With a market cap of $1.397 trillion, Google is not only one of the top three most valuable companies in the world, but it’s also one of the most profitable. Thanks to its powerful combination of technology and strategy, the search engine has turned itself into an online powerhouse capable of amassing billions annually.
True, Google ads are a key revenue source for the tech giant, but they’re far from the only one. So if it’s free to use, then how does Google make money?
Below is a thorough analysis of the company’s business model, the various revenue sources, and how exactly Google translates internet users’ habits into profit.
Google’s Business Model
Being a titan in the world of search engines, Google reaps a substantial portion of its profits through advertising, with its algorithms skillfully pairing ads to the millions of daily searches. Beyond Google Ads, the company makes bank from cloud offerings, apps and hardware, Playstore, and even YouTube’s premium content.
Google is also the largest subsidiary of Alphabet Inc., which is a collection of companies that offer a variety of other services like software, apps, mobile operating systems, and more. And just like the business model of Google, Alphabet’s businesses mainly rely on advertising to make money.
Currently, Alphabet’s largest competitors are Apple Inc. Meta, Microsoft, Amazon, and Alibaba, while Microsoft’s Bing and Yahoo, are two other relevant players in the search industry. And while they strive to keep up with Google, considering both barely hold 4% of the search engine market while Google has an impressive 93.18%, it’s safe to say Google’s dominance in the digital playground is more than guaranteed.
Google Revenue Breakdown
Google makes the bulk of its revenue, or 80.2%, from advertising on its properties, including YouTube. Cloud services account for 9.3% of Google’s revenues, while other Bets account for 10.3%.
Given the above, one could argue that Google makes money in three different ways. But we’ve outlined the earnings in this way only to give you a gist of how gigantic Google’s advertising segment actually is.
In order to truly uncover Google’s sources of revenue, we need to look at things in more detail. Here are the six top ways Google makes its money.
1. Google Ads
These ads appear on the top and bottom of a search engine result page. Ads may also appear on Google Maps, Google Play Store, in the shopping tab, and also on the websites of Google search partners.
They are easily recognizable by their small ‘Ad’ label and can earn Google anything from a few cents to over $50 per click. In 2022, Google made a staggering $224.47 billion from ads, up from the $209.49 billion it had generated in 2021.
By matching advertisements to users’ search requests, Google provides content precisely tailored to their needs. As a result of this exact targeting, billions of clicks are generated every day.
2. Google Cloud Platform (GCP)
Even though cloud storage is free, to monetize on this platform, Google limits the use of its services, such as networking, machine learning, IoT, security, and developer tools.
It follows a pay-as-you-go pricing model, and depending on the storage, network, and operations, it may cost from a couple of hundred dollars to over $10,000 and more.
In fact, in 2022, the cloud platform earned the company a solid $26.28 billion. Google revenue sources from GCP back in 2021 were significantly lower, or $19.20 billion.
3. Hardware
The company’s hardware solutions, like the Google Pixel smartphones, tablets, laptops, and earbuds, together with Google Nest smart home products and Chromecast digital media players, are all devices that have been launched fairly recently. And even though they are considered non-major, or miscellaneous channels, they’re still an important asset.
In 2021, this Google revenue source generated a total of $19.6 billion in revenue and over $6.1 billion worth of profits.
4. Google Play
Launched in 2008, Play Store is Google’s digital store for Android users. It covers games, movies, TV shows, music, and also books. In March 2018, Play Store broke a record with a whopping 3.6 million apps, and five years since, in March 2023, the store has a little over 2.6 million apps.
The Play Store has both free and paid apps, the cost of which varies depending on the type of app. Additionally, Google gets money through Play Pass which costs from around $5 to $30 per year and is available to use for up to five members simultaneously.
It’s a pass that enables users to access games and apps without ads or in-app purchases on some products. However, it doesn’t provide access to all 2.6 million apps. There is also a fee for developers who wish to upload apps to the store.
Compared to Google’s revenue streams from ads, one may argue that the earnings from Play Store are insignificant. However, app and game consumer spending on this item in 2022 amounted to $42.3 billion. And even though the number is 11.6% lower compared to 2021, it’s still higher than in 2020.
5. YouTube Premium Content
YouTube’s premium content advertisement-free subscription service is another important source of Google’s income. It offers a one-month free trial, after which it is available for $11.99 per month.
The YouTube Premium subscription revenue falls under Google services which makes it hard to separate the revenue generated from subscriptions only. And although it currently isn’t one of Google’s top revenue sources, its earnings as of 2022 are estimated at $29.2 billion.
6. YouTube TV
Launched in 2017, YouTube TV is an innovative streaming television service that offers a wide selection of live shows, on-demand videos, and DVR. With unlimited access to over 100 live channels. YouTube TV is available for $72.99 per month and can be shared with up to six household accounts.
According to recent announcements, YouTube TV has surpassed the five million user mark. So even though there is no official data as to how many of these are non-paying trial customers, it’s safe to say that despite being relatively new on the market, YouTube TV has already made a significant impact on Google in terms of revenue.
How Much Money Does Google Make?
At the end of 2022, Google’s revenue was $279.8 billion, up from $256.74 billion the year before. What’s more, Alphabet Holding, Google’s parent company, was the first internet company in the world with a market capitalization of an incredible $1.9 trillion.
Over the past twenty years, Google’s revenue has seen tremendous growth, given it was only $0.4 billion back in 2002. As it continues to grow, Google is looking towards the future and is dedicating its efforts to new domains like AI, autonomous cars, and IoT devices.
In doing so, it not only strives to maintain its place among leading tech firms but also to be a pioneer in innovation and technological advancement.