Google’s $2 Trillion Business Model - How Google Earns Money
Today, we will explore the fascinating world of Google and how it makes money. From its humble beginnings as a college project to its current status as a tech giant, Google has come a long way. But how does it manage to offer so many free services like Search, Gmail, Maps, and YouTube? Let's dive into the details and find out. We'll cover Google's history, primary revenue streams, the freemium model, and how it uses data to make money. We'll also discuss the challenges it faces and its plans. So, if you're curious about how Google works, this video is for you.
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00:00Namaskar, friends.
00:01Do you know that Google searches more than 8.5 billion times a day?
00:06It's like every person in the world searches Google once in a day.
00:12It's not a small thing in itself.
00:14But what's even more amazing is that all this is free.
00:18And not just Google search.
00:19Almost every product of Google is completely free to use.
00:22Watching videos on YouTube is free.
00:24Using Gmail is free.
00:26Using Google Maps is free.
00:28Despite giving us all this for free,
00:30Google's market cap is more than $2 trillion.
00:34How is this possible?
00:35How can Google give us so many services for free?
00:39No one takes money from us.
00:40But still, it has become such a rich company.
00:43Let's understand the business model of the internet's most famous company
00:47in today's video.
00:58You must have heard a lot, friends,
01:00how today we call a photocopy machine a Xerox machine.
01:03We call white glue a fevicol.
01:05And we call an adhesive bandage a band-aid.
01:07Whenever a company dominates in its field in this way,
01:11its name is associated with its work.
01:14In the same way,
01:15today it is said to search the internet as Google.
01:19This Google search started in 1998,
01:22as a college project.
01:24Larry Page and Sergey Brin had made it with a mission
01:27to organize all the information in the world
01:30and make it accessible and useful.
01:33What is our mission?
01:34Basically, we want to organize the world's information
01:36and make it universally accessible and useful.
01:40In the early days,
01:41Google was just a simple search engine.
01:43Which looked like this.
01:44A very simple website to search the internet.
01:47The word Google in itself
01:49has no meaning,
01:51but it is inspired by the word Google.
01:53Google is the name of a number.
01:55Put 100 zeros after 1.
01:58If there are 3 zeros after 1,
02:00we call it 1000.
02:01If there are 4 zeros after 1,
02:02we call it 10,000.
02:03In the same way,
02:04if there are 100 zeros after 1,
02:05that number is called Google.
02:07Google, the name of this company,
02:09was chosen to show that
02:10our search engine will find so much information on the internet
02:14that it will be in Google.
02:16If you are a very old user of the internet,
02:18you will remember that
02:19when Google used to search in those days,
02:21there were a lot of result pages.
02:23And Google used to show these result pages
02:251, 2, 3, 4, 5, endlessly.
02:28And it used to write its name with so many Os.
02:31In the year 2000,
02:32Google took its first big step.
02:35It introduced the system of AdWords.
02:37Today, it is called Google Ads.
02:39Because of this,
02:40the businesses could pay
02:42to display their ads
02:44on Google's search results pages.
02:46Later, we will talk about
02:48how it became Google's biggest business model.
02:50But over the years,
02:51Google started offering a lot of products and services.
02:54In the year 2004,
02:55Gmail was introduced for the first time.
02:57In 2005,
02:58Google Maps was introduced.
03:00Which changed the world.
03:02In 2006,
03:03Google acquired YouTube.
03:04On which you are watching this video.
03:06Many people don't know that
03:07in the beginning,
03:08YouTube used to be a separate company.
03:10It was only in 2006
03:12that Google bought YouTube.
03:13After that, in 2008,
03:14Google introduced Android.
03:16The same mobile operating system
03:18that is installed in most people's phones.
03:20In the same year,
03:21Google launches its own web browser.
03:23Google Chrome.
03:24Which is the most popular web browser in the world.
03:26Later,
03:27Google started making its own hardware products.
03:29Its Pixel smartphones,
03:31Chromebook laptops,
03:32and smart home devices.
03:34Today,
03:35Google is expanding
03:36in the field of Artificial Intelligence.
03:38After hearing all this,
03:39you will feel that
03:40Google has launched
03:41more than one powerful product.
03:43And everything was successful.
03:45But this is not true.
03:46All the examples I gave you,
03:48are examples of successful products and services.
