Google business model – unmasking the almighty hidden revenue model
When last did you visit google? Not too long ago I would want to believe. In fact, chances are that you got here through making a simple google search. Yeah, we are all used to that. It is Google to the rescue every single day.
Now can you imagine for just one second what life and learning would look like without Google? From how to prepare your favourite recipe, to how to make a baby sleep longer at night to completing your 3 year old boy’s assignment down to your PhD research work, Google has got the answer to all your questions.
Google offers so much value that one can only imagine how we will all cope without it. But despite all it offers, users don’t pay for it because it uses what we call the hidden revenue model.
Today we shall look at the google business model and how it makes money from the almighty hidden revenue model.
Understanding the Hidden Revenue Model in Google Business Model
We have described Google business model as a hidden revenue model but the question is, ‘what is a hidden revenue model’? And why do we describe Google as such?
A hidden revenue business model is a means of generating revenues from a business without involving the primary users of the service. So the model deliberately keeps users out of the equation so they don’t have to pay a dime for the service or product offered. For instance, Google has over 4.3 billion users. But none of these people is made to pay any cent for searching for information on google, no matter how many searches they make in a day. In fact, there is no such thing as ‘search limit’ with Google. Users can search a million times a day if they can and if they so wish – yet, no pay.
But Google is not a free enterprise. They are making money. In fact, In 2021 Google’s revenue was a whooping 256.7 billion dollars. The question you should be asking then is, ‘how possible can this be?’ Is it possible that a company who does not ask its users to pay can be making this amount in a year?
Yes, it is very possible. And the secret lies in the hidden revenue model.
In the case of Google for example, what they do is that they transfer the burden of payment to advertising companies and businesses bidding on keywords. Facebook also uses this same model.
Today I will show you in detail how Google managed to create such a model worth over two hundred billion dollars in revenues. Moreover, to unlock so much financial value, a proper business model has to have an appealing value proposition for all the stakeholders involved and I will share that too.
But first, some key stats about Google and its business model.
Key Stats About Google and Its Business Model
- Google is the most visited site in the world with over 84 billion searches per year
- Google dominates the Search Engine Market, it has commands over 92% of all searches globally
- 81% of people search online before making a major purchasing decision.
- Google has over 4.3 billion users
- Google revenue has crossed two hundred billion dollars
Google Business Model – How it Works
Google uses an advertising business model, where companies take part in an ad network called AdWords. As a matter of fact, companies actually bid on keywords to sell their products and services. This model works quite well as it allows those businesses to track their ads results and to offer their ads to interested users. In fact, through tracking, Google can understand what users might want and pay based on what users click through.
So there are 3 key stakeholders that makes the google business model a success. The first and perhaps the most important stakeholder is the users that throng to google to search for information every now and then – over 84 billion searches take place in a year.
Second is the content creators or publishers. The truth is that users won’t be on Google if creators have not published valuable contents that answer their questions. So the publishers are also as important as the users.
To complete the tripod upon which Google business model is standing is the advertisers. Will you feel some sorry for them to understand that they are the ones that provide 100% of the money upon which the other 2 continue to exist?
Well, that won’t be necessary. None of these 3 stakeholders is featuring in the Google business model because of the love they have for Google. No, not at all. They are there for themselves. Each person for his own ‘selfish’ interest. Yes, that is how smart Google is and that is how powerful the business model it built has become.
And how did it achieve this?
It is by providing a strong and compelling value proposition that appeals to all party. So we shall together look at the value proposition that has helped Google grow its revenue exponentially.
Google Business Model – The Value Proposition
The truth is that as long as this hidden revenue model is concerned all three stakeholders must find a good reason to be part of the system. Fortunately Google has been able to build very strong value proposition that gives each party no room to look elsewhere. So I will share the Google value proposition for each of the party.
Google Value Proposition for Users
Do you understand what it means when we say that Google has over 4.3 billion users? That is a massive number by all standards. The number represents over 80% of the total people that use the internet. To further put this in perspective, how many businesses have you heard that controls over 90% of the industry’s market share? That tells you how powerful and how dominant Google has become as a search engine industry leader.
But this did not happen by chance, neither is there an issue of first mover advantage to this – after all Google is not the first search engine in the world. Google is able to attract 4.3 billion users because of the value they see in it.
And here is the summary of the Google value proposition for users:
- A free search engine for billions of users around the world.
- Users get a free, seamless engine that helps them find an answer to anything.
- Google also provides new advanced features that enable a very advanced and rich experience for users.
Google Value Proposition for Publishers (Content Creators)
Over 70 million blog posts are published on Google every single month and over 38.3 million websites use Adsense. Now, for you to have this insane numbers it is because there is something in it for those publishers. So what value does Google offer to retain this number of publishers?
