You Google for Free; How does Google earn from it?
Aug 09 2018 The DMTI
Alphabet’s Google has become such a part of our lives that it has officially been declared as a verb by the Oxford Dictionary. No matter what the topic, Google has the answers for it all and for free! Yet the company made $31.91 billion in 2017 Q4 alone. How is this possi-ble? How can a company that provides services briefly become the most valuable compa-ny in the world? The answer is advertisement or search engine marketing. Google makes most of its money from selling advertising opportunities on the search pag-es to the extent that $27.27 ie 85.5% of all its revenue is generated from ads alone.
The ads are divided into three main components: AdSense, AdWords and AdMob. While AdSense publishes ads on other websites, AdWords is the software that determines which ads will be presented on the Google webpage. AdMob and AdSense are the same, except that AdMob is for mobile applications.
How it works is as follows:
The search engine marketing process begins with advertisers bidding to place ads for their products or services on the relevant search query result pages. The amount bid and quality are the factors influencing the placement of the ad, with better ads being featured higher on the page. Google uses a Vickrey auction system for efficiency where the bidders are unaware about their rivals’ bids. Once all bids are in, the highest bidder wins but actually pays the price of the second highest bidder. Another factor influencing the ad’s placement is Google’s Quality Score that takes into account the relevance of the advertiser’s landing page to the search query. For instance, a washing machine brand will have to bid less to appear higher on a page that is about washing machines than a general appliance company.
The reason Google’s advertising solution is so attractive to advertisers is that they can tar-get advertising to a niche clientele easily. An AdWords campaign can be targeted not only at users who have already expressed an interest in the brand’s offer but also be designed to ignore Google users who have not. This element of search en-gine marketing is known as contextual advertising. Brands also benefit from this ar-rangement as they have to pay only when someone clicks on the displayed ads. This is known as Pay Per Click or PPC.
Adwords may be one of the primary sources of Google’s revenue, but it is not the only one. Google’s AdSense network places adverts on partner sites be they blogs or major content publishers and takes a share of the revenue generated from the transaction.
Thus, even though its search engine services are free for the world to use, Google can earn a healthy profit from brands trying to get their message across.
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