Google’s $2 Trillion Business Model | How Google Earns Money? | Dhruv Rathee
Today, we will explore the fascinating world of Google and how it makes money. From its humble beginnings as a college project to its current status as a tech giant, Google has come a long way. But how does it manage to offer so many free services like Search, Gmail, Maps, and YouTube? Let's dive into the details and find out. We'll cover Google's history, primary revenue streams, the freemium model, and how it uses data to make money. We'll also discuss the challenges it faces and its plans. So, if you're curious about how Google works, this video is for you.
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00:00Namaskar, friends.
00:01Do you know that Google searches more than 8.5 billion times a day?
00:06It's like every person in the world searches Google once in a day.
00:12It's not a small thing in itself.
00:14But what's even more amazing is that all this is free.
00:18And not just Google search.
00:19Almost 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 us all this for free,
00:30Google'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 company on the internet 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 search the internet as Google.
01:18This Google search started in 1998 as a college project.
01:23Larry 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.
01:33What is our mission?
01:34Basically, we want to organize the world's information.
01:36And make it universally accessible and useful.
01:40In the initial days, Google was just a simple search engine.
01:43Which looked like this.
01:44A very simple website to search on the internet.
01:47The word Google in itself doesn't have any meaning.
01:51But it is inspired by the word Google.
01:53Google 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.
02:02Similarly, if there are 100 zeros after 1,
02:05that number is called Google.
02:07Google was chosen to represent this company.
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 when Google used to search in those days,
02:20there were a lot of result pages.
02:23And Google used to show these result pages,
02:251, 2, 3, 4, 5, endlessly.
02:28And used to write his name with so many Os.
02:31In the year 2000, Google took its first big step.
02:35They introduced the system of AdWords.
02:37Today, it is called Google Ads.
02:39Because of this, the businesses could give money
02:43to display their ads on Google's search results pages.
02:46Later in this video, we will talk about
02:48how it became Google's biggest business model.
02:50But over the years, Google 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.
03:17The same mobile operating system that most people have in their phones.
03:20This year, Google launches its own web browser.
03:23Google Chrome.
03:24Which is the most popular web browser in the world today.
03:27Later on, Google started making its own hardware products.
03:29Their Pixel smartphones,
03:31Chromebook laptops,
03:33and smart home devices.
03:34Today, Google is expanding in the field of Artificial Intelligence.
03:38After hearing all this, you will feel that
03:40Google kept launching one more powerful product.
03:43And everything was successful.
03:45But this is not true.
03:46All the examples I have given you,
03:48are examples of successful products and services.
03:50There are a lot of things that Google tried,
03:53but Google failed in all of them.
03:55Like Google Plus.
03:56Google tried to make its own social media platform.
03:59In the competition of Facebook.
04:01But it failed.
04:02Google Hangouts.
04:03The app to chat.
04:04Which used to run a lot at one time.
04:06But it was shut down in 2022.
04:08Google Nexus Tablets.
04:10These were also very famous at one time.
04:12In the competition of iPad.
04:13But after a while, Google shut them down as well.
04:16Google Podcasts.
04:17Google Glass.
04:18Google Wave.
04:19Google Reader.
04:20Examples of failures.
04:21In reality, there are a lot more in comparison to successes.
04:25If you go to Wikipedia and see the entire list,
04:27there are more than 200 products and services
04:29that failed by Google.
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 a lot of times.
04:39Keeping all these successes and failures in mind,
04:42let's see how Google earns the most money today.
04:46With its oldest business model,
04:48Google Search Ads.
04:50Let's understand in detail.
04:52On the screen, you can see Google's revenue breakdown for the year 2022.
04:56That is, how much money did Google earn in the year 2022?
05:00The total revenue is $280 billion.
05:03Out of which, 58% of the money,
05:05that is $162 billion,
05:07comes from Google Search Ads.
05:10The second biggest source of income is
05:12Google Network Ads.
05:14Ads that you see on different websites
05:16that partner 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 that 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,
05:37is split between the creators and Google.
05:4045% of the money goes to Google
05:42and 55% stays with creators like me.
05:46The 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.
05:56When 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.
06:06The revenue from Google's sales of apps, phones and laptops
06:10comes on the fourth number with $29 billion.
06:14Around 10.4%.
06:16The last major revenue source is
06:18Google Cloud with $26 billion.
06:20It is also interesting to see
06:22where Google spends this money.
06:24Around $40 billion is spent on research and development.
06:29So that more new products and services can be researched.
06:32More new failures can be attempted.
06:34Around $44 billion is spent on non-production costs.
06:38Like renting offices,
06:40advertising, marketing, accounting,
06:42employees' salary.
06:44The total expenses are around $207 billion.
06:49As you can see on the screen.
06:51This is the entire company's balance sheet.
06:53Here you can also see that
06:55income before taxes is $71 billion in 2022.
