Google's Advertising Business

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Google's advertising business was an after thought for Google. It was not hatched by the two founders and it was at first doubted by the CEO. But Google mints close to 98% of its money from that advertising business. Google invented a new ad platform and has never looked back since. That revenue stream has allowed it to go for a once in a decade IPO, has allowed it to engage in big and bold experiments. That revenue stream has been Google's lifeblood. That ad platform is as simple as search, or at least simple looking.

Google experimented in the traditional online search ad space and found a fit, a great fit. More recently it has experimented with radio and TV with mixed results. Its most recent push been into mobile. It has worked hard on its mobile OS - Android - so as not to charge for that OS, but to serve even more ads on mobile phones. I am a huge fan of ad supported services. It is more egalitarian than charging. Imagine if Google were to charge a few cents per search. You can't.

Google is a big company that retains the spirit of a startup. It looks hungrily at new spaces. It has laid down most of the groundwork for mobile. Right now it is looking squarely at audio and video for the web medium. It is no revelation that it will look to populate those spaces with its lucrative ads. It is not at all a given that it will succeed as wildly and totally as it has in the traditional web space, but there are few people who doubt it will keep iterating until it finds a good fit.

The benefit for the consumer? Services they traditionally paid for will go free. What's there to complain?

Advertising by Google
Google's risky advertising business| ZDNet May 2007
Google Is an Advertising Company August 2005 For all the speculation that Google’s goal is a “web OS” that supplants Windows as the lowest-common denominator platform for getting on the Internet, and for all the talk that Microsoft (and, in particular, Bill Gates) sees Google as a serious threat to their monopoly-powered golden-egg-laying geese, I just don’t see how Google is building a platform for developers that even vaguely competes with Windows. ....... “Follow the money” is as good a way as any to define a company: the point of business is to profit. This is why Apple is not, and has never been, a software company: their profits come from hardware sales — computers, and, now, iPods. Microsoft is a software company: their profits — billions of dollars every quarter — come almost solely from software. ..... Judged by their profits, Google is an advertising company. They don’t profit from search, they don’t profit from software. They profit by selling ads. ..... Google’s software is just an excuse to show ads. Google’s search results and apps like Gmail serve the same purpose as the editorial content in magazines and newspaper.
Updated: Android's Secret Sauce? Google's Advertising Rev-Share Deals With Carriers March 2010 it is sharing advertising revenues with carrier and handset partners, but clarified that it is limited to search and does not extend to other applications, like YouTube or Maps ..... this is good news for carriers, which have been looking for new revenue sources that could help pay for the next generation of networks that will cost billions. ..... mobile advertising is set to take off. Google has agreed to pay $750 million for the mobile ad network AdMob. ...... give away the operating system and make money on advertising ....... Kyocera, which hasn’t made a smartphone in six years, came out of retirement to make its first Android device, a low-end phone that could easily be free with carrier subsidies. ... Google could ship roughly 22 million phones this year.
AdWords - Wikipedia, the free encyclopedia AdWords is Google's flagship advertising product and main source of revenue. Google's total advertising revenues were USD$21 billion in 2008 ...... The original idea was invented by Bill Gross from Idealab who, in turn, borrowed it from yellow pages.
Google AdWords: A Brief History Of Online Advertising Innovation Google’s search advertising model ...... was iterated, and many of the key concepts were borrowed ..... a few key market-defying decisions, and one stunning insight, made it all work ...... Advertising first appeared on Google.com in January 2000 ..... text ads were sold by a sales rep on a CPM basis. (Yes, that’s right, there was no pay-per-click, no self-serve, no bidding.) ...... based on its initial lack of success with advertising, Google had planned to give its inventory over to DoubleClick, the largest banner ad business of the time....... then the bubble burst in Spring 2000, and the online ad banner market crashed....... Google introduced a self-serve model for buying text ads — they got the idea from GoTo.com ..... October 2000, Google introduced AdWords ... “Have a credit card and 5 minutes? Get your ad on Google today.” ...... In 2001, Google’s ad revenue was on pace to hit $85 million, but was outpaced by Overture (the renamed GoTo), which earned $288 million in ad revenue selling pay-per-click ads on an auction basis....... February 2002, Google introduced a new version of AdWords ....... introduced a breathtaking innovation. ...... introduced clickthrough rate, as a measure of the ad’s relevance, into the ranking algorithm. So if an ad with a lower bid per click got clicked more often, it would rank higher....... a lower bid ad with more clicks generated more revenue than a higher bid ad with fewer clicks....... Google had two moments of pure brilliance. ....first was PageRank.... second was introducing relevance into the pay-per-click auction model...... Google didn’t invent search or auction-based pay-per-click advertising — their innovation was perfecting it...... Nobody at the time thought there was anything wrong with Overture’s model — it was making lots of money...... Nobody at the time thought search was a business

Google Predicts Mobile Ad Surge as AdMob Deal Closes , giving the search giant pole position in the emerging wireless advertising space..... the FTC commissioners unanimously voted to close the investigation. ...... its innovation in new ad formats, such as units placed within third-party applications. .... search remains the order of the day for mobile marketers. ..... In the past two years, Google has seen a more than fivefold increase in its mobile search queries, and it's only picking up steam ..... Innovations such as the click-to-call feature found in many mobile search ads make the format more compelling for users, who often use their smartphones to search for local businesses while on the go. ...... as smartphones take on more of the functions of notebooks and desktops ...... mobile ad revenues will eventually eclipse ad sales from the traditional Web on the company's balance sheet.
How Much Is Google Worth to N.Y.? Company Says $6 Billion New York the second-biggest state for Google-driven economic activity, trailing only California, where the company estimates it generated $14 billion in 2009. .... “for every dollar [spent] on Google advertising, an advertiser earns back $2.” ..... the clicks on free searches for businesses in the state, which Google computes are 70% as valuable as clicks on paid search ads. .... the evolution of the “I Love New York” tourism campaign. Five years ago, he said, the state’s effort to lure tourists relied primarily on a toll-free number and brochures. ..... Since adopting AdWords as the cornerstone of its digital presence, the tourism campaign netted 17% of its online traffic through the Google program last year. Davidson credited some $50 million in additional tourism revenue to Google.
Google says it helps generate $54 billion for businesses and nonprofits‎ Google is emphasizing its role in creating jobs and economic development to counter a growing perception on Capitol Hill that it abuses its dominant position in online advertising. ...... "Google is rolling out a marketing campaign to get people to look at them in a more balanced and positive way so they don't get pounded by politicians." .... businesses get five clicks on their search results for every one click on their ads. Based on that, the company calculates that businesses get $8 in profit for every $1 they spend on AdWords.
Google Says It Generates $54 Billion for U.S. Economy The Internet’s share of overall advertising spending is forecast to rise to 17 percent in 2012 from 13 percent last year

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