Google Business Model 2023

Business Model Insights

© Murat Uenlue | DigitalBizModels.com

Google Business Model 2023

Business Overview

“Our mission is to organise the world’s information and make it universally accessible
and useful.” ~ Google

As of July 2023, Google holds a market share of over 90% in online search. Even the
closest competitor Bing is degraded to only 3% market share. Most Google Search is
composed of keyword search which allows for digital ads to be displayed that provide
better returns on investment than traditional ad formats. Google’s main revenues
come from selling advertisement inventory to businesses on an auction-basis. The
inventory (made of digital screen space and targetable user characteristics) is
dynamically generated every time a user enters search keywords and results are
displayed.

A lot of the targetable characteristics are already in the search keywords themselves. A
user “googling” mortgage-related terms is far more likely to be open to be displayed
loan products than someone watching a soap opera on TV.

Google connects those seeking information with those providing the information that
is being sought. Search results are composed of organic results and paid results
placements. Paid placements are ads of various formats and are Google’s main
revenue source. Connecting information seekers with providers of relevant
information makes Google a platform business model.

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How does Google make money?

In FY22 Google (more accurately Alphabet, their parent company) made revenues of
$283b which were composed of:

​ 79% advertising revenues;

​ 10% are made of YouTube subscriptions, hardware sales (e.g. Pixel), and Google
Play (their app store);

​ 9% on Google Cloud;

​ 2% other bets and financial gains.

While the “other bets” category is small in terms of revenue, there are countless
smaller and larger bets which at some stage may grow to something. Some of their
biggest bets pertain to Waymo, quantum computing, AI, Wing (drone delivery) and
even medical (Calico).

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Who are Google’s main competitors?

On Search, Google’s biggest direct competitors are Bing and Yahoo. The biggest
competitor in digital advertising is Meta (the parent company of Facebook, Instagram,
WhatsApp) and Amazon. But of course, the list of competitors is very large. Take Apple
Maps which is competing in the maps ad space and who recently announced to enter
search. In addition, many platforms have announced plans for ad products, such as
Uber Advertising (here the video link), Airbnb foreshadowing an ad product and
Netflix’ ad layer. These are just a few emerging examples of many.

Then there are many other competitors for their other endeavours, such as Netflix
being the competitor for YouTube and AWS as a competitor for Google Cloud.

In addition there are strategic layers of competition. The most important example is
Apple’s iOS which is competing with Google’s Android OS / Chrome OS and making
tracking of users more difficult with an increasing focus on privacy eroding at least
some of Google’s targeting capabilities. Hence, as iPhone market share increases,
some of Google’s search revenue could be affected (not to mention boosting Apple’s
own search ad base).

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Overview

This article is structured in line with the elements of the business model canvas:

​ Value Propositions
​ Revenue
​ Key Partners
​ Key Assets & Resources
​ Key Activities
​ Channels
​ Customer Relationships
​ Customer Segments
​ Cost Structure

© Murat Uenlue | DigitalBizModels.com

Sources

Our key sources for the business model canvas and this article are:

● Investor updates, including annual reports, quarterly reports

● Investor press releases

● Press News

● 3rd party data, e.g. Similarweb, TechCrunch, Entrepreneur and other insights
portals

We are highlighting direct quotes from these sources in “blue italics”

Check out the full article:

https://www.digitalbizmodels.com/blog/google-business-model

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Value Propositions

Google is a multi-sided platform. It makes sense to distinguish among (at least) the
following three types of participants:

1. Search Users

2. Website Owners such as brands, businesses, media/news, influencers, VIPs,

etc

3. Advertisers are the subset of website owners that pay for ads. Note that many
website owners do not run ads. From a Google revenue perspective that’s
obviously a big distinction that we need to take into account

As a platform business model, Google needs to provide value to these participant

types.

(1) Value propositions for search users:

● Find/access information & solutions to problems: Users are trying to access

information that they could otherwise not access. Often this is triggered by a
problem that users are trying to solve (e.g. deciding on something, filling a
knowledge gap, etc)

● Lower search costs/efforts: Even where users could find the info they are
looking for, search platforms provide access to it more conveniently and faster
than traditional methods

● And more, e.g. accessing information in most life situations, on the phone
within a moment, etc. Things like preview snippets, etc have accelerated this
further.

