Google’s_$2_Trillion_Business_Model How_Google_Earns_Money Dhruv_Rathee
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00:00Namaskar, friends.
00:01Do you know that Google searches for more than 8.5 billion times a day?
00:06It's like every person in the world searches for something or the other once a day.
00:12It's not a small thing in itself.
00:13But what's even more amazing is that doing all this is completely free.
00:18And not just Google search, almost 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 all this for free, Google'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, but still we have become such a rich company.
00:43Let's understand the business model of the most famous internet company in today's video.
00:58You must have heard a lot about how 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,
01:10its name is associated with its work.
01:14In the same way, it is said today to do an internet search like Google.
01:19This Google search started in 1998 as 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.
01:32What is our mission?
01:34Basically, we want to organize the world's information.
01:36And make it universally accessible and useful.
01:39In the early days, Google was just a simple search engine.
01:42Which looked like this.
01:44A very simple website to search on the internet.
01:47The word Google in itself doesn't mean anything.
01:50But it is inspired by the word Google.
01:52Google is the name of a number.
01:55Put 100 zeros after 1.
01:57If there are 3 zeros after 1, we call it 1000.
02:00If there are 4 zeros after 1, we call it 10,000.
02:03Similarly, if there are 100 zeros after 1,
02:05that number is called Google.
02:07The name of this company, Google, was chosen to represent this.
02:10That our search engine will find so much information on the internet,
02:14that it will be in Google.
02:15If you are a very old user of the internet,
02:17then you remember that in those days,
02:19when Google used to search,
02:20there were a lot of result pages.
02:23And Google used to endlessly show these result pages, 1, 2, 3, 4, 5.
02:27And used to write his name with so many O's.
02:31In the year 2000, Google took its first big step.
02:34They introduced the AdWords system.
02:37Today, it is called Google Ads.
02:39Because of this, the businesses could give money
02:42to display their ads on Google's search results pages.
02:46Later in this video, we will talk about
02:47how 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, Gmail was introduced for the first time.
02:57In 2005, Google Maps was introduced.
03:00Which changed the world's map.
03:02In 2006, Google acquired YouTube.
03:04On which you are watching this video.
03:06Many people don't know that in the beginning,
03:08YouTube used to be a separate company.
03:10It was only in 2006 that Google bought YouTube.
03:13After that, in 2008, Google introduced Android.
03:16The same mobile operating system that is in most people's phones.
03:20This year, Google also launched its web browser.
03:22Google Chrome.
03:23Which is the most popular web browser in the world today.
03:26Later on, Google started making its hardware products.
03:29Their Pixel smartphones.
03:31Their Chromebook laptops.
03:32And smart home devices.
03:34Today, Google is expanding in the field of Artificial Intelligence.
03:37After listening to all this, you will feel
03:39that Google kept launching one more powerful product.
03:42And everything was successful.
03:44But this is not true.
03:46All the examples I gave you,
03:48are examples of successful products and services.
03:50There are many such things that Google tried
03:53but Google failed in all of them.
03:55Like Google+,
03:57Google tried to make its social media platform
04:00in the Facebook competition.
04:01But it failed.
04:02Google Hangouts,
04:03an app for chatting,
04:04which used to be very popular at one time.
04:07But it was shut down in 2022.
04:09Google Nexus tablets,
04:10they also became very famous in the iPad competition.
04:13But after a while, Google shut them down too.
04:16Google Podcasts,
04:17Google Glass,
04:18Google Wave,
04:19Google Reader,
04:20examples of failures,
04:21in reality, are far more than successes.
04:25If you go to Wikipedia and look at the entire list,
04:27there are more than 200 products and services
04:29that Google has failed.
04:30And here, there is a big lesson for all of us.
04:32Failure 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 what makes Google earn the most money today.
04:46Our oldest business model.
04:48Google Search Ads.
04:50Let's understand in detail.
04:51On the screen, you can see Google's revenue breakdown for 2022.
04:55That is, where did Google earn the money in 2022?
05:00The total revenue is $280 billion.
05:03Out of which, 58% of the money,
05:05that is $162 billion,
05:07is shown on Google Search Ads.
