Google (Alphabet’s) Revenue Generation – Google, the search engine giant, is one of the most profitable and influential companies in the world. But how does Google make money? And what are its main sources of revenue?
The answer is not as simple as it may seem. Google is actually a subsidiary of Alphabet, a holding company that owns and operates various businesses and initiatives under the Google brand and beyond. Alphabet was created in 2015 to separate Google’s core internet services from its other ventures, such as self-driving cars, health care, and moonshots.
According to Alphabet’s annual report, the company generated $182.5 billion in revenue and $40.2 billion in net income in 2020. The majority of its revenue came from two segments: Google Services and Google Cloud. Let’s take a closer look at each of these segments and how they contribute to Alphabet’s bottom line.
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Google Services is the largest and most profitable segment of Alphabet, accounting for $168.6 billion or 92% of its total revenue in 2020. This segment includes Google’s core products and platforms, such as:
- Search: Google’s flagship product that allows users to find information on the web. Google dominates the global search market with over 90% share. Google makes money from search by displaying ads on its search results pages and on its partner websites through its advertising network.
- YouTube: The world’s largest online video platform that allows users to upload, watch, share, and monetize videos. YouTube has over 2 billion monthly active users and generates revenue from ads, subscriptions, and other services.
- Gmail: The most popular email service in the world with over 1.8 billion users. Gmail is part of Google’s suite of productivity and collaboration tools, such as Google Drive, Docs, Sheets, Slides, Calendar, Meet, and Chat. Gmail makes money from ads and premium features for business and education customers.
- Google Play: The official app store for Android devices that offers apps, games, books, movies, music, and more. Google Play has over 2.5 billion monthly active users and generates revenue from app sales, in-app purchases, subscriptions, and ads.
- Google Maps: The leading online mapping service that provides directions, navigation, traffic, transit, and other information. Google Maps has over 1 billion monthly active users and makes money from ads, commissions, fees, and licensing.
- Google Photos: The cloud-based photo and video storage and sharing service that offers unlimited free storage for high-quality photos and videos. Google Photos has over 1 billion monthly active users and makes money from subscriptions for extra storage and printing services.
- Google Hardware: The division that develops and sells consumer hardware devices, such as Pixel phones, Nest smart home products, Chromebooks, Chromecast, Stadia gaming platform, Fitbit wearables, and more. Google Hardware makes money from device sales and related services.
Google Cloud is the second-largest segment of Alphabet, accounting for $13 billion or 7% of its total revenue in 2020. This segment includes Google’s cloud computing, data analytics, artificial intelligence (AI), machine learning (ML), and enterprise solutions, such as:
Google Cloud Platform (GCP)
The infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) offering provides computing, storage, networking, database, security, and other cloud services to businesses of all sizes. GCP competes with other cloud providers like Amazon Web Services (AWS) and Microsoft Azure.
The cloud-based software-as-a-service (SaaS) offering provides productivity and collaboration tools for businesses, such as Gmail, Drive, Docs, Sheets, Slides, Calendar, Meet, Chat, and more. Google Workspace competes with other SaaS providers like Microsoft Office 365 and Zoom.
Google Cloud AI/ML
The portfolio of AI/ML products and services that enable businesses to build intelligent applications using Google’s technology and expertise. This includes AutoML, Dialogflow, Natural Language API, Speech-to-Text API, Text-to-Speech API, Translation API, Vision API, Video AI, Recommendations AI, Vertex AI, Explainable AI, TensorFlow Enterprise, Cloud GPUs, Cloud TPUs, Deep Learning VM Image, Deep Learning Containers, Contact Center AI, Document AI, etc.
The customized solutions address the specific needs and challenges of various industries, such as retail, consumer packaged goods, financial services, healthcare and life sciences, media and entertainment, telecommunications, gaming, manufacturing, supply chain and logistics, government, education, etc.
Other Bets is the smallest and least profitable segment of Alphabet, accounting for $657 million or 0.4% of its total revenue in 2020. This segment includes Alphabet’s non-Google businesses and initiatives that are in the early stages of development or have long-term goals, such as:
- Verily: The life sciences and healthcare company that focuses on research, development, and innovation in areas like biotechnology, digital health, clinical research, and population health.
- Waymo: The self-driving technology company that aims to make autonomous vehicles safe, accessible, and convenient for everyone.
- Loon: The network of high-altitude balloons that provides internet connectivity to rural and remote areas around the world.
- Wing: The drone delivery service that delivers goods like food, medicine, and other items to customers in minutes.
- X: The moonshot factory that pursues radical solutions to big problems using breakthrough technology and science.
- GV: The venture capital arm of Alphabet that invests in startups across various sectors and stages.
- CapitalG: The growth equity fund of Alphabet that invests in later-stage companies with proven business models and strong growth potential.
- Google Fiber: The broadband internet and cable television service that offers gigabit-speed internet and TV packages to select cities in the US.
In conclusion, Google (Alphabet) makes money from a diverse range of products and services that cater to billions of users and customers around the world. The company’s main sources of revenue are advertising and cloud, which together account for 99% of its total revenue. However, the company also invests in other bets that have the potential to disrupt various industries and create new opportunities for growth and innovation.
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