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(2) VP for website owners:

● Access to audience: access to incremental audience

● Well-matched traffic: platforms will aim to match businesses with the best
suited traffic and that’s what most website’s are after

● Insights Free analytics tool Google Analytics and opportunity to increase

rankings

● Income: many website owners decide to participate as display network

partners (via AdSense) and generate income based on impressions and clicks

(3) VP for advertisers:

● Supply of new targetable advertising spaces: Google creates ad spaces on the

screens of users who they can target better than traditional methods

● Better advertising ROI/ROAS and/or avoiding losing customers: often digital

advertising should yield better returns on advertising investment. But even
where this may not be the case, businesses may be forced to participate
where their competition does so, in order to avoid losing customers

● Low barriers to entry and exit + scalability: advertisers can advertise at

lowest cost with no overhead cost of creating campaigns, etc which allows low
small and medium sized companies, even individuals (sole traders,
micro-entrepreneurs) to participate and scale as they grow

Learn more about the value propositions of digital business models here.

© Murat Uenlue | DigitalBizModels.com

Revenue

In the Financial Year ending 31/Dec/22 Google’s total revenues were $283b. These
were composed of:

​ Google Services:

​ Google advertising:

​ Google Search & other $162b

​ YouTube ads $29b

​ Google Network $33b

​ Google advertising (total) $224b

​ Google other* $29b

​ Google Services (total) $254b (ads plus other)

​ Google Cloud $26b

​ Other bets $1b

​ Hedging $2b

​ Total revenues $283b

* Includes YouTube non-advertising revenues (i.e. subscriptions), hardware sales (e.g.

Pixel), and Google Play (their app store).

With this Google is diversifying away from advertising revenue only. And while it may
not be quite where they would love to have it yet (given 79% is still ad revenue), it is
also much further from where Meta is with their 98% reliance on ad revenues.

Learn more about revenue generation in digital business models here.

© Murat Uenlue | DigitalBizModels.com

Key Partners

Google’s business model is one of the difficult cases where one can come to different
conclusions about who is the supply side and who the customer.

From a revenue perspective, the users are the supply side as they supply the ad spaces
with defined targetability characteristics. One could decide to add users to the key
partners side. But, unlike in the case of Social Media, ordinary users have a more
passive role as they dont create content, hence we’re not seeing a big case to add
them to the supply side.

The truth is that the business model canvas is quite a limited tool and certainly not
well-suited to describe search platforms (we do have similar problems with social
media platforms).

With that we have

● Website owners: Based on the above website owners are the (deliberately or
not) key partners as they are creating the content that is being sought after.
This can include many different types, such as: Brands, Businesses,
Influencers, VIPs, Media/News, Blogs, Creators and many more

● Ad display partners: Owners of digital properties who choose to display ads,

e.g. websites using AdSense or apps (using AdMob)

● Ad distribution partners: e.g. browser providers, mobile carriers, original

equipment manufacturers, and software developers

Learn more about key partners in digital business models here.

© Murat Uenlue | DigitalBizModels.com

Digital Business Models: 11 Verticals of Disruption

Digital Tech Vertical Examples covered

Asset & Service Sharing Uber, Airbnb, Lime, WeWork
Social & Communication Facebook/Meta
Search & Vertical Search Google, Zillow, AirDNA, Rome2rio
eCommerce Amazon, Etsy, Wayfair
Content & Media Netflix, YouTube, Spotify, Apple News+
Online Travel &, Dining Booking.com, Expedia, TripAdvisor, Yelp
Software-as-a-Service Slack, ClickUp, MS Teams
HW / SW tech platforms Apple, Microsoft Google
Fintech Paypal, Afterpay, Kiva, LendingClub
Digital Health Tech Doximity, Conversa, Ro
Education Technology Udemy, Coursera, Moodle, StudentVIP

⇒ Learn more here

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Key Activities

Key business model activities pertaining to the value propositions of Google Search
are:

● Data capture via Crawling: The search process starts well before any users
types a search query and it never stops. Google’s algorithms constantly crawl
the internet by following links

● Data organisation via indexing: Each page is being indexed for the words it
contains (like the index of a book but for all words), analysed for numerous
signals and organised in a search index. Google uses >200 signals with a
combination of on- and off-page factors

● Discovery & match: The key activity that Google performs is to match what it
considers to be the best result to any given search. This is a big feat due to the
billions of pages (estimated ~8b, on around 1.6-1.9b web sites with 400m
active ones) available online and trillions of searches per year and the
permutations across both. It happens through a “whole bunch of algorithms”
(Google). Have a look at the infographics below that explain the steps involved
(on a high level)

● Presentation: Google no longer has a flat list of results. It uses different forms
of search result presentation. For starters, it ranks the results with what it
considers to be the most relevant result at the top. They are now delivering
different presentation elements depending with the interpreted search intent

Learn more about key activities in digital business models here.

