Elaborative Business Model Of Google – Detail Explanation

Updated on: Sep 22, 2021

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Google LLC is an American multinational company that specializes in Internet-related services and products and includes a variety of services including online advertising technologies, cloud computing, search engine, software, hardware, and a lot more.

The business Model of google is a multi-sided platform. What started as a search engine company is now a technical giant today. But do you know what Google exactly gains from this?

Thus this makes us anxious to know the successful Business model of Google.

In this blog, we have discussed Google’s business model which includes Google’s revenue model and other related factors like customer segmentation, key activities, cost structure, etc.

But, before we look at google’s business model let us know about Google as a company.

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About Google

Google’s story began in 1995 at Stanford University when Larry Page was to start his graduation at Stanford University and Sergey Brin was already a student at Stanford University.

These two friends started working on a technology where the searches would rely on website backing links. They called their search engine “BlackRub”. This name was replaced by “Google” in a short while.

After successfully raising an amount of one million dollars from family, friends, and other investors, Google Inc. was born officially. In the following years, the company experienced rapid growth and moved to its current headquarters known as Googleplex in California.

Let us now see the business model of google in detail.


What is the Business Model of Google?

The unique business model of Google is based on hidden revenue business patterns. This means it is not the ultimate user who is paying Google for its use.

It is the companies who pay Google to advertise themselves on the searches and to rank first in the search results. This is possible because of the numerous searches made on the Google search engine which is approximately equal to 63,000 searches per second.

Let us now see how exactly does google make money by providing its services.


How does Google exactly makes money?

More than three – fourth of Google’s revenue comes from Google Ads and Youtube Ads. But the company is also engaged in some other important businesses which are described below:


1. Advertising


Google is based on Performance Advertising. This means that the advertiser would need to pay only when the user takes a particular action such as clicking on a link.

Google has five advertising platforms:

  • Google Ads: This refers to the ads that appear when a user searches on the Google search engine. This usually appears on the top of the Search Results page.
  • Google Shopping: This appears in the shopping section of companies that have paid Google to advertise their products.
  • Google Adsense: The website provides spaces for Google Ads which are displayed as per the user’s time and demand.
  • Google Admob: The advertisers can advertise on their apps and this can help developers earn some money from their apps.
  • Youtube: There are a variety of ads displayed between a Youtube video. For these ads, the advertisers pay Google to advertise their products and services.


2. Youtube Premium

Youtube Premium is a subscription-based model of Youtube. The various advantages offered by Youtube Premium over Youtube is that it offers ads-free streaming across Youtube, Youtube Music and Youtube Gaming, and a lot more.


3. Google Cloud

It is a cloud computing service run by Google. Although 15 GB of space is provided free of cost, the user needs to pay for more cloud space. It is worth mentioning that Google Cloud represents 5.5% of the total revenue earned by Google.


4. Google Pixel

It refers to the smartphone brand of Google. Although it does not have a large representation among the various market players it has been growing nowadays.

The company has also merged with Google Home. The company develops various gadgets for homes including cameras, doorbells, smoke systems, locks, and a lot more.

Let us now know about googles customer segmentation.


Customer Segments of Google

Google has its customer segment divided into three groups:


  • Advertisers: These refer to all the companies who want to market their products and services on Google search engine, no matter whether they are large or small businesses, some advertising agencies, or let it be any individual.
  • Content Publishers: These refer to the people who create content and then publish it on the web to monetize it. They include bloggers, digital influencers, educational sites, entertainment sites, and a lot more.
  • Users: It refers to any individual who searches on the web. Let it be you, me, or anyone else in this world, we all are users whenever we search on the web. This is the segment that supports Google in its advertising business model although does not pay anything directly to Google.


Let us find out what are the different key activities of google.


