How Does Google Make Money?

The Market of Online Advertising

Whenever we have a question, no matter the subject or the time of day, we simply type our question into the Google search bar, and within seconds, millions of different links are matched to our question. We’ve all done it! We’ve all “Googled” solutions to homework problems, summaries of books, good places to eat around our area in the hopes of finding a match. Google was founded in 1998 by Larry Page and Sergey Brin who where Ph.D. students at Stanford University at the time. Google has expanded enormously since its creation, becoming the search engine of choice. The corporation has been estimated to process over one billion requests each day and run more than one million servers in data centers around the world. Google’s mission statement from the beginning has been to organize the world’s information and make it universally accessible and useful. My aunt is a lawyer for Google, and after hearing about Google’s headquarters, which is nicknamed the “Googleplex” and located in Mountain View, California, I was curious as to how Google made their money. I knew that millions of people use the search engine on a daily basis, but seeing that anyone with Internet access had the ability to use Google, I wondered how the corporation was able to make a profit off of something that is free. After doing a little bit of research, I was introduced to the market of online advertising. In one of the articles I read, Google claimed that they “generate revenue primarily by delivering relevant, cost-effective online advertising.” During the financial year of 2006, the Google corporation reported a total of $10.492 billion dollars in advertising revenues, and only $112 million in other revenues such as licensing. In 2011, Google reported that 96% of its revenue was from its advertising programs alone. Google provides an advertising service called AdWords that enables businesses to display ads on Google. The program is largely focused on keywords. When searched for, the keyword generates a businesses’ ad to be shown. Google’s advertising service is unique in the sense that it allows businesses to set a budget for advertising, and only when people click on their ads is when they pay. The cost of advertising using AdWords is determined by the businesses’ keyword’s cost per click bid amount. A higher cost per click bid amount allows the ad to be shown higher up on the page. This photograph demonstrates where a person is most likely to see ads on Google: While Google and similar companies have dominated the Internet space with search ads, predictions indicate that by 2015 more money will be spent towards displaying ads on social media sites rather than on search engines. Until then, Google continues to bring in a copious amount of money through their online advertising services. All of the other services Google provides exist to further and advance primary businesses. Services such as Google Mail, Maps, Earth, and Drive were expensive to generate and expensive to maintain, however the more time spent on Google means the more time viewing and clicking on various advertisement, and the more money made. Sources: http://www.investopedia.com/stock-analysis/2012/what-does-google-actually-make-money-from-goog1121.aspxhttp://en.wikipedia.org/wiki/Google#Advertisinghttp://techcrunch.com/2014/04/07/internet-ad-spend-to-reach-121b-in-2014-23-of-537b-total-ad-spend-ad-tech-gives-display-a-boost-over-search/