© Murat Uenlue | DigitalBizModels.com

© Murat Uenlue | DigitalBizModels.com
Key Assets & Resources

● Technology: Google has many layers of technology, starting from

hardware/server infrastructure, many layers of (distributed) software as well
as network infrastructure and more

● Algorithms: It’s been their algorithms that made Google big. Their original
PageRank algorithm has dramatically evolved over time and takes over 200
signals into account when ranking search results. In addition they have many
algorithms that work together to provide the different value propositions. This
continuously-evolving asset is part of their critical intellectual property

● Content/information: in particular the websites they crawl and the internal

representation thereof for the purposes of search results delivery. This also
includes data & content published on the internet (collected via crawling
and/or data scraping), such as shopping data; Then there is data from external
sources & databases, e.g. flight, hotel data, etc

● Data: Google collects a lot of data, such as usage data on the platform, usage
data off-platform (tracking), user profile/personal data, user-generated
content (e.g. mails, reviews, documents) and a lot more. This kind of data
helps with making ads more efficient as well as providing personalisation

● The Google brand is synonymous with search. The term “Googling” has
become synonymous with searching for something on the internet and has
found its way into dictionaries. In the renowned Interbrand brand ranking,
they have been ranking in the top-5 for many years in a row

It is clear that we are focussing only on the basics of Google Search here. A wider
review of their products would fill many books.

Learn more about key assets & resources in digital business models here.

© Murat Uenlue | DigitalBizModels.com

Google Business Model on A Page (B-MAP)

We have used the Biz Model Canvas

for many years. But we have
realised that it’s been developed for
any sort of company (esp traditional
ones). It is simply not well tailored
to describe digital business models.

That is why we developed the

Business Model on a Page (B-MAP):
to explain in crystal clarity the
business models of digital firms.

Check out the Google Business

Model on a Page (B-MAP) + a
15-minute walk through video with
explanations.

⇒ Our most-affordable offer for any income level in any country

⇒ Grasp a business model within 30 minutes

⇒ Learn more here

© Murat Uenlue | DigitalBizModels.com

Channels

As per our discussions above Google needs to treat the three key participant types (1)
Search users; (2) Website owners; (3) Advertisers as customers to which channels have
to be established.

A majority of Google’s channels pertain to the most diverse and by-far largest
participant type: Search Users

(1) Channels for search users

Google’s key value delivery channels are:

● Web browsers & their URL fields which in most browsers directly trigger a
search unless a valid URL has been entered. This was not the case in the early
days

● Being the default search engine: For most people and browsers, Google is the
default search engine. In combination with the above (the URL field), it
triggers trillions of searches annually

● Android OS, Chrome OS / browser, Maps, etc: Google gives users many free
tools which trigger search activities (and data capture) or have Google Search
set as default (e.g. Android/Chrome OS)

User acquisition channels are:

● Word-of-mouth: “Googling” says it all

● Free Chrome browser: Google copied the playbook of Netscape but with
more long-lasting success to give out the browser for free (which at the time
was by far the fastest) and use Google as the default search engine

● Free Android OS / Chrome OS: these are free to licence for mobile phone
manufacturers who dont want to go through the complex task of developing

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an OS. The free licence comes with the obligation to pre-install some of
Google’s tools (further some cannot be uninstalled)

(2) Channels for Website owners

● The most important channel between Google and website owners is Google
Analytics: a free tool that, however, requires website owners to install a
tracking code on their website which will give Google deep insights into the
users of their website. It will also give Google massive amounts of data for
ranking websites as well as improving their ranking algorithms over time. This
data and their market dominance in the install base of tracking code is a huge
competitive advantage

● Google has also AdSense for those websites and apps that are willing to
display ads (mostly the good old banner ads that you know). This is a key part
of Google’s display network and a major driver of the associated revenue that
we have seen

(3) Channels for Advertisers

● The main channel is Google Ads: a portal through which advertisers can
set-up the simplest to the most complex ad campaigns. It can also be
connected with Google Analytics for a closed-loop AI-optimised process to get
the best return on ad investment

● All display areas: such as search results, websites, apps and other digital
properties

Learn more about the channels of digital business models here.

© Murat Uenlue | DigitalBizModels.com

Customer Relationships

From the perspective of the business model canvas methodology, all relationships are
self-serving.

But this is not sufficient to characterise customer relationships. We are looking at

customer relationships from the perspective of underlying human needs underpinning
the actual value propositions. And we have to do this for the key participant types of
the multi-sided platform (1) search users, (2) website owners and (3) advertisers.

