Googles Advertising network worth $150 billion: How do they do it?
Google LLC is a technology company that requires no introduction. From the world's biggest search engine to mobile applications, the biggest video sharing platform, and many products thrive under their wings. But that's not all; the company has world's largest advertising network.
A recent stat showed us Alphabet, the parent company, has a net market value of over $1.5 trillion. The only companies that can rival this tech giant are Apple, Amazon and Microsoft. Alphabets primary source of income is Google Ads, and just in 2020, it generated almost $183 billion in revenue.
During a seminar of Google, I/O, hosted for software developers on Tuesday 25th May, a little information got the spotlight. One of them was the succession percentage of Google advertisements. In the conference for software developers, far-reaching visions and incoming updates inspired many people, including shareholders. Google declared their main business is still in ads. Alphabets 80% revenue comes directly from google ads. And just last year, it was $147 billion.
Google Advertisement is on point
As more and more people are trailing online footprints every day, it just makes sense for businesses to publish ads online too. Of course, there are ads on tv and billboards, but most of the free to use online products model survives through ad revenue. Since the last decade, Google is the market leader for advertising. The online ads industry is so vast that this one company is responsible for nearly 29% of online ads globally. And the metric is only going to rise as more products and improvement implementations are coming. Being a market leader and no lack of funding lets them use all the resources without holding back. And they can experiment with every possible way for making a profit without bugging the user with exceeding amount of annoying ads.
Alphabet being a widely successful publicly traded company, generates nearly all of its profit and revenue from ads. Google invested in various sectors of technology or at least dipped its toe in around everything tech. Smartphone OS and software, AI, intelligent cars, search engine, health tech, and more. During the Google I/O on Tuesday, priority was set to reveal visions for google and potential in advertisement revenue. Of the income in 2020 business year when the pandemic situation was in the worst condition, the company made a profit of $147 billion and its 80% of their gross profit as a whole company.
Facebook was number two in the online advertising probe. With 2.85 billion active users, the company captures approximately 24% of ads published online. Alibaba projects 9% respectfully. Over the years, Google acquired quite a few tech platforms. Ads on the search engine, YouTube videos, maps, websites etc., are a few primary ones. Android devices get ads too, via Google services, and a hefty sum is taken as a cut. Many content creators are making significant money through ad and sponsorship revenue. And these ads are solely selected by google. AI, machine learning algorithms, crawlers make sure to deploy only relevant ads based on locality. As they are drastically monitoring and improving the system, more business and vendors trust to deposit in the platform.
"Search and other" revenue built up $104 billion during the 2020 business year. It was 71% of the total ad revenue for Google. Alphabet, as the parent company, received 57% of its revenue from it. It is also possible for advertisers to bid on keywords. Specific keywords help rank their product or service online and reach more people. Cost per click bid is another form of ad revenue for Google LLC.
API based services use google traffic data to gain an advantage for leveraging user data. And in the bid auction we mentioned, there is a big competition among bidders. Usually, a more competitive keyword or phase is more expensive. Location, language, age, sex & interest determine the type of ads showing on the viewer's screen. According to Wedbush, 80% of the searches are not monitored since they are not commercial. Amazon is a prominent competitor of Google on the "search" option. Google accounts use up to 57% of US search on different eCommerce platforms. Google maps could be worth $11 billion by 2023, according to analyst Morgan Stanley.