Google Inc. (NASDAQ:GOOG) has become one of the most influential companies in the world. The company has undertaken different areas of technological ventures that have, in most cases, paid off. It started off as a search engine and from there expanded to become what it is today. Let’s sees how did Google become one of the most powerful stocks in the stock market.
A snapshot of revenue sources for Google.
Google realized the potential of internet advertising long before it became mainstream and that is what made Google a financial giant from a small search engine. Google earns 96 percent of its revenue from advertisements; though this percentage is gradually descending because of the large revenue YouTube (and other businesses) is bringing in for the company.
The advertising revenue flows in through two streams. Every time you search something and visit a page and find an ad placed there, Google charges the advertiser. The other way is letting other companies join the Google network and placing Google branded ads on their websites, pages etc.
The alliance of advertisers with Google is on an on-your-own-will basis, which means there are no formal contracts. Google gives the advertisers free hand to back out any time they want. This makes Google a formidable and easy platform for advertising; this policy attracts more advertisers.
Times are changing for Google now. Although advertising is still the main source of income for the company, but other businesses have also started to contribute. Google’s Android and its gadgets have also made a market for themselves and help the company gather lots of big bucks; its smartphones and tablets may not be as popular as Samsung and Apple’s, but they have found their particular target audience in the market. YouTube, as mentioned earlier, is also paying its major role.
This year, Google received a major boost of 20 percent in its third quarter revenue but the revenue gained from internet advertising fell by 4 percent. Contrary to that, revenue from businesses other than the search engine advertisement grew handsomely.
Google Play app store has also started to contribute to the total revenue of the company. There are billions of android devices that visit the Play Store daily, which became the reason behind the 2 percent growth in the revenue gained from downloads.
However, if we scrutinize Google’s revenue closely, we’ll notice that everything leads to advertisement one way or the other; whether it’s the Google Play store, Gmail or Google Maps; they’re all laced with advertisements.
One of the biggest threats to Google Inc. (NASDAQ:GOOGL) biggest source of revenue is Facebook. More and more advertisers are opting for the social networking giant due to the sheer volume of its daily active users. Although Google’s ad revenue still towers over Facebook, but Facebook is gaining pace. Executives at Google brushed this off and said that Google’s ad revenue has bounced back and forth in the past couple of years. And come to think of it, Google isn’t exactly losing any revenue; it’s just that the dynamics are shifting because of Google’s large involvement in other major operations.
