Hello, friends! Do you know that on Google, every day, there are more than 8.5
billion Google searches? It's as if every person on Earth, searches for something or the
other on Google at least once a day. This is not a small feat. But more amazing than this is that doing this is completely free. And not only Google search, almost every product by
Google is completely free to use. Watching videos
on YouTube is free. Using Gmail is free. Google Maps is free to use. Despite providing all of this for free, Google's market cap is
more than $2 Trillion. How is this possible? How can Google provide
so many services for free? It doesn't charge us any money, but has still managed to
become such a big company. Friends, today, let's understand the business model of the most
famous company on the internet in this video. Friends, you must have heard a lot about how we refer to photocopy
machines as Xerox machines, refer to white glue as Fevicol and refer to adhesive bandage as Bandaid. Whenever a company
dominates in its field like this, its name is associated with what it does. Similarly, today, an internet search
is known as "Googling" something. This Google search started
in 1998 as a college project. Larry Page and Sergey Brin
created it with a mission to organise all the
information in the world and to make it accessible and useful. "Our entire mission is basically to organise
world's information and make it universally
accessible and useful." During its initial days, Google
was a simple search engine. This is how it looked. A simple website to search
for things on the internet. The word "Google" doesn't actually mean anything, but it is inspired from the world Googol. Googol is the name of a number. The number 1 followed by 100 zeroes. If there are 3 zeros after 1,
it is called a Thousand. If there are 4 zeros after 1,
it is Ten Thousand. Similarly, if there are 100 zeros after 1, that number is called Googol. Google was chosen as a
name to refer to this number to show that their search engine will
look up so much information on the internet that it will be in Googols. If you used internet during its early days, you'd remember that Google
searches in those days, showed numerous result pages. And Google used to number and
list these result pages endlessly. And the name Google came with extra O's. In 2000, Google took its first big step. They introduced the
system of AdWords. Today, it is known as Google Ads. Through this, the businesses could pay to display their ads on Google's search results pages. Later in this video, we will talk about how it became Google's
biggest business model. But over the years, Google started offering many
more products and services. In 2004, Gmail was introduced. In 2005, Google Maps was introduced, which changed the world. In 2006, Google acquired YouTube, the very platform you
are watching this video on. Many people don't know
that in the beginning, YouTube was a separate company. It was only in 2006 that
Google bought YouTube. After that, in 2008,
Google introduced Android. The same mobile operating system
that is in most people's phones. The same year, Google
launched its own web browser. Google Chrome. Which is the most popular
web browser in the world today. Later, Google started making
its own hardware products. Their Pixel smartphones, Chromebook laptops, and smart home devices. Today, Google is expanding in
the Artificial Intelligence field as well. And after hearing all
this you will feel that Google has been producing
one powerful product after another. And everything turned out to be successful. But this is not true. The examples I listed right now are the examples of its
successful products and services. There are many things that Google tried but eventually failed. Like Google Plus. Google tried to make its
own social media platform to compete with Facebook. But it failed. Google Hangouts,
an app for chatting, which was popular at one time, but was shut down in 2022. Google Nexus tablets, which were also
famous at one time, they were competing with the iPad, but after a while, Google shut them down too. Google Podcasts,
Google Glass, Google Wave,
Google Reader, the number of examples of failures, in reality, are far more in
comparison to the successes. If you go to Wikipedia
and look at the entire list, there are more than 200
such products and services by Google that have failed. And here we have an important lesson. "Failure is the mother of all successes." If you really want to achieve success, you will have to fail many times. Keeping in mind these
successes and failures, let's talk about the present day, and see which is the most
profitable stream for Google. With its oldest business model, Google Search Ads. Let's understand it in detail. On the screen, you can see the revenue
breakdown of Google for the year 2022. That is, where did Google earn
its revenue in the year 2022? The total revenue is $280 billion, of which 58% of the revenue, i.e. $162 billion comes from the ads shown with Google searches. After this, the second
biggest source of income is Google Network ads. The ads that you get on different websites that partner with Google. Google earns $32.78 billion from here. Third is YouTube Ads $29 billion comes from here. The ads that you will see
while watching this video. Here, it's interesting that these ads are the source
of income for us YouTubers. The money that advertisers
pay to show these ads is split between Google and the creators. 45% of the revenue goes to Google and 55% goes to creators like me. So the 45% share of YouTube
from the content of all creators generates about $29 billion in
revenue for Google in a year. Similarly, there are apps
on Google Play Store. When an app creator sells their