05:10The second biggest source of income is Google Network Ads.
05:13The ads you see on different websites,
05:16partner with Google.
05:18Google earns $32.78 billion from here.
05:21On the third number is YouTube Ads.
05:23$29 billion comes from here.
05:25That is, the ads you see in the middle of this video.
05:28Here is a very interesting thing that
05:30these ads are also a source of income for us YouTubers.
05:33The money that advertisers pay to show these ads,
05:36is split between the creators and Google.
05:4045% of the money goes to Google.
05:4255% stays with creators like me.
05:45The 45% share of YouTube with all the creators,
05:49generates $29 billion in revenue for Google in a year.
05:53Similarly, there are apps on Google Play Store.
05:55When an app creator sells his app through Google Play Store,
05:5970% of the revenue goes to the creator
06:03and 30% goes to Google.
06:05The revenue from the sales of these apps,
06:07and the money earned by Google by selling phones and laptops,
06:10comes on the fourth number with $29 billion.
06:14Around 10.4%.
06:16And then the last major revenue source is
06:18Google Cloud with $26 billion.
06:20Now, an interesting thing to see is
06:22where does Google spend this money?
06:24About $40 billion is spent on research and development.
06:28So that more new products and services can be researched.
06:32More new failures can be attempted.
06:34About $44 billion is spent on non-production costs.
06:38Like renting offices,
06:40advertising, marketing, accounting,
06:42employees' salaries.
06:44The total expenses are about $207 billion.
06:49As you can see on the screen.
06:51This is the balance sheet of their entire company.
06:53Here you can also see that
06:55income before taxes is $71 billion in 2022.
06:59They pay a tax of $11 billion.
07:01And they make a profit of approximately $60 billion.
07:05The most interesting thing in this entire business model
07:08is this free funda.
07:10How is it possible to make a profit by giving these free things?
07:13There are two reasons for this.
07:15First, these free things are not completely free.
07:18The base level products are free.
07:20But if you want a premium service,
07:22then you have to pay money.
07:24This is a very common business strategy
07:26which is called the freemium model.
07:28Free plus premium.
07:29And many companies use it.
07:31Spotify, LinkedIn, Zoom, and now Twitter also uses it.
07:34In simple words, the basic thing will be given to you for free.
07:37But if you want a premium service,
07:39then you have to pay money for it.
07:41For example, using Gmail is free.
07:43But its storage limit is 15 GB.
07:45If you want more storage than that, then you have to pay money.
07:47Using Google Drive is free.
07:49But its storage limit is also 15 GB.
07:51If you want more than that, then you have to pay money.
07:53Watching videos on YouTube is free.
07:55But there will be ads in between.
07:57If you want to remove ads, then you have to pay money.
07:59You have to buy YouTube Premium.
08:01This freemium model is a very successful model
08:03because it gives you a chance to try before buy.
08:05You can try the product
08:07and if you like it, then you have to pay money.
08:09But in the case of Google,
08:11the interesting thing is that
08:13most people still don't use their paid services.
08:1595% of the people who watch YouTube
08:17have not bought the premium.
08:1995% of the people who use Gmail or Google Drive
08:23don't pay money for it.
08:25But still, Google earns its majority revenue
08:28from free services.
08:30Here comes our second reason.
08:32Data collection.
08:34The more free services we use,
08:36the more data Google has available on us.
08:40Everything that we search on Google,
08:42every video that we watch on YouTube,
08:44every email that we send,
08:46all this data is anonymously collected
08:49and used for targeted advertising.
08:52You must have seen this happening yourself.
08:54If you search for a healthy recipe on YouTube,
08:56then while browsing websites on Google,
08:59you will start getting ads
09:01for healthy tiffin services or nutritionists.
09:03If you search for hotels in Dubai on Google,
09:06then you will start getting ads for Dubai tourism.
09:08For different tourist attractions in Dubai.
09:10Google uses a very advanced machine learning algorithm
09:13to show targeted ads.
09:15And not just for ads,
09:17but to show normal search results,
09:19a very complex algorithm is used on Google.