03:50There are a lot of things
03:52that Google tried
03:53but Google failed in all of them.
03:55Like Google+,
03:57Google tried to make its own social media platform
04:00in the Facebook competition.
04:02But it failed.
04:03Google Hangouts,
04:04an app for chatting,
04:05which used to run a lot at one time
04:07but it was shut down in 2022.
04:09Google Nexus tablets,
04:11they were also very famous at one time
04:12in the iPad competition.
04:14But after a while,
04:15Google shut them down too.
04:16Google Podcasts,
04:17Google Glass,
04:18Google Wave,
04:19Google Reader,
04:20examples of failures,
04:21in reality,
04:22are far more than successes.
04:25If you go to Wikipedia
04:26and look at the entire list,
04:27there are more than 200 products and services
04:29that Google has failed.
04:30And here,
04:31there is a big lesson for all of us.
04:33Failure is the mother of all successes.
04:35To achieve success in the right way,
04:37you will have to fail many times.
04:39Keeping all these successes and failures in mind,
04:42let's know,
04:43what does Google earn the most money from?
04:46From its oldest business model,
04:48Google Search Ads.
04:50Let's understand in detail.
04:51On the screen,
04:52you can see Google's Revenue Breakdown for the year 2022.
04:56That is,
04:57where did Google earn the money in the year 2022?
05:00The total revenue is $280 billion.
05:03Out of which,
05:0458% of the money,
05:05that is $162 billion,
05:07comes from Google Search Ads.
05:10After this,
05:11the second biggest source of income is
05:12Google Network Ads.
05:13The ads you see on different websites,
05:15are the ads that partner with Google.
05:18Google earns $32.78 billion from here.
05:21The third number is YouTube Ads.
05:23$29 billion comes from here.
05:25That is,
05:26the ads that you see in the middle of this video.
05:28Here,
05:29there is a very interesting thing that
05:30these ads
05:31are also a source of income for us YouTubers.
05:33The money that advertisers pay
05:35to show these ads,
05:37is split between the creators and Google.
05:4045% of the money goes to Google,
05:42and 55% goes to creators like me.
05:45The 45% share of YouTube
05:47from all the creators,
05:49generates $29 billion in revenue
05:51for Google in a year.
05:53Similarly,
05:54there are apps on Google Play Store.
05:55When an app creator
05:57sells his app through Google Play Store,
05:5970% of the revenue
06:01goes to the creator
06:03and 30% goes to Google.
06:05So, the revenue from the sales of these apps
06:07and the money that Google earns
06:09by selling phones and laptops
06:11comes on the fourth number
06:13with $29 billion.
06:15Around 10.4%.
06:17And the last major revenue source is
06:19Google Cloud with $26 billion.
06:21Now, it is also interesting to see
06:23where Google spends this money.
06:25About $40 billion is spent
06:27in research and development.
06:29So that more new products and services
06:31can be researched.
06:33More new failures can be attempted.
06:35About $44 billion is spent
06:37in non-production costs.
06:39Renting offices.
06:41Spending on advertising, marketing, accounting.
06:43Paying employees' salaries.
06:45The total expenses are
06:47$207 billion.
06:49As you can see on the screen.
06:51This is the balance sheet of the company.
06:53Here you can also see
06:55that income before taxes
06:57is $71 billion in 2022.
06:59They pay a tax of $11 billion.
07:01And they make a profit
07:03of approximately $60 billion.
07:05The most interesting thing
07:07about Google is
07:09this free funda.
07:11How is it possible to make a profit
07:13by giving these free things?
07:15There are two reasons behind it.
07:17First, these free things are not
07:19completely free.
07:21The base level products are free
07:23but if you want a premium service
07:25then you have to pay money.
07:27This is a very common business strategy
07:29which is called the freemium model.
07:31Free plus premium.
07:33Spotify, LinkedIn, Zoom
07:35In simple words, the basic thing
07:37will be given to you for free
07:39but if you want a premium service
07:41then you have to pay money.
07:43For example, Gmail is free
07:45but its storage limit is 15 GB.
07:47If you want more storage than that
07:49then you have to pay money.
07:51Google Drive is free but
07:53its storage limit is 15 GB.
07:55If you want more than that
07:57then you have to pay money.
07:59Watching videos on YouTube is free
08:01but there will be ads in between.
08:03This is a successful model because
08:05it gives you a try before buy opportunity.