app through Google Play Store, 70% of the revenue goes to the creator and 30% goes to Google. So, the revenue from
the sales of these apps and the other revenue by
selling phones and laptops, that part of Google's revenue is
fourth on the list with $29 billion, at around 10.4%. And the last major revenue source is Google Cloud with $26 billion. Now, it is also interesting to see where does Google spend this money? Around $40 billion is spent on Research and Development. For their ongoing research to create
more new products and services. To keep on attempting at new failures. About $44 billion is spent on non-production costs like renting offices, spending on advertising,
marketing, and accounting, and paying salaries to the employees. Their total expenses
are around $207 billion, as you can see on the screen. This is the Balance
Sheet of their company. Here you can also see that income before taxes
was $71 billion in 2022. They paid $11 billion in taxes and their profit was
approximately $60 billion. The most interesting
thing in this business model is providing things for "free." How is it possible to earn a
profit by providing things for free? There are two reasons behind this. First, these "free" things
are not completely free. The base level products are free, but if you want premium service, you have to pay. This is a common business strategy which is called the Freemium model. Free plus premium. And many companies use this. Spotify, LinkedIn, Zoom,
and now even Twitter uses it. In simple words, the basic
services will be given to you for free, but if you want the Premium service,
you will have to pay for it. Like, Gmail is free to use, but its storage limit is 15 GB. If you want more storage,
you will have to pay. Google Drive is free to use, but its storage limit is 15 GB too. If you want more than that,
you need to pay. Watching videos on YouTube is free. But you will get ads in between. If you want to remove ads,
you will have to pay money. You will have to subscribe
to YouTube Premium. This Freemium model is very successful because it gives you an
opportunity to 'Try Before You Buy.' You can try a product and only if you like it,
should you pay for it. But in Google's case, the interesting thing is that most people do not use their paid services. 95% of people who watch videos on YouTube have not subscribed to
their Premium version. 95% of people who use Gmail or Google Drive do not pay for it. But still, Google earns its majority
revenue from its free services. Here comes our second reason, Data Collection. The more free services we use, the more can Google acess our data. Everything we search on Google, every video we watch on YouTube, every email we send, all of this data is anonymously collected and used for targeted advertising. You must have noticed this too. If you search for a
healthy recipe on YouTube, later when you are on Google
and its partner websites, you will see ads for healthy
tiffin services or nutritionists. If you search for hotels
in Dubai on Google, you will see ads for Dubai tourism, and different tourist attractions in Dubai. Google uses an advanced Machine
Learning Algorithm to show targeted ads. And not just for ads, but even to show normal search results, Google uses a very complex algorithm. When you look up something, which website will be shown
at the top of the search results, and which website will be at the bottom, and how to get your own
website to rank higher, this has become a distinct
branch of science today. It is called SEO,
or Search Engine Optimisation. If you own a business but you do not want to
spend money on paid ads, while still having your business at
the top of the search results organically, then the sponsor of today's
video's will be useful for you. Thatware Thatware is an SEO company that uses more than 1,000 proprietary AI
algorithms and advanced SEO techniques. They will help you rank your
brand at the top of search results so that your business and your brand can become more visible. So that more people visit your website. They offer precise ROI tracking too and give real-time insights so that you can track their results and make informed decisions. Being ranked well in search results is like a lottery for any small business. Because thousands of
new potential customers can visit your website only
through a Google search. So if you are interested, you can visit the thatware.co website. Or you can use the link
in the description below and simply drop your
inquiry on the website. Now, let's get back
to the topic of paid ads to understand Google's Ad Targeting better. What is your age group? Are you a man or a woman? Which country do you live in? Which city do you live in? What do you search about? What do you like? Based on these data,
Google creates a profile for you. And from a different perspective, an advertiser can choose
these as parameters. If you have a small business
selling clothes or glasses. And you want your ad to be
seen by 18-25 year old girls, who live in the NCR region specifically. You can choose these parameters. And then you can
choose some keywords, like sunglasses or sarees. And Google's task here is to match an advertiser with a user. If your age group, region, and
gender matches to the parameters and you search for a word
related to 'sunglasses' on Google or you watch a video
related to it on YouTube, like a review of some sunglass, Google will know that you are the target customer for this ad and Google will show you this ad. This is a simplified explanation, but broadly speaking, this
is how Google Ads work. If we go into a bit more complexity, there is a lot of competition
between advertisers as well. So, there's a bidding to show Ads. Advertisers can decide how much money