Key Activities of Google

  • Crawl and Index: Google crawls all the pages present on the world wide web and indexes them according to the richness of the content. Thus accordingly, google ranks different websites on its search results page.
  • Search, Match and Present: There are billions of web pages on the World Wide Web. Google is responsible for organizing every webpage according to the relevancy of the matching pages found.
  • Improve Searching: First of all, Google tries to understand what the user is looking for based on the word entered in the search box. Then Google also tries to disqualify such sites which it feels would promote spam and click-baiting.
  • Build Ecosystems: The company tries to achieve this objective by integrating tools such as Google Search Engine, Android, Chrome, Youtube, Gmail, and a lot more.
  • Marketing: Google as a company also needs to promote its products and services.


Let us now see how has google distributed its cost.


Cost Structure of Google

The cost structure of Google includes:

  • Research and Development
  • Sales and Marketing
  • Data Centers
  • Traffic Acquisition Costs
  • General, Administrative, and Legal Operations

Let us now see the different competitors for google in different fields.


Competitors of Google

Google is diverse in different fields like search engines, advertising, mobile, and cloud service. So, there are many different competitors for google in every field.

Let us see individually who are the different competitors for Google.


Search Engines competitors

1. BingIt is Microsoft’s search engine and accounts for something between 2% and 6% of the market share computed worldwide. It has its origin from Microsoft’s previous search engines: MSN Live, Windows Live Search and Live Search.

2. YahooYahoo is an American web service provider and was one of the biggest search engines on the planet, but now accounts for only around 2% of the market share computed worldwide.

3. BaiduIt is popularly known as the Google of China and it accounts for more than 60% of the search engine market in China. Globally it accounts for nearly 1% of the global market share.

4. YandexYandex is the search engine used in Russia and accounts for nearly 45% of the search engine market in Russia. Google has also suffered losses from the Russian Government due to the so-called prohibitive content.


Advertising competitors

  • Facebook: Facebook is also a major player in the online advertising industry. It has a nearly 25% market share in the advertising industry.
  • Amazon: The competitor may seem odd at first, but makes sense when we look into the analytics. Amazon accounts for nearly 8.8% of the ads share worldwide which poses a threat to Google’s advertising business.


Mobile Industry

  • Apple: Although Android is the leader in the mobile industry and is well ahead of iOS. However, Apple as a company poses threat to both the software and the hardware market as well as Google has its Pixel phones and has acquired Motorola as well.


Cloud Services

  • Amazon Web Services: Amazon Web Services is the leader in the field of Cloud Computing with a market share of 33%. Google just has a market share of 8%.
  • Microsoft Azure: Microsoft Azure is also a strong competitor for Google and accounts for 16% of the total market share which is well ahead of Google.


Next, let us see the different strengths and weaknesses of google.


Strengths and Weaknesses

Google’s Strengths

  • Leadership: 

Google is the ultimate leader in the online search engine market and to date, no competitor has come to such a position to threaten Google’s existence.

  • Technology: 

Google’s systems processing speed is awesome and it can process more than 40,000 queries per second.

  • Revenue: 

Google can generate huge revenues from its various businesses discussed above which permits it to invest in innovation and new products and acquisitions regularly.

Google’s Weaknesses

  • Privacy Policies: 

One of the important weaknesses of Google is its privacy policies. The company is frequently questioned about its inner policies of hiding information on its algorithms and similar information.

  • Overdependence on Advertising: 

Nearly 80% of Google’s revenue is from advertising and the company can suffer worst situations from the competition and political situations.

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On the analysis of the business model of Google, we have known that Google has a well-distributed and well-organized structure. It uses different methods to build its revenue like advertising using google ads, google shopping, google AdSense, youtube, etc. We have also seen the different customer segmentation of google which include advertisers, content publishers, and users.

Wasn’t it interesting to know the Business model of Google? Learn how to grow your business using digital marketing, check out our website for more information.

Also, you can check out Free Digital Marketing Masterclass by IIDE to understand what digital marketing is all about.

Let us know your thoughts in the comments below.

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Aditya Shastri

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs......[Read full bio]


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