Google is the largest search engine as we all are very much aware of it, and we mostly wonder how Google earns money while working on it. At the end of this article you all will not wonder any more that how Google earns money or what are the Google income sources.
Most of the Google services are of no direct monetary price and that is the thing which delights us. The first and the most important source of income for Google is business advertising, which consists of two complementary advertising programs, AdWords and AdSense.
If we talk in terms of percentage then approx. 97% of Google income is generated from the advertisements and rest from its own services.
Advertising Revenues
AdWords: Advertisements which comes on the search result pages of Google and its partner websites while searching for any term, this are based on auction-based advertising programs.
AdSense: A program that Google offers to partners and other publishers who place AdWords ads on their own websites.
Google also offers brand advertising that promotes advertisers’ products and services through texts, images, videos and interactive ads that run on distinct Google platforms.
Non-advertising revenues
Google non-advertising source of income are its products such as Google Pay, it’s an online store of apps, movies, and music, Chrome and Chrome OS devices.
Geographical Segmentation
Approx. half of the Google income source is USA. International income sources for the company are increasing because of rapid penetration of multi-device internet around the globe.
Cost Structure
Google’s Cost break down in four components:
- Cost of revenues
- Research and Development (R&D)
- Sales and Marketing
- Administrative expenses
Cost of revenue includes Traffic Acquisition Costs (TAC), Content acquisition costs, expenses associated with the operation of its data centres, and inventory costs for hardware etc.
R&D expenditure includes compensation for the company employees. With an increasing focus on R&D to further expand the product offerings that expense is expected to grow.
Google also has a huge Sales and marketing team. Its sales and marketing expenses accounted for 12% of the company’s overall expenses, and are expected to increase because of rising competition in search engine business.
