Where Does Google Get 97% of Its Revenue?

50 Comments

googleadrev

Ask your friends what business Google (s goog) is in and the answer you’ll most likely get is “search.” And they would be wrong. Google is, first and foremost, an advertising company. A full 97 percent of its revenue comes from advertising on its various properties, including YouTube, plus partner sites through its AdSense product. Sure, Google has Android and Chrome OS and everything else, but it doesn’t make money from them — they’re just there to get people to watch more ads.

50 Comments

Anon

How much goes Google make in Ads on the search results page vs on Ads on other peoples pages and mobile apps and etc.

StareClips.com

@Carlos Guevara,

It’s very easy to misinterpret things when you don’t understand business.

Google has a number of different competitors in the market. Microsoft Bing being a big one. Yahoo being another, of which Microsoft acquired control. There are also a number of fly-by-night advertisers cropping up left and right, because this is where the money is at.

So, if you use Google as an advertiser and think they are giving you an unfair cut of the money, all you need to do is go to a competitor. If you don’t think there are any viable competitors, just acquire direct advertisers yourself.

It was possible before Google and is still possible today.

The real reason Google is so successful is because the competition aren’t giving terms which are much better. So, the one giving the best service is going to naturally rise to the top. Google is that clear winner (so far).

On a side note, this article is still a bit misleading. Saying that Google isn’t in the search business and is, instead, in the advertising business is a misnomer. It would be like saying Time Magazine is not in the magazine business but in the advertising business. And that NBC is not in the entertainment business but in the advertising business.

Just because a business makes the bulk of their income FROM advertising… does not mean they are only in the “advertising business”. Otherwise, you could say your local grocery store is in the advertising business because they “advertise third-party products on their store shelves.”

The fact of the matter is… if Google’s search engine vanished, they would lose a majority of their money. While they do make most of their money through advertising, that advertising is featured primarily on their search engine. Thus, their search engine is the mainstay of their business.

They have two ways of doing business as a search engine. Charge everyone money for using the search engine and make it ad-free… or, put up ads and provide free search to everyone. I think the latter model is a win-win for everyone because it gives advertisers an avenue for getting attention and it gives consumers a free service.

To somehow think this is a bad thing is just someone trying to get more blog hits. A blog which, no doubt, features advertising. A blog which probably earns most of its income from advertising. A blog which might not consider itself to be in the blogging business, but the advertising business, perhaps?

Carlos Guevara

So natural they steel publishers efforts

Recently Google Adsense adopt a new price policy invoked by the world economy crises while taking the same revenues from advertisers
they give less to publishers .
so if you a website or blog and you have lets say 100 clicks a day which
was yield 10 US$ for you you now get 2 US$
So great Google like Shylock in merchant of venice.

Arnold

I agree with Anand, and I would go a bit further by asserting that one is not in the business of making or offering something; one is in the business of *selling* something.

To Anand’s point, Google would be in the search business only if you as the search “customer” paid Google to access search results. This isn’t to say that search isn’t central to Google’s genetic makeup as a company. Rather, search is one of the strategic core competencies that supports, enables, and drives Google’s advertising business by connecting advertisers with potential customers.

As Charmaine points out, search-based advertising is only one of several channels through which Google monetizes on advertisements (albeit presumably the dominant one). AdSense, for example, has nothing to do with search, and everything to do with driving advertising revenue.

StareClips.com

The big debate, really, is what constitute “the business” that someone is in. If someone makes lemonade and sells it, then it’s pretty safe to say they are in the business of making lemonade. However, if someone makes lemonade, goes to local businesses and offers to place advertising on the cups and this exchange of money helps the person to give lemonade away for free, then what business are they in? The business of making lemonade or the business of providing advertising?

To understand this, you need to break it down into two parts.

1) What benefit is the company providing to consumers?

2) What service is the direct result of the exchange of money?

In the case of a simple lemonade stand, the benefit to the consumers is a nice refreshment… the service which results in the exchange of money is simply providing this lemonade to the consumer. In the second example, the second part has changed… the exchange of money is the direct result of advertising on the lemonade cups.

