How Google Makes Money

Almost all its money (99 per cent) comes from advertising.

When Larry page and Sergey Brin first developed their search engine, the plan was to make money by licensing it. But that soon seemed like a slow and expensive proposition. So, in the first quarter of 2000, Google introduced its first advertising programme called AdWords, which allowed advertisers to place their ads alongside search results. Except that these weren't called advertisements, but "sponsored links" and appeared separately on the right side of the search page, demarcated by a line. Initially, AdWords advertisers paid Google based on the number of times their ads showed up alongside the search results (called cost-per- impression). But in the first quarter of 2002, it started charging advertisers per click (the advertiser paid only if somebody clicked on the ad). In the second quarter of 2005, Google launched AdSense, which extended Google and the advertiser's reach to other (but specified) internet sites that used Google search. Here's how it works: Say, you are a marriage counselling website, and one of your visitors runs a search (using Google search on your webpage) for a divorce lawyer. The law firms whose ads show up as sponsored links will pay Google, which in turn will split some revenue with the website. For the nine months ended September 30, 2005, Google pulled in $4.16 billion (Rs 18,720 crore) in advertising revenues, of which $1.88 billion (Rs 8,460 crore) came from "Google Network" websites. So, primarily, Google's money-making trick is still the same: translate search results into ads, be it on its own sites or some affiliates. In the short term, Google needn't worry about search slowing down, but eventually the number of people searching for stuff on the internet will hit a ceiling-at least, the numbers will slow. Google, then, will need to make money doing other things. The bet on Wall Street is that by then, Google would have more than figured out what things.