06:59They pay a tax of around $11 billion
07:02and they make a profit of approximately $60 billion.
07:06The most interesting thing in this entire business model
07:09is this free funda.
07:11How is it possible to make a profit by giving these free things?
07:14There are two reasons behind it.
07:16First, these free things are not completely free.
07:19The base level products are free
07:21but if you want a premium service,
07:23you 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,
07:33and now Twitter also uses it.
07:35In simple words,
07:36the basic thing will be given to you for free
07:38but if you want a premium service,
07:40you have to pay money for it.
07:42Like Gmail is free to use
07:44but its storage limit is 15 GB.
07:46If you want more storage than that,
07:47you have to pay money.
07:48Google Drive is free to use
07:50but its storage limit is also 15 GB.
07:52If you want more than that,
07:53you have to pay money.
07:54Watching videos on YouTube is free
07:56but there will be ads in between.
07:58If you want to remove ads,
07:59you have to pay money.
08:00If you want YouTube Premium,
08:01you have to pay money.
08:02This freemium model is a very successful model
08:04because it gives you a try-before-buy opportunity.
08:06You can try a product
08:08and if you like it,
08:09you can pay money after that.
08:11But in the case of Google,
08:12the interesting thing is that
08:13most people still don't use their paid services.
08:1795% of the people who watch YouTube
08:19have not bought the premium.
08:2195% of the people who use Gmail or Google Drive
08:24don't pay money for it.
08:26But still,
08:27Google earns its majority revenue
08:29from free services.
08:31Here comes our second reason.
08:33Data collection.
08:34The more free services we use,
08:37the more data Google has available on us.
08:40Everything that we search on Google,
08:43every video that we watch on YouTube,
08:45every email that we send,
08:47all this data is anonymously collected
08:50and used for targeted advertising.
08:53You must have seen this happening yourself.
08:55If you search for a healthy recipe on YouTube,
08:57when you browse Google websites,
09:00you will see ads for healthy tiffin services or nutritionists.
09:04If you search for hotels in Dubai on Google,
09:07you will see ads for Dubai tourism,
09:09different tourist attractions in Dubai.
09:11Google uses an advanced machine learning algorithm
09:14to show targeted ads.
09:16And not just for ads,
09:17but to show normal search results,
09:19a very complex algorithm is used on Google.
09:22When you search for something,
09:24which website will show up in search results
09:26and which website will show down?
09:28And how to make your website rank higher?
09:30This has become a science in itself.
09:33This is called SEO.
09:35Search Engine Optimization.
09:37If you have your own business
09:39and you want Google to spend money on paid ads
09:41and show your business's website
09:43on search results organically,
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10:09so that you can track their results
10:11and take informed decisions.
10:12Being ranked well in search results
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10:16Because thousands of new potential customers
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10:29Now let's come back to the topic of paid ads
10:31to understand it better.
10:33How does Google exactly target ads?
10:35What is your age group?
10:37Are you a man or a woman?
10:39Which country do you live in?
10:40Which city do you live in?
10:41What do you search about?
10:43What do you like?
10:45On the basis of these things,
10:46your profile is made.
10:48And from a different perspective,
10:50an advertiser can choose all these things.
10:53You have a small business of selling clothes
10:55or glasses.
10:56And you want your ad
10:58to be visible to 18-25 year old girls.
11:01Who specifically live in the NCR region.
11:03So you can choose these things.
11:05And then you can choose some keywords
11:07like sunglasses or saris.
11:09And Google's job here is
11:11to match an advertiser
11:13with the user.
11:15If your age group, region and gender match
11:17and you search for a word related to sunglasses on Google
11:21or you watch a video related to it on YouTube
11:24like you watched a review of a sunglass.
11:26Then Google finds out
11:28that you are the target customer for this ad.
11:31And Google will show you this ad.
11:33This is a very simplified explanation.
11:35But in general,
11:36Google ads work like this.
11:38If we go into a little complexity,
11:40there is a lot of competition between advertisers.
11:42So ads are bidded.
11:44Advertisers can decide
11:46how much money they are ready to pay
11:48to show their ad.
11:50If on the other hand,
11:51another company is ready to pay more money
11:53then their ad will be shown first.
11:55Google calculates the ad rank for this.
11:58Which ad should be placed on which rank.
12:00For this, the quality of the ad is also considered
12:02apart from the money.
12:03On the other hand,
12:04how well the user is matching
12:07with this specific ad.
12:09If he has searched something,
12:10then how relevant is this ad
12:12for that particular user.
12:14And here, there are different types of ads.
12:16For example, search ads.
12:17When you write something on Google,
12:19the top ads in the search results
12:21are called search ads.
12:23Then there are banner ads.
12:24When you go to different websites,
12:26like a news website,
12:28the ads you see on the banners
12:30are part of the Google Display Network.
