How Much Is Google Worth And How Do They Make Their Money?

Google is an American multinational technology company with a focus on information technology, the internet, and software services. It has always been counted among the world’s most valuable company with a market capitalization of $500 billion as of 2016. Google has twice become the world’s most valuable company, but their reign was only short-lived after being quickly overtaken by their biggest competitor, Apple.

Per Forbes’ 2016 analysis, the Google brand is valued at $82.5 billion against Apple’s brand value of $154.1 billion. Also, Google’s revenue reached $68.5 billion. Google ranks among the world’s best companies to work for. In January 2020, the company attained $1 trillion in value, inking its name in history as the fourth tech company to reach the milestone after Apple, Amazon, and Microsoft.

Google Is Worth Over $1 Trillion: A Look at How Its Value Grew Over the Years

Founded in 1996 by two Stanford Ph.D. students (Larry Page and Sergey Brin) as part of their research project, the search engine originally named “BackRub” employed the use of backlinks and page numbers to rank results rather than the conventional method of ranking by the number of the search word’s appearance on a page. Google’s domain name was registered in 1987 while the company became incorporated in 1998.

Google started in the garage of a certain Susan Wojcicki, another Ph.D. student at Stanford and friend of Larry and Sergey. In 1998, Google received initial funding estimated between $300,000 and $750,000 from three angel investors including Amazon’s Jeff Bezos. However, in 1999 when Larry and Sergey noticed that running the company was eating into their study time, they offered Google for sale at the price of $1 million to Excite — one of the leading internet brands at the time. Fortunately for them, Excite’s CEO George Bell rejected the offer. Excite has since folded up.

Larry and Sergey decided to keep up with the company’s run. In August 2004, Google launched its IPO, offering 19,605,052 shares at $85 each. This saw their market cap reach $23 billion. In 2015, Google reorganized its numerous parts into a conglomerate name Alphabet Inc. Under the new conglomerate, Google businesses such as search, ads, maps, apps, YouTube, and Android are run separately from others like its investing arm (Google Ventures and Google Capital) as well as its incubator project Google X.

2015 came and Google’s (Alphabet Inc) market cap stands at over $500 billion, making it the 2nd most valuable company in the world at the time. Roughly 5 years later, its value climbed to an astonishing $1 trillion.

When I joined Google, we had just raised money at a $100M valuation. So proud to see it hit the storied $1T market cap today! #10000x pic.twitter.com/Z0C9ZgSwUS

— marissamayer (@marissamayer) January 13, 2020

Google Generates Over 80 Percent of Its Revenue Through Ads

Google has enjoyed rapid and exponential growth since its incorporation in 1998. Its innovative “PageRank” technology of ranking websites took the world by storm and today, the word Google has evolved from being just a search engine company that started in a garage to a VERB. Like most of us have said at some point, “Just Google it…”.

To think that Larry Page and Sergey Brin nearly sold it in 1999, what a shame it would have been. Anyway, the company has made most of its money from ads and that has been a major factor driving-up its value.

AdWords and AdSense are Its Major Advertising Platforms

Google makes the bulk of its money from advertising. As the company’s annual report once stated: “We generate revenue primarily by delivering relevant, cost-effective online advertising.”

Companies and brands are in constant competition to get their products known to the world and Google developed a platform where billions assemble daily. Over 1 billion people make use of the internet every day and almost all conduct their research via the Google search engine.

While over $80 percent of Google’s annual revenue comes from advertising, most of it is generated from Google AdWord and Google AdSense.

How Google Ads (Formerly Adwords) and AdSense Works

AdWord offers two basic services; pay-per-click (PPC) and cost-per-acquisition (CPA) advertising. On this service, business owners have their website/contact displayed to potential customers when they search for a related keyword.

AdSense, on the other hand, generates revenue through a pay-per-impression or pay-per-click basis. The program specializes in placing a banner advertisement on a website. Website owners use this to benefit from a share of the revenue paid to Google by brands who requested such advertisements. Over 14 million websites make use of AdSense.

Admob and Other Ads Avenues Through Which Google Makes Money

Every product and service that Google is involved with are directly or indirectly targeted at the primary aim of making money from advertising. This is the case for other Google businesses like Google Display, Google Mobile programs, Google Local, Google Maps, Apps, YouTube, Android Chrome browser, and Chrome OS.

For instance, though Andriod is free, Google makes money from it via the ads it displays thereof, search traffic, and a percentage of every app sale on its play store. With Admob, advertisers can sign up to have their ads displayed on apps. AdSense is what Admob is for add developers as it enables them to make money from their apps.

YouTube and YouTube Premium

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Google has expanded their products and services over the years by making potentially lucrative acquisitions and mergers. Like the $1.65 billion acquisition of YouTube in 2006, a year after its launch.

Now regarded as the second largest search engine after Google, the video-sharing platform has become a significant source of revenue for the company. It was estimated in 2019 that google generated 9.4 percent of its total revenue from the platform; this amounts to over $15 billion.

The company makes money from YouTube by offering advertisers the chance to place their ads on frequently-watched videos that are related to their products and services. As it is with AdSense, Google shares the revenue with people that uploaded the videos based on the number of views their content generates.

YouTube Premium offers its users an ad-free experience, so Google makes money when people pay $12 per month to subscribe for it.

Sales of Its Smart Home (Google Nest) and Hardware Products

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Google also earns by selling products like Chromecast, Chromebook, Google Glass, and more. From the money generated from its advertising space, Google has been able to fund and explore new business models. These include Calico, Nest, and Fiber.

Under the company’s Nest brand, it offers a wide array of products that range from smoke detectors to smart speakers, routers, cameras, smart doorbells, thermostats, and what have you.

Google’s hardware operations began to surge in 2010. Some of its popular hardware products include the Google Pixel smartphone, Daydream View virtual reality headset, Wi-Fi mesh wireless router, Android TV, and much more.

Google Shopping

For years, Google has been striving to get a piece of the eCommerce industry. This is hardly a surprise considering how Amazone has been faring thereof. This is surely one of the reasons that inspired the company’s Buy on Google platform.

Through the platform, retailers get to sell their products directly on Google and they are not required to pay any commission fees. While Buy on Google allows people to sell their products without paying commission fees to the company, it is not the case for Google Shopping.

Google Shopping operated a “pay-to-play” model that requires people to pay the company for their products to be listed. What Google Shopping cost depends on the visibility a retailer wants his or her products to get.