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How does Google make money?

What are the different ways that Google makes money?

The other day someone asked me how Google makes its money. At the time I called upon the knowledge I had and talked about the ads they have in the search results, the Chromebooks and Android systems they are selling, and Google Apps and Docs.

This week Google announced, it was disappointed with its 27% rise in revenues. Yes you read right, it was disappointed! Profits were up 6.4% and revenues 27%. In the same period, (the last quarter of 2011) Microsoft saw its revenues rise just 5%, and its profits fall by 0.15%!

Here is the interesting (weird) thing, Google’s share value fell 10% after the announcement, whilst Microsoft’s grew by around 2%! How crazy.

Anyway, this got me thinking, what are all the way Google makes money, as that is a lot to get just from the ways I mentioned.

How does Google make money?

The fact is, the majority of Google’s revenues come from the ads it presents to users on search result pages. However in recent years it has started making more and more money in other ways. So what are these other ways Google makes money?

Chromebooks

Introduced mid last year, Chromebooks are laptops powered by Google Chrome OS, where the laptop and the internet are one. There are no programs, desktop or start menu, the who experience runs from the cloud, utilising all Google’s (and other)Β online applications.The Google Chrome Logo

Samsung and Acer are the two firms which currently offer Chrome OS powered laptops, however expansion to more brands in the future is inevitable. Samsung and Acer obviously take their share the sales, as will Amazon and the other places Chromebooks are sold, however the laptops do make money for Google.

Android

I assumed that Google made money from Android, however I was wrong – Google does not make money from its Android mobile operating system. Android is a Google-led open source mobile OS framework, however Google does not profit from it.

Google Android's Logo

YouTube

Since Google bought YouTube in 2006, the site hasn’t been that profitable for it. YouTube is now the site with the third most traffic on the web, meaning that it has huge potential, however until recently, it was only making money from ads.

Before Google AdSense ads used to appear alongside videos, which they still do, however now they also advertise within videos too. Furthermore, YouTube have started offering online movies, which users can pay to watch from the comfort of their own home – or wherever they are.

Google Storage

Many Google services offer online storage, however this is only a finite amount. Should you want to purchase extra storage for Gmail, Google Docs, Picasa or Blogger (photos on blogger, not posts) then you can do so from Google Storage. I doubt this brings in Google a lot of revenue, but nerveless, it makes the internet giant some money.

Google Store

Google have an online store which distribute to may different locations around the world. They sell everything from branded keyrings and juggling balls, to t-shirts and even accessories with past Google Doodles printed on them.

DoubleClick, AdSense and AdWords

The majority of Google’s revenues come from the advertisers who use AdWords and DoubleClick. These ads are then either shown in the search results, or on websites which host AdSense units. Google makes lots of money out of ads. It doesn’t tell AdSense hosts what cut of the advertisers fees they get, but it makes Google a lot of money, so I would guess that they take home more than website owners hosting their ads.

Other Ways Google Makes Money

These are not the only ways Google makes money, other ways include, Google Apps for Business, Google Cloud Connect, Google Docs, Feedburner (through ads), Google Earth Pro, Google Mini (where you effectively buy the Google search engine to use on your own site/intranet), Google Checkout and more.

Hopefully this gives you some insight into just how many ways there are that the search giant that is Google makes money.

0 replies on “How does Google make money?”

Nice article. I had forgotten just how many ways Google makes money. It is quite astounding. Hats off to them for doing so much in the span of a decade. One common theme with them seems to be innovation and pioneering in new ideas whereas other companies take more conventional routes.

-Jean

now, why might the share price go down when reporting a profit? Well share prices go up and down because of demand. Lets say that tomorrow TecBlog inc is going to post its results. I know that things are going well, as do many other people. We expect 27% growth and 12% increase in profit. The share price goes up because we all want some so they sell at a higher price. Unfortunately growth was only 25% and profits went up a measly 9%, so the share price falls as I decide to sell mine because I didn’t make any money and don’t want to carry a risk. Likewise the other way round, you expect worse so a small rise is better than expected and the price goes up. Even a smaller loss that expected can make the price rise. Now back to Google. Google’s real value lies in the fact that they can tailor advertising to each individual user because they record all of your searches and so know what you are interested in. This is why the adverts that pop up are uncannily accurate. As a side story AOL released anonymous data a few years ago and a reporter managed to identify an unknown user and call her at home using just the search terms she had used. see this link, it is a bit of an eye opener. http://www.nytimes.com/2006/08/09/technology/09aol.html?pagewanted=all

Thanks for clearing that up Jonny πŸ™‚
I am into economics, so I understand that missing targets is often more important than the figures, but it does still seem a bit odd that Microsoft’s share price responded well to such big losses!

Regarding the Google search queries and ads, I knew they targeted them, but that sort of user specific data is scary!

Thanks for the comment πŸ™‚

I think that Google make users who want to store loads of content (more than most people do) on their servers pay for that.
It is possible to lease out server space for cloud data storage Rich, however you probably need to have quite a watertight privacy policy, as selling storage comes at a privacy risk to the buyer. Also you would need to make sure your server was always online (unless you arranged otherwise with your clients) and would probably need a backup server in case it went down – basically it could get costly!

Hope this helps, thanks for joining the community πŸ™‚
Christopher – Admin Team

Christopher,

Good idea for a post. Google truly is a monster. It’s hard to fathom the amount of data they process and what it takes to pay for all of that work plus the innovations they produce. I also hear they have pretty great benefits for their employees!

I had no idea that they were disappointed with their revenues, but it’s amazing that the mere mention of it made their stock prices fall! What a massive animal they are, it will be interesting to see how they manage with the fast moving world of the web.

Google makes massive amounts of money off advertising, but projects that don’t directly bring in revenue (like Android) could still contribute to their bottom line as they get more and more people in front of Google advertising more often. I think the long-term strategy with Android is just to get more eyeballs to advertise to, by replacing “dumb” phones and feature phones in the market.

As I said Michael, most of Google’s money comes from ads, without those Google would not be where it is today πŸ™‚

Thanks for taking the time to comment, welcome to Technology Bloggers!
Christopher – Admin Team

I guess the most popular means of Google to earn money is thru ads. In this way, Google can attract more businesses or individuals to invest for their spot in Google ads. Actually, I’ve seen lots of people who really have that huge budget for those ads.

Good question. I often ask myself that and now I know the answer. I figured it can’t be just from ads. As for Chromebooks, I’ve never heard of them until now. Thanks for sharing!

You are not alone regarding the Chromebooks Tony! Google haven’t really advertised them that much, so lots of people don’t know about them.

Thanks for the comment, welcome to Technology Bloggers πŸ™‚
Christopher – Admin Team

This pooling of data that Google has just announced is just aimed at improving how they market your data to advertisers and nothing else. Now they can also use your interests as expressed on other sites and your musical and video tastes through Youtube and the likes.

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