Ask someone what Google is. Most likely, they will reply that Google is a search engine company. But a more accurate explanation is that it is an advertising company because a vast majority of its revenue comes from advertising. Here’s what we mean by that.
1) Google founders’ mission
Ironically, in the early stages, Google founders were opposed to advertising and did not intend to make a profit through biased results. That is to say, their initial plan for Google’s search engine was to stay in the academic realm. Hence, its PageRank algorithm was more accurate than all the then existing search engines that did not keep their results separate from organic results in a way that users could see which of them were organic and which of them paid. Google founders aimed at all these aspects of search engines in the early days. However, eventually, Google started using advertisements in their search engine. In the initial vision outlined by Page and Brin, advertisements were an indication of failure. But today advertisements represent the overwhelming majority of its revenue.
2) Google’s search engine results
Google separates the search results into paid results and organic results. The paid results come first in the ranking list, which is then proceeded by the organic results. By segregating the results in this manner, Google aims for an above-average click rate. This means that Google hopes for people to click on the sponsored links more often than organic results. In other words, Google wants people to place their trust in the advertisements as representing more relevant or useful answers than the search results. Today, the company generates revenue when people click on advertisements, not when they find answers to their queries as was earlier intended by the founders. Hence, Google derives the vast majority of its revenue from advertising.
3) Google’s advertising ventures
Mainly, Google has 2 advertising ventures. Firstly, is Google properties, which is a service for hosting advertisements built into its products and the most significant part is AdWords. Secondly is Google network members, a service that runs advertisements on websites, the most significant part being AdSense. Together, AdWords and AdSense reinforce their joint dominance in the digital advertising space with different impacts.
4) Google’s revenue generation
Advertising is very embedded in Google’s search engine. As a result, the revenue from advertising financially supports Alphabet, the holding company of Google. It generates all of its revenue from Google, a major part of which comes from AdWords and AdSense. The remaining comes from smaller ventures such as Google-branded hardware, media content, and apps in the Google Play store. Although these ventures are covered frequently in the press they do not contribute to the company’s financial success as much as AdWords and AdSense. Many of the enterprises of Alphabet make significant losses and do not meet the threshold to qualify as profitable. Instead, it is Google’s advertising revenue that supports these ventures. And Goole invests a vast majority of this revenue in the other smaller ventures.
5) Google’s data-collection
User interaction measurements with search results and cookies allow Google to capture latent information from existing individual behaviors. These methods of tracking the behavior of web users can personalize advertising. When Google puts to use its enormous data collection, online advertising becomes extremely effective. This way, defining Google as an advertising firm reconfigures its search engine as a tool that captures useful information through mutual consent. Many of Alphabet’s ventures that might seem very separate from the core business of Google serve a major role in data-collection or advertising opportunities.
Google’s advertising model is having a dramatically widespread effect on the operations of various economic models. It impacts the digital information ecology and its culture extensively. A major part of Google’s agenda is to open up profitable ventures through advertising revenue. This has come to underlie the web landscape and infrastructure needed for the Internet. If we allow Google to dictate the web infrastructure, those benefits will have to conform to the limitations set by Google. Given the widespread effect of the Google advertising model, such global expansion may only solidify the current boundaries of the web.
Graham, R. Google and advertising: digital capitalism in the context of Post-Fordism, the reification of language, and the rise of fake news. Palgrave Commun 3, 45 (2017)