12:33And then there are video ads shown on YouTube.
12:36Which are played in the middle or before the video.
12:38There is also a category of skippable and non-skippable.
12:41If we look at the total money
12:43coming from these different types of ads,
12:45then Google's total revenue from ads
12:48is $237 billion.
12:50And similarly, in 2022,
12:52their total revenue was $280 billion.
12:55So out of 280,
12:56Google earns $237 billion
12:58only from these ads.
13:00Look at this chart.
13:01Year by year, you can see
13:02how much was Google's advertising revenue.
13:04Almost an exponential growth
13:06can be seen here.
13:07This revenue has been increasing
13:09for the past 20 years.
13:10And in 2020-21,
13:12you can see a huge jump.
13:14This was due to COVID.
13:15Most people were sitting at home
13:17and spending time on the internet.
13:18More ads were being watched.
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.
13:34In 2023,
13:35Meta's annual advertising revenue
13:37was $131 billion.
13:39Amazon also earns money
13:41by showing ads in the same way.
13:42You must be thinking
13:43why did Amazon need to show ads
13:45when Amazon is already selling products
13:47and earning money on its website.
13:49Actually, the purchase history data
13:51coming out of selling products
13:53about users
13:54is 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
14:04with your interest.
14:06But Amazon knows
14:08which products you bought.
14:10You can be targeted more accurately
14:12with these product sales.
14:13You know that you like to buy
14:15such things.
14:16So you can see ads of such things.
14:18Because of this, Amazon
14:20generated $46.9 billion
14:22in its revenue
14:23only through advertising.
14:25In the last 20 years,
14:26because of this one business model,
14:28all these companies have dominated the internet.
14:30But now, it seems
14:32that there are cracks in this model.
14:34There are two major reasons behind this.
14:36The first is privacy concerns.
14:38People are worried about
14:40what Google knows about you.
14:42What you eat, where you live,
14:44where you work,
14:45even what diseases you suffer from.
14:47Because people often search
14:49about these things on Google.
14:51What are your relationships?
14:52What problems are you facing
14:54in your life?
14:55I think Google does have more information
14:57than Facebook does.
14:58I don't know if it's a bad thing.
14:59I think it helps make 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 the users
15:11even though the users
15:13had turned off the location history.
15:15As people's awareness
15:17about privacy is increasing,
15:18people are sharing less information
15:20on the internet.
15:21And the less information
15:22goes to these websites,
15:23the worse their ad targeting will be.
15:26And if the ad targeting is bad,
15:28advertisers won't want to spend so much money
15:30which will affect their revenue.
15:33But the second problem
15:34is even bigger than this.
15:36There's a famous saying
15:37that you must have heard.
15:38Don't put all your eggs in one basket.
15:40Don't put all your eggs in one basket.
15:42If that basket falls,
15:43all the eggs will break.
15:45This advertising model
15:46will completely fall apart
15:47if someday people stop
15:49using Google search
15:50for some reason.
15:52With time,
15:53the reliability of Google search
15:54has decreased.
15:55Earlier, you could only see
15:56one ad on top.
15:57But now if you search for something,
15:59the top search results
16:00will be ads only.
16:02If you only see ads everywhere
16:03when you search,
16:05then the usefulness
16:06of those search results
16:07starts decreasing.
16:08And now imagine
16:09a competitor
16:10who shows you exactly
16:11what you want to search
16:13without any ads.
16:14Like a platform like ChatGPT.
16:16If you ask a question
16:17to ChatGPT,
16:18you get a direct answer
16:19in a single paragraph
16:21without any ads.
16:22But if you put the same question
16:23on Google search,
16:24you will get a lot of results
16:26with a lot of ads.
16:28And you don't know
16:29the reliability of
16:30different search results.
16:31Which is reliable?
16:32Which is a trustable source?
16:34Which website should be clicked?
16:36Which should not be clicked?
16:37In my opinion,
16:38these AI-powered chatbots
16:39like ChatGPT
16:41will be the biggest threat
16:42to Google's
16:43advertising business model
16:44in the coming years.
16:47Maybe Google also knows this.
16:48That's why Google is also
16:49developing its
16:50AI softwares.
16:52Like Gemini,
16:53which is a competitor
16:54of ChatGPT.
16:55Now, only time will tell
16:56whether Google will
16:57remain the face
16:58of the internet
16:59for the next 20 years
17:00or not.
17:01Or some other company
17:02will leave it behind.
17:04But one thing is for sure,
17:05this competition
17:06between these different
17:07companies
17:08is a good thing
17:09for a consumer,
17:10for us,
17:11because we will get
17:12better services
17:13and products.
17:14If you want to understand
17:15AI in this way
17:16in detail,
17:17then I have explained it
17:18in this video.
17:19You can click here
17:20to watch it.
17:21Thank you very much.