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How Google Makes the Vast Majority of Its Money From Advertising

Companies and Brands You Know • Beginner Investing • 6 min

What this lesson is about

Search, Maps, Gmail, YouTube, Android. Nearly everything Google builds ultimately points back toward the same underlying revenue engine: advertising.

2 parts · a quick check after each · then the quiz

Part 1 of 2

Search,, Maps,, Gmail,, YouTube,, Android,, Chrome., Google, (Alphabet), has, created, a, huge, range, of, products., Most, of, its, total, revenue, comes, from, one, main, source:, advertising,, mainly, through, Google, Search, and, YouTube., Search, advertising, works, mostly, on, a, pay-per-click, model., Advertisers, bid, for, ad, space, next, to, relevant, search, results., Google, gets, paid, when, a, user, clicks, on, one, of, those, ads.

Many, of, Google's, other, products, are, free, to, use., They, serve, a, strategic, purpose, beyond, just, their, function., They, help, build, and, keep, a, large,, engaged, user, base., These, products, also, create, usage, patterns, that, support, the, advertising, business,, which, generates, most, of, the, company's, revenue., Google, Cloud,, Alphabet's, cloud, computing, division,, competes, with, AWS, and, Microsoft, Azure., It's, a, real, and, growing, business,, but, it, still, brings, in, a, much, smaller, share, of, total, revenue, compared, to, advertising.

Where the money comes fromOne line at eighty per cent is the whole company and the whole risk.

Quick check

What has historically been the source of a large majority of Alphabet's (Google's parent company) total revenue?

Part 2 of 2

Insider, Angle:, This, concentration, is, why, relying, heavily, on, advertising, revenue, is, a, serious, concern, for, Alphabet., A, slowdown, in, advertiser, spending, can, happen., This, usually, follows, broader, economic, conditions., Changes, in, digital, advertising, rules, or, how, people, search, for, information, online, could, hit, a, company, this, dependent, on, one, main, revenue, source,, no, matter, how, many, other, products, it, offers.
Try, This:, Look, up, Alphabet's, latest, quarterly, earnings, report., Find, the, revenue, breakdown, by, segment, (Google, Search,, YouTube, ads,, Google, Network,, Google, Cloud,, Other, Bets)., What, percentage, of, total, revenue, comes, from, advertising-related, segments, combined,, compared, to, everything, else?

Quick check

How does Google Search generate advertising revenue?

Quiz

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