So here is the deal – before Google disrupted the advertising world and took over the digital advertising market, only a few established publishers could make money via advertising. However, with its AdSense network, Google also allows small publishers to monetize their content. That became a huge incentive that makes creators and micro Bloggers all over the globe to start creating and publishing valuable contents on Google.
In fact, creators actually compete among each other to create contents on Google, because the more contents one creates (among other things) the higher the chances of making money.
Examples of publishers include:
- Online news sites
- Magazine sites
So how do they get paid for these contents?
The publishers can “rent” part of their web pages space to Google to place banners from businesses that are part of the AdWords network. When users browse the pages with banners or click through them, those publishers earn a good chunk of the money paid by those advertisers. That is how they get to monetize their content. And this is called AdSense.
Google Value Proposition for Advertisers
The third group in the Google business model tripod is the advertisers. You can argue that the advertisers are actually the most important group here and you will not be wrong. After all they power it financially.
Yeah, this is actually the core of the Google business model. It is focused on targeted text-based ads for businesses offered via the AdSense network. Before Google existed, there was no way for marketers to know in detail all the conversion metrics of their ads. While Overture was the first to offer CPC advertising, Google managed to scale it up at massive levels.
Google Business Model – The Market Segments
Though it all started just as a search engine but today Google is more. The Google business model today covers some other business segments. In this section we shall look at those various market segments of Google business model.
1. Search Engine Segment
This is the most important segment of Google’s business model. Not unexpectedly, it also plays the most significant role in helping Google generate good revenues. The search engine segment itself has different products-
- Google Search
- Google Books
- The Google Photos
- Special Searches
2. Advertising Segment
Advertising is very significant in helping the Google business model generate bulk of its revenues. It lets businesses, marketers, and advertisers run ads on Google for which they pay Google a fixed amount. Some of the products that come in this segment are-
- Google AdWords
- Google Analytics
- Ad Mob
3. Enterprise Product Segment
Very familiar cloud based apps all fall under this segment. Examples are:
4. Google Fiber
Google Fiber is another service segment of Google. It is a fiber optic-based broadband internet service that allows for fast broadband connections and access to wide array of digital media. It’s built specifically to deliver high-speed connectivity to businesses and individuals in select cities across America. To be more direct on the speed capacity of Google fiber, it can accommodate broadband of over 1,000 mbps. In fact, this is many dozens of times faster than the average American broadband connection.
The service is currently operating or rolling out operations in 18 cities, including Atlanta, Georgia; Austin, Texas; Charlotte, North Carolina; Chicago, Illinois; Denver, Colorado; San Francisco, California; and Seattle, Washington.
5. Google Nest
Google Nest is another service segment of Google. It covers line of smart home products including smart speakers, smart displays, streaming devices, thermostats, smoke detectors, routers and security systems. Its security systems also includes smart doorbells, cameras and smart locks.
Google Nest is actually one of the numerous acquisitions by Google in it’s expansion plan. It was acquired in 2014 from the startup Nest Labs, a home service of smart interconnected thermostats and smoke detectors, for $3.2 billion.
As at the time of the acquisition, Nest Founder and CEO Tony Fadell claimed that Nest devices were in over one million homes. Under Google however, Nest continues to focus on thermometers and other smart home technologies.
6. Verily Life Sciences
Formerly known as Google Life Sciences, Verily focuses on a wide range of life science and human health projects, including a bandage-sized glucose monitor and a perfect “baseline” of human health. Verily is focused on finding solutions to diseases and other global health problems, including smart contact lenses, assistive eating devices for people with hand disabilities, and other healthcare challenges.
Other Google Products
There are still so many other services and products of Google. They may not be as popular as the Google search but they still contribute significantly to the overall success of the Google business model. Some of them are:
- Google News
- Google Phones and Android OS
- And Google Chrome
Now that you understand well the things that the Google business model Google does and how it adds value to its users, the time has come to understand how Google makes money. And I am sure you want to understand this too.
Google Business Model – How They Make Money
The search queries that are made on Google are increasing every single day.
So, there is no doubt that it is one of the most amazing sites in the world that is used by more than 90% of the people who are using the internet in the best way.
But we know that when people search for information on Google they don’t pay money. The service is entirely free.
So let us see how Google Search helps Google in making money.
Users send a search request to Google, and then Google provides relevant results.
Now, marketers and businesses use this system to run their ads using AdWords by paying to Google, so their products and services can top the relevant search results as the answer/solution to the query of the user. So Google gets most of the money from the advertisements in the best way.