08:07You can try a product and if you like it
08:09then you have to pay money.
08:11But in the case of Google,
08:13most people still don't use
08:15their paid services.
08:1795% of the people who watch YouTube
08:19haven't bought the premium.
08:2195% of the people who use Gmail
08:23or Google Drive don't pay for it.
08:25But still, Google
08:27earns its majority revenue
08:29from free services.
08:31Here comes our second reason.
08:33Data collection.
08:35The more free services we use
08:37the more data Google
08:39has available on us.
08:41Everything that we search on Google
08:43every video that we watch on YouTube
08:45every email that we send
08:47all this data is anonymously collected
08:49and used for targeted advertising.
08:51and used for targeted advertising.
08:53You must have seen this yourself.
08:55If you search for a healthy recipe on YouTube
08:57then while browsing websites on Google
08:59you will get ads
09:01for healthy tiffin services
09:03or nutritionists.
09:05If you search for hotels in Dubai
09:07then you will get ads for Dubai tourism.
09:09For different tourist attractions in Dubai.
09:11Google uses a very advanced
09:13machine learning algorithm
09:15to show targeted ads.
09:17And not just for ads,
09:19but to show normal search results
09:21Google uses a very complex algorithm.
09:23When you search for something
09:25which website will show up
09:27and how to rank
09:29your website
09:31this has become a science in itself.
09:33This is called SEO.
09:35Search Engine Optimization.
09:37If you have your own business
09:39and you want Google paid ads
09:41to be shown organically
09:43on your search results
09:45then today's video's sponsor
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09:57to rank your brand on top
09:59in search results so that
10:01your business and brand can become more visible.
10:03More people can come to your website.
10:05They do precise ROI tracking
10:07and give real-time insights so that
10:09you can track their results and
10:11take informed decisions.
10:13Being ranked well in search results
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10:17Because thousands of new potential customers
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10:21So if you are interested
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10:29Now let's come back to the topic of paid ads
10:31to understand better
10:33how exactly Google does ad targeting.
10:35What is your age group?
10:37Are you a man or a woman?
10:39Which country do you live in?
10:41Which city do you live in?
10:43What things do you like?
10:45On the basis of all these things
10:47a profile is made.
10:49And from a different perspective
10:51a person can choose all these things.
10:53You have a small business of selling clothes
10:55or spectacles and you want
10:57your ad to be visible to
10:5918-25 year old girls
11:01who specifically live in the NCR region.
11:03So you can choose these things.
11:05And then you can choose some keywords
11:07like sunglasses or saris.
11:09And Google's job here is
11:11to match an advertiser
11:13with a user.
11:15If your age group, region and gender are matching
11:17and you searched for a related word
11:19for a specific ad
11:21or you saw a related video on YouTube
11:23like you saw a review of a sunglass
11:25then Google gets to know
11:27that for this ad
11:29you are the target customer
11:31and Google will show you this ad.
11:33This is a very simplified explanation
11:35but in general, Google ads
11:37work like this.
11:39If we go into complexity,
11:41there is a lot of competition between advertisers.
11:43So ads are bidded.
11:45Advertisers can decide how much money
11:47they are ready to pay to show their ad.
11:49On the other hand,
11:51if another company is ready to pay more
11:53then their ad will be shown first.
11:55Google calculates the ad rank
11:57for this.
11:59Which ad should be placed on which rank.
12:01For this, the quality of the ad is also considered
12:03apart from the money.
12:05On the other hand, the user matches
12:07this specific ad very well.
12:09If he has searched for something,
12:11how relevant is this advertiser
12:13for that user.
12:15There are different types of search ads.
12:17For example, when you search for something on Google
12:19the top ads in the search results
12:21are called search ads.
12:23Then there are banner ads.
12:25When you go to different websites
12:27like a news website,
12:29the ads you see in the banner
12:31are part of the Google Display Network.
12:33Then there are video ads shown on YouTube
12:35which are played in the middle of the video
12:37or before the video.
12:39There is also a category of skippable and non-skippable.
12:41If we total the money coming from
12:43Google Ads,
12:45the total revenue from Google Ads
12:47is $237 Billion.
12:49Similarly, in
12:512022, the total revenue was
12:53$280 Billion.
12:55So, out of $280 Billion,
12:57$237 Billion is earned
12:59only from these ads.
