
Smartness
Taking this study to its next level, one must understand that Google's Search Engine is still the prominent and ranks at the top in fetching substantial revenues for Google. And searching is all about words. In Google's terminology, these are called as 'keywords'.
The above Infographic depicts clearly the top keywords that Google, bidders and publishers use.
It all works seamlessly in a virtually perfect world:
Advertisers use Google AdWords to pay for their placement of ads.
Publishers offer ad space in their blogs and websites using Google AdSense.
Users click on the ads – advertisers pay Google and the Publishers – only when they are clicked.
Conclusion
There is a lot to learn from the Google's Business Model. There are even hundreds of books on Google and its approach. No wonder there is a large fan base for what Google does and there are people who follow it religiously for what it does and stands. It's the simplicity that helped Google skyrocket its business model in its early days. Some even say that the founders still prefer to keep the home page simple and they insist that the words on the home page do not exceed 28 words.(
Source).
Since all the key players in the advertising business get benefited, this system would run effectively as long as Google runs its business with all the key players in mind while making any changes to its business model.
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