09:22On your search,
09:23which website will be seen above
09:25and which website will be seen below in the search results,
09:27and how to make your website rank higher,
09:29this has become a different science today.
09:32This is called SEO,
09:34that is, Search Engine Optimization.
09:36If you have your own business
09:38and you want that without spending money on Google paid ads,
09:41your business's website is shown on top of the search results organically,
09:45then the sponsors of today's video will be very useful for you.
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09:57at the top in the search results
09:59so that your business and your brand can become more visible.
10:02More people can come to your website.
10:04They also do precise ROI tracking
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10:08so that you can track their results
10:10and take informed decisions.
10:11Being ranked well in search results
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10:15Because thousands of new potential customers
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10:28Now let's come back to the topic of paid ads
10:30to better understand
10:32how exactly Google targets ads.
10:35What is your age group?
10:36Are you a man or a woman?
10:38Which country do you live in?
10:39Which city do you live in?
10:40What things do you search about?
10:42What things do you like?
10:44Based on all these things,
10:45a profile is created for you.
10:47And from a different perspective,
10:49an advertiser can choose all these things.
10:52You have a small business of selling clothes or glasses
10:55and you want your ad to be seen by 18-25 year old girls
11:00who specifically live in the NCR region.
11:02So you can choose these things.
11:04And then you can choose some keywords
11:06like sunglasses or saris.
11:08And Google's job here is
11:10to match an advertiser with a user.
11:14If your age group, region and gender are matching
11:16and you searched for a word related to sunglasses on Google
11:20or you saw a related video on YouTube
11:23like you saw a review of a sunglass.
11:25Then Google finds out that
11:27you are the target customer for this ad
11:30and Google will show you this ad.
11:32This is a very simplified explanation
11:34but in general, Google ads work like this.
11:38If we go into a little complexity,
11:39there is a lot of competition between advertisers too.
11:42So ads are bidded.
11:44Advertisers can decide
11:45how much money they are ready to pay
11:47to show their ad.
11:49If on the other hand,
11:50another company is ready to pay more money
11:52then their ad will be shown first.
11:54Google calculates the ad rank for this.
11:57Which ad should be placed on which rank.
12:00For this, besides money,
12:01the quality of the ad is also checked.
12:03On the other hand,
12:04how well the user is matching
12:06with this specific ad.
12:08If he has searched for something,
12:10then how relevant is this advertiser
12:12for that one user.
12:13And here, there are different types of ads too.
12:16Like search ads,
12:17when you write something on Google,
12:18the top ads in the search results
12:20are called search ads.
12:22Then there are banner ads.
12:23When you go to different websites,
12:25like on a news website,
12:27the ads that you see in the banner
12:29are part of the Google Display Network.
12:32And then there are video ads shown on YouTube
12:35which are played in the middle of the video
12:36or before the video.
12:37There is also a category of skippable and non-skippable.
12:40If we look at the total money
12:42coming from these different types of ads,
12:44then Google's total revenue from ads
12:47is $237 billion.
12:49And similarly, in 2022,
12:51their total revenue was $280 billion.
12:54So out of $280 billion,
12:55Google earns $237 billion
12:57only from these ads.
12:59Look at this chart.
13:00Year by year, you can see
13:01how much was Google's advertising revenue.
13:04Almost an exponential growth
13:05can be seen here.
13:07This revenue has been increasing
13:08for the past 20 years.
13:10And in 2020 to 2021,
13:11you will see a huge jump.
13:13This was due to COVID.
13:14Most people were sitting at home
13:16and spending time on the internet.
13:18More ads were being seen.
13:20More 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 Meta's Facebook and Instagram.
13:33In 2023,
13:34Meta's annual advertising revenue
13:36was $131 billion.
13:39Amazon also earns money
13:40by showing ads like this.
13:42You must be thinking
13:43why did Amazon need to show ads
13:44when Amazon is already selling products
13:46and earning money on its website.
13:48Actually,
13:49the purchase history data
13:50coming out of selling products
13:52about users
13:53is even more important than Google's data.