they are ready to pay to show their ad. If another company is
willing to pay more, then their ad will be shown first. Google calculates the
Ad Rank to decide this. It decides the rank for each ad. For this, apart from the money the quality of the ad
is also considered. On the other hand, the user Google checks how well the
user matches to each specific ad. Based on whatever they have searched for, how relevant will an advertiser
be for that particular user. And here, there are
different types of ads too. Like Search Ads, when you type something on Google, the ads on top of the search results are called Search Ads. Then there are Banner Ads. When you go to different websites, like a news website, the ads that you see on
the banners on the website are part of the Google Display Network. And then there are Video
Ads shown on YouTube, which are played in the middle,
before or at the end of the video. This is further bifurcated into the
category Skippable and Non-Skippable. If we see the combined revenue
from all these different types of ads, Google's total revenue
from ads is $237 billion. And in 2022, their total
revenue was $280 billion. So, out of the $280 billion, Google earns $237
billion just from these ads. Look at this chart. You can see Google's
annual advertising revenue. You can see nearly
exponential growth here. This revenue has been
increasing for the past 20 years. And in 2020-21, you will see a huge jump. This was due to COVID. Most people were spending
time at home on the internet. More and more ads were being watched. Advertisers were willing to
spend more money on ads. So Google's revenue jumped
so high during that time. But Google is not the only company which relies on targeted advertising for its business. Meta's Facebook and Instagram do the same. In 2023, Meta's annual
advertising revenue was $131 billion. Amazon also makes money
by showing ads like this. You might be thinking, why
would Amazon need to show ads when it is already making money
by selling products on its website? Actually, while selling the products, the purchase history data of
each user that is generated, is more important than the
data collected by Google. Because Google knows only about where your interest lies. When you watch a video on YouTube or search for something on Google search. those are you interests. But Amazon knows which
products you have purchased. You can be more accurately
targeted by these product sales. If they know what are
the things you like to buy, then you be shown the
ads of other similar things. That's why Amazon generated
$46.9 billion in revenue from advertising alone. In the last 20 years, this
single Business Model has helped these companies
dominate the internet. But now, cracks seem to
have appeared in this model. There are two major reasons for this. First, the privacy concerns. People are worried about the extent
of things Google knows about you. What you eat,
where you live, where you work. Even the diseases you suffer from. Because people often search
for such things on Google. What are your relationships? What are the problems
you face in your life? "So I think Google does have more information than Facebook does. I don't know if that's a bad thing. I think that it helps
make the product better." Look at this news from 2023. Google paid a fine of $93 million
to the state of California, USA. because Google was tracking users' location even though users had
turned off their location history. As awareness about privacy
is increasing among people, people are sharing less
information on the internet. And if these websites do not
get more and more information their ad targeting will get worse. And if ad targeting gets bad, advertisers won't want to spend more money which will adversely affect their revenue. But the second problem is even bigger. You must have heard the famous saying "Don't put all your
eggs in one basket." because if that basket falls,
all the eggs will break. This advertising model
will completely fall apart if someday people stop using
Google search for some reason. Already, with time, Google search's reliability
has been on the decline. Earlier, you saw only one ad on the top. But now, if you search for something, the first few top results will be ads. If you are hit by so many ads
when you look up something, then the usefulness of those
search results starts to decrease. And now imagine that if
a competitor comes up, which shows you exactly
what you want to search for, without any ads. A platform like ChatGPT. When you ask ChatGPT any question, you get a direct answer
neatly formatted into paragraphs without any ads. But if you look up the same
question on Google search, you will get a lot of results, which will be full of ads and you won't know the
reliability of different search results, which is reliable,
which is a trustable source, which website should you click on,
and which website should you not. In my opinion, these AI-powered chatbots like ChatGPT will be the biggest threat to
Google's advertising business model in the coming years. Perhaps, Google already knows this. That's why Google is also developing
its own Artificial Intelligence software, like Gemini, as a competitor to ChatGPT. Now, only time will tell whether Google will remain as the face of
the internet for the next 20 years or not. Or whether some other
company gets ahead of it. But one thing is for sure. This competition between
different companies is definitely beneficial for the
consumers, for individuals like us. Because we will get better
services and products. If you want to understand
Artificial Intelligence in detail, I have explained it in this video. You can click here to watch it. Thank you very much!