Given this, Google provides various different services to consumers. In turn, they gets lots and lots of traffic. They then monetize this traffic using ads. So, the benefit they are providing to consumers is the organization of information. The service provided resulting in the exchange of money is advertising.

So, yes… Google IS in the advertising business. However, this only makes sense if you’ve got money in your hands and you’re looking to advertise. If, however, you have information you are looking to organize, then Google is in the business of organizing the world’s information.

James

Did you know that GigaOM is not a blog? Sure they post a lot of poorly-thought-out blog posts, but they don’t make any money off them. They just post silly pie charts in order to get you to see more banner ads.

Libran Lover

VERY informative article! Especially for Gigaom’s tech-savvy readers who had no idea of this SHOCKING fact! The chart made it EXTREMELY EASY for me to understand the complex economical concepts lucidly explained in the article. Will read again. A+++++

su2lly

Wow. Here’s another fact. Did you know that 100% of the person who made this chart is a Giant D Nozzle? I’m always amazed at those who complain about a company that gives things away for free.

CJ Millisock

This article is bunk.

Just because Google gets 97% of its revenue from advertising, it doesn’t mean Google is an advertising company.

A company isn’t necessarily defined by its monetization strategy.

Anthony Wang

Google might be a search/software company, but it’s an advertising *business* – a business is an entity that exists to make money, and ads are how Google makes money (well, 97% of it)

the company (people and projects) makes software, but it wouldn’t exist in its current form without the ad business (monetization) – it would still be a grad school project running out of the Stanford CS lab

Vipin

I failed to understand what is the meaning of this post. Is it a news or surprise for author.

Chris Dean

-1

Only for the most naive definition of business. The NY Times is in not in the journalism business because it derives the majority of revenues from ads? That’s just ridiculous. The Times is in the journalism business and Google is the research business. The only reason I buy the Times (and thereby read the ads) is because of the great reporting. Same with teh google.

This is an attention getting story not worthy of gigaom.

chris

Friend: ” Most of Google’s revenue comes from search.”
Reader: “No, your wrong, revenues come from “Search Advertising.” (say advertising slowly)
Friend: “Oh, you’re really smart. That changes everything.”

Martin

and that 97% which is advertising is derived from search terms. So what on earth are you talking about?

Rich

Same could be said of GigaOM. Right? So is Google GigaOM and visa versa? or is GigaOm an extension of Google. The interperative arm of Google?

Hey I don’t see you name on the Editorial Masthead…what’s up with that?

Jordan Golson

Ah, but GigaOm (and TechCrunch, and VentureBeat) also make money from conferences and subscription services and the like.

Magazines make money from ads, but also from subscribers and single-copy sales. Same with newspapers.

Google makes almost all it’s money from ads — not from Gmail, Android or the Chrome OS.

satish sharma

This is truly an absurd conclusion. Such conclusions have no no place in this blog — maybe on a tabloid.

It’s akin to saying banks don’t make money by charging interest but only by issuing bonds or credit cards.

Most of the advertising is on the keywords; “search” is the method by which it is monetized.
If you ever search anything in google — you an see the paid advertisements on top and right hand panel. Pray tell why would I see this unless I searched for something in the first place.

There is another method of keyword advertising that’s placing related keyword ad’s on websites. That too is only money maker for search reasons — otherwise why would you, as a website owner, accept “rival” ads.

les madras

indeed. the author barely knows his elbow from his ass…

f2point8

Similar question: What business is television in? If you answered, “entertainment” you’re wrong.

Cheese

Yes, Taj Mahal is a white building and Google makes money from ads. I would expect GigaOM to go beyond the obvious – in this case, to give a breakdown of the 97% – what properties of Google contribute to this 97%? How much does google.com bring in vs google sites per country? How much does youtube bring in, and how much does Ad Sense? What about other google sites (scholar, docs, picassa…)?

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