1. Advertisements Help Google in Making Money
When it comes to the advertisements that are on Google most of the time, there is just one thing to say for sure. These help a lot when it comes to the generation of the revenue in the best way. However, for the advertisements, there are three different components which are a great help for sure.
Well, these are AdWords, AdMob, and AdSense. There is no doubt that without these three components, Google will not be able to advertise in the best way. Now there are different tasks for every single one of the components that are mentioned here-
Role of Google AdWords
For example, Google AdWords is something that can be considered as a targeted platform for advertisers out there who want to develop as well as launch certain campaigns on behalf of Google Engine in the best way.
The advertisements that will be allowed to display on the internet are selected with the help of Google AdWords. So, it can be said that it is one of the most important and amazing components for Google Advertisements in the best way.
Role of Google AdSense
Now when we come to AdSense, there is just one thing to say. This component is basically publisher-oriented, and it is a platform that can be used by publishers from all over the world who want to make some money by posting the advertisements that they have on their websites.
So, there is simply not a single speck of doubt about the fact that they will be able to be a part of the important Google Display Network in the best way. Now, who wouldn’t want to be a part of it, right?
Role of Google AdMob
Now we come to the last one of the components, and it is known as AdMob. Well, this is one of the components which has the same properties as AdSense. However, there is some difference between these two options, and it is this that AdMob can be used for mobile applications while AdSense is for websites.
2. Google Shopping Ads
This is yet another component of the Google business model. There are so many different types of ads that Google has in the first place. So, we can say this without any form of doubt that people need to know about some of these ads so that they can have an idea about the fact that Google can make money with the help of these amazing ads for sure.
The search engine is something that uses the amazing Google Shopping ads in the best way. These are the ads that are pretty useful when it comes to picking out the amazing target customers and shoppers who will be impressed by the ad format that the Google Shopping ads have.
3. Revenue Generated from Google Maps
This is certainly one of the most important factors that contribute in a large way to the revenue that is generated by Google for sure. There are Google Maps which are used by the users who want to have some directions from one place to another.
There is a pretty large user base for the amazing Google maps, and it gets the amazing revenue from the API that has which is particularly used by the companies such as Trivago, Uber, Pokemon Go and so much more.
The product pricing that is paid by the users will be directed towards the company in the best way. Hence, it is certainly a fact that Google Maps is one of the biggest generators of revenue for Google Company. This is something that people always need to keep in mind for sure.
Did you notice the consistency in the hidden revenue model of Google here? Millions of people use the Google maps, but the revenue comes from third party companies and not the actual users.
4. Revenue Generated From Google Translate
Another powerful product or Google application that generates revenue for the company is Google Translate. It is such a powerful (yet free application) by Google that users can use to translate pretty much anything.
Despite the application being free of cost, there is no doubt that it is an application that can make a lot of money for the Google Company.
The reason behind this is that the businesses and the amazing individuals are constantly using the Google Translate application and the API integration that it has can help it make money in the best way.
My wife for example transacts with several Chinese websites and Google translate comes in handy in helping her translate from Chinese to English.
5. Revenue Generated from G Suite
Here is another option for the Google Company from which it can make a lot of money for sure. G Suite is something that can be considered as the amazing brand of cloud productivity in the best way.
There are collective and collaboration tools provided in the G Suite such as Docs, Hangouts, Gmail, Calendar, Drive, Sheets, Sites, and so much more in the most amazing way for sure.
However, unlike most of the other Google services that uses the hidden revenue model, the G suite operate on a freemium business model. What this means is that the user will be able to get a cloud space with is limited, and the features that are provided are pretty much free until and unless the user wants to upgrade and for that, he has to pay so that he can use it for his business in the best way. So, that is also one of the ways Google can make money.
6. Google Pixel
It is the smartphone brand of Google. It still does not have a large representation among market players or among Google’s revenue streams, but it has been growing. When Google acquired Nest Labs, it merged the acquisition with Google Home. The company develops technology gadgets for homes, such as cameras, doorbells, alarm systems, smoke systems, locks, and thermostats.
7. YouTube Premium
Have you noticed that before you watch any Youtube video, an ad will first pop up before the video you even want to watch? And sometimes in between more ads continue to pop up? Yeah, advertisers pay to have their products advertised at those points. And that is certainly one way Google makes money which you already know.
But you can also decide that each time you make a Youtube search, that you would prefer to watch videos without those ads – yes, it is possible. To achieve this, all you need to do is go for YouTube Premium. It is a subscription model that offers ad-free streaming content across YouTube, YouTube Music, and YouTube Gaming. So that is another revenue source for Google.
Conclusion of Google Business Model
Google is one of the most powerful and most successful products of the 21st century. And its major success has come from strong innovation and the hidden revenue model which presents an irresistible value proposition to the various parties that power the business model.