13:01Look at this chart, you can see
13:03the advertising revenue of Google
13:05year after year.
13:07You can see an exponential growth here.
13:09This revenue has been increasing for the past 20 years.
13:11In 2020-2021, you can see
13:13a huge jump. This was due to COVID.
13:15Most people were spending time
13:17in their homes on the internet.
13:19More ads were being watched.
13:21More advertisers were spending money on ads.
13:23So, Google's revenue increased so much at that time.
13:25And Google is not the only company here
13:27that relies on targeted advertising
13:29like this for its business.
13:31The same is the case with
13:33Meta's Facebook and Instagram.
13:35In 2023, Meta's annual advertising revenue
13:37was $131 Billion.
13:39Amazon also earns money
13:41by showing ads in the same way.
13:43Why would Amazon need to show ads
13:45when Amazon is already selling products
13:47and earning money on its website?
13:49Actually, the purchase history data
13:51coming from selling products
13:53is even more important
13:55than Google's data.
13:57Because Google only knows
13:59what is your interest in.
14:01You watch a video on YouTube
14:03or you search something in Google search
14:05with your interest.
14:07Google knows which products you have purchased.
14:09You can be targeted more accurately
14:11by these product sales.
14:13If you know that you like to buy
14:15such things, then you can be shown
14:17ads of such things.
14:19Because of this, Amazon generated
14:21$46.9 Billion in its revenue
14:23only through advertising.
14:25In the last 20 years,
14:27these companies have dominated the internet
14:29because of this one business model.
14:31But now, it seems that cracks
14:33have started to appear in this model.
14:35There are two main reasons behind this.
14:37First is privacy concerns.
14:39People are worried about what
14:41Google knows about you.
14:43What do you eat? Where do you live?
14:45Where do you work?
14:47Even what diseases do you suffer from?
14:49Because people often search on Google
14:51about these things.
14:53What are your relationships?
14:55What problems are you facing in your life?
15:01Look at this news of 2023.
15:03Google had paid a fine of $93 Million
15:05to the state of California.
15:07Because Google was tracking
15:09the location of the users
15:11even though the users
15:13had turned off the location history.
15:15As people's awareness
15:17about privacy is increasing,
15:19people are sharing less information on the internet.
15:21And the less information
15:23goes to these websites, the worse
15:25their ad targeting will be.
15:27And if the ad targeting is bad,
15:29advertisers won't want to spend so much money
15:31which will affect their revenue.
15:33But the second problem is even bigger.
15:35There is a famous saying
15:37which you must have heard.
15:39Don't put all your eggs in one basket.
15:41If you drop all your eggs in one basket,
15:43all the eggs will break.
15:45This advertising model will completely
15:47fall apart if people
15:49stop using Google search for some reason.
15:51With time,
15:53the reliability of Google search has been decreasing.
15:55Earlier, you could only see one ad
15:57but now if you search for something,
15:59the top search results
16:01will be ads only.
16:03If you only see ads everywhere,
16:05the usefulness of those search results
16:07starts decreasing.
16:09Now imagine a competitor
16:11who shows you exactly what you want to search
16:13without any ads.
16:15Like a platform like ChatGPT.
16:17If you ask a question to ChatGPT,
16:19you will get a direct answer
16:21without any ads.
16:23But if you put the same question on Google search,
16:25you will get a lot of results
16:27and a lot of ads will be there
16:29and you don't know the reliability of different search results.
16:31Which one is reliable?
16:33Which one is a trustable source?
16:35Which website to click on?
16:37In my opinion, AI-powered chatbots
16:39like ChatGPT
16:41will be the biggest threat
16:43to Google's advertising business model
16:45in the coming years.
16:47Maybe even Google knows this.
16:49That's why Google is also developing
16:51its artificial intelligence software
16:53like Gemini which is a competitor of ChatGPT.
16:55Only time will tell
16:57whether Google will remain
16:59the face of the internet for the next 20 years
17:01or not.
17:03Or some other company will leave it behind.
17:05But one thing is for sure,
17:07this competition between different companies
17:09is a good thing for a consumer
17:11like us because
17:13we will get better services and products.
17:15If you want to understand AI
17:17in detail like this,
17:19then I have explained it in this video.
17:21You can click here to watch it.
17:23Microsoft Mechanics
17:25www.microsoft.com
17:27www.microsoft.com