13:56Because Google only knows
13:58what is your interest in.
14:00You watch a video on YouTube
14:02or you search something
14:03in Google search
14:04with your interest.
14:05But Amazon knows
14:07which products you bought.
14:09You can be targeted more accurately
14:10with these product sales.
14:12You know that you like to buy
14:14certain things.
14:15Then you can see ads
14:16of similar things.
14:18Because of this,
14:19Amazon generated its revenue
14:20of $46.9 billion
14:22only through advertising.
14:24In the last 20 years,
14:25because of this one business model,
14:27all these companies
14:28have dominated the internet.
14:30But now,
14:31it seems that cracks
14:32have started to appear in this model.
14:34There are two major reasons behind this.
14:36The first is privacy concerns.
14:38People are worried
14:39about what things
14:40Google knows about you.
14:41What do you eat?
14:42Where do you live?
14:43Where do you work?
14:44Even what diseases
14:45do you suffer from?
14:47Because people often
14:48search on Google
14:49about these things.
14:50What are your relationships?
14:51What problems are you facing
14:53in your life?
14:54Well, I think Google does
14:56have more information
14:57than Facebook does.
14:58I don't know if it's a bad thing.
14:59I think it helps
15:00make the product better.
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 users.
15:11Even though users
15:12had turned off
15:13the location history.
15:15As people are becoming
15:16more aware of privacy,
15:18people are sharing
15:19less information on the internet.
15:21And the less information
15:22goes to these websites,
15:23the worse their ad targeting
15:25will be.
15:26And if the ad targeting is bad,
15:27advertisers won't want
15:28to spend so much money
15:30which will affect
15:31their revenue.
15:32But the second problem
15:33is even bigger than this.
15:35There is a famous saying
15:36that you must have heard.
15:37Don't put all your eggs
15:38in one basket.
15:39Don't put all your eggs
15:40in one basket.
15:41If that basket falls,
15:42all the eggs will break.
15:44This advertising model
15:45will be completely shattered
15:46if someday people
15:47stop using Google Search
15:48for some reason.
15:51With time,
15:52Google Search's reliability
15:53has been decreasing.
15:54Earlier, you used to see
15:55only one ad on top.
15:56But now,
15:57if you search for something,
15:58the top search results
15:59will be Ads.
16:01If you only see
16:02Ads everywhere,
16:04then the usefulness
16:05of those search results
16:06starts decreasing.
16:07And now imagine
16:08a competitor
16:09who shows you
16:10exactly what you want
16:11to search for
16:12without any ads.
16:13Like a platform
16:14like ChatGPT.
16:15If you ask a question
16:16to ChatGPT,
16:17you will get
16:18a direct answer
16:19in one paragraph
16:20without any ads.
16:21But if you put
16:22the same question
16:23on Google Search,
16:24you will get
16:25a lot of results
16:26which will have
16:27a lot of ads
16:28and you won't know
16:29the reliability
16:30of different search results,
16:31which is reliable,
16:32which is a trustable source,
16:33which website
16:34to click on,
16:35which not to click on.
16:36In my opinion,
16:37these AI-powered
16:38chatbots like
16:39ChatGPT
16:40will become
16:41the biggest threat
16:42to this advertising
16:43business model
16:44of Google
16:45in the coming years.
16:46Maybe Google
16:47also knows this thing.
16:48That's why Google
16:49is also developing
16:50its Artificial Intelligence
16:51softwares like
16:52Gemini,
16:53which is a competitor
16:54of ChatGPT.
16:55Now, only time
16:56will tell
16:57whether Google
16:58remains the face
16:59of the internet
17:00for the next 20 years
17:01or not.
17:02Or some other company
17:03left it behind.
17:04But one thing
17:05is for sure,
17:06there is competition
17:07between these
17:08different companies.
17:09For a consumer,
17:10for us,
17:11it is a good thing
17:12because we will get
17:13better services
17:14and products.
17:15If you want to
17:16understand Artificial Intelligence
17:17in detail like this,
17:18then I have explained it
17:19in this video.
17:20You can click here
17:21and watch it.
17:22Thank you very much.