Hello, friends!
Did you know that more than 8.5 billion Google searches are made every day? It’s as if every person on Earth searches for something on Google at least once a day. This is not a small feat. But more amazing than this is that doing this is completely free. Not only Google search, almost every product by Google is free to use. Watching videos on YouTube is free. Using Gmail is free. Google Maps is free to use. Despite providing all of this for free, Google’s market cap is more than $2 trillion. How is this possible? How can Google provide so many services for free, not charge us any money, and still manage to become such a big company? Today, let’s understand the business model of the most famous company on the internet.
The Journey of Google
You must have heard a lot about how we refer to photocopy machines as Xerox machines, white glue as Fevicol, and adhesive bandage as Band-Aid. Whenever a company dominates in its field like this, its name is associated with what it does. Similarly, today, an internet search is known as “Googling” something.
Google search started in 1998 as a college project. Larry Page and Sergey Brin created it with a mission to organize all the information in the world and make it accessible and useful. “Our entire mission is basically to organize the world’s information and make it universally accessible and useful.” During its initial days, Google was a simple search engine. A simple website to search for things on the internet.
The word “Google” doesn’t actually mean anything, but it is inspired by the word “Googol.” Googol is the name of a number: the number 1 followed by 100 zeroes. Google was chosen as a name to refer to this number to show that their search engine will look up so much information on the internet that it will be in Googols. If you used the internet during its early days, you’d remember that Google searches in those days showed numerous result pages. Google used to number and list these result pages endlessly, and the name Google came with extra O’s.
Key Milestones in Google’s Journey
- 2000: Google introduced AdWords, now known as Google Ads. Businesses could pay to display their ads on Google’s search results pages.
- 2004: Gmail was introduced.
- 2005: Google Maps was introduced, which changed the world.
- 2006: Google acquired YouTube, the very platform you are watching this video on.
- 2008: Google introduced Android and launched its own web browser, Google Chrome.
- Recent Years: Google started making its own hardware products like Pixel smartphones, Chromebook laptops, and smart home devices. Today, Google is expanding in the Artificial Intelligence field.
Google’s Successes and Failures
While it may seem that Google has been producing one powerful product after another, this is not true. Google has had its share of failures. Examples include Google Plus, Google Hangouts, Google Nexus tablets, Google Podcasts, Google Glass, Google Wave, and Google Reader. There are more than 200 such products and services by Google that have failed. This teaches us an important lesson: “Failure is the mother of all successes.” If you really want to achieve success, you will have to fail many times.
The Business Model: How Google Makes Money
Despite these failures, Google’s core business model has remained highly profitable. Let’s understand it in detail. On the screen, you can see the revenue breakdown of Google for the year 2022:
- Google Search Ads: $162 billion (58% of total revenue)
- Google Network Ads: $32.78 billion
- YouTube Ads: $29 billion
- Apps and Hardware Sales: $29 billion
- Google Cloud: $26 billion
Google’s total revenue in 2022 was $280 billion. The most profitable stream remains Google Search Ads. This advertising model relies on targeted advertising, collecting data from users to show relevant ads. Google’s Machine Learning Algorithm matches advertisers with users based on their searches, video views, emails, and more.
Free Services and the Freemium Model
The most interesting aspect of Google’s business model is providing things for “free.” Basic services are free, but premium services come at a cost. This Freemium model is used by many companies like Spotify, LinkedIn, and Zoom. Most people use Google’s free services, but the data collected is used for targeted advertising.
Privacy Concerns and Future Threats
However, this model faces challenges. Privacy concerns are growing, and people are sharing less information online. Additionally, new competitors like AI-powered chatbots (e.g., ChatGPT) could threaten Google’s advertising business model by providing ad-free search experiences.