(1) For search users:

● Empowerment: Google helps accessing valuable information that was

inaccessible to many and does so at a pace simply unimaginable previously.
With that “Googling” has become synonymous with obtaining information or
knowledge (though of course the actual knowledge is on the destination
websites that are not owned by Google). In addition, Google is free (including
browser) despite empowering characteristics

● Reliability: avoiding platform manipulation is very important as it will

otherwise lead to bad search results and impact customer retention. Worse
yet, if scam and fraud pages rank high, this would reflect even more poorly on
Google. Avoiding platform manipulation was the primary focus of all major
Google updates until the mid-2010s and instrumental to their success

● Privacy has become an important topic and could deter users. Google
provides large amounts of control over privacy settings for those that care
about it

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(2) For website owners:

● Opportunity: Being able to reach an unprecedented number of website

visitors directly has opened opportunities to many website owners. And while
technically speaking this opportunity was provided by the internet itself,
Google channelled internet traffic and helped those that successfully ranked
high to grab this opportunity. The prospect of being able to benefit from this
opportunity is the most defining characteristic between website owners and
Google even though it did not materialise for many (as is the case for the
supply side on most platforms and marketplaces)

(3) For advertisers:

● Empowerment: even the smallest business can now start with digital
advertising within half a day even if they have never done it before. But the
advertising tools are suited from the smallest to the largest firms with a very
extensive and automatable feature set, many different ad formats across
many displays

● Self-serving: Google Ads are self-serving for advertising of all sizes. Many
businesses will still use agencies, esp for the overall campaign aspects but can
also do everything in-house if they wish to do so

Learn more about the customer relationships of digital business models here.

© Murat Uenlue | DigitalBizModels.com

What’s new in Google’s Business Model?

Check out the latest on Google’s Business Model, Q3 2023 investor update

Check out the latest on Google’s Business Model, Q2 2023 investor update

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Customer Segments

(1) Search users:

● The most important aspect of segmenting users is for the purposes of

providing the best targetability for their advertising customers. Beyond
keywords, Google offers many other way of targeting user segments:
Geographic, geo-demographic, interest are some of the most important
dimensions by which Google provides targetable user segments to advertisers

● Behaviour, Technology: For their internal purposes, Google will segment users
by factors like device type, by used browser, screen sizes, user behaviour, etc.
This type of segmentation is the optimisation of their value propositions, e.g.
to not lose mobile phone users to other forms of accessing the internet

● Geo-demographic segmentation also plays a role in their growth planning and

marketing efforts

(2) Website owners:

● By vertical: Which search vertical does it cover (there can be hundreds:

financial, medical, legal, travel, product/industry, etc with thousands of
subverticals)

● Keyword clusters: Which keyword clusters (and actual keywords therein) do

the respective pages aim to serve

● Type of page: commercial / non-commercials, education, news, blog, brand,

creative / artist, etc

● Traffic size/sources: distinguishes between smaller and larger pages in terms

of daily/monthly/annual website visitors. Add to this the mix of traffic sources

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(3) Advertisers:

● Some of the most important advertiser segmentation factors are geography,

industry and company size

● Other segmentation factors are by the types of ad formats, campaign types,

advertising tools used and other technical usage factors

● Segmentation factors shown under website owner: advertisers will do better

in the ad space auctioning mechanism when there is better alignment
between their ads and their website (called quality factor)

Learn more about the customer segments of digital business models here.

© Murat Uenlue | DigitalBizModels.com

Crucial Concepts in Digital Technology

Social Networks and Search

Engines, like Google,
Facebook, Twitter and
Pinterest are some of the
best examples to
understand the crucial
business management
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Instead of explaining these crucial concepts in theory, we are using Social Media &
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You will not find the ideas explained in this top-consultancy &
elite university grade book elsewhere in the open market.

Learn more & download a free 30-page excerpt here

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Cost Structure

The cost structure looks similar to other tech players. The biggest difference are Traffic
Acquisition Cost (TAC) which are part of the direct cost and therefore captured in the
cost of revenue.

● Cost of Revenues (45% of revenue FY22):

○ Traffic Acquisition Cost (TAC) includes: “[1] Amounts paid to our

distribution partners who make available our search access points and
services. Our distribution partners include browser providers, mobile
carriers, original equipment manufacturers, and software developers.
[2] Amounts paid to Google Network partners primarily for ads
displayed on their properties.”

○ TAC was $49b = 17% of revenue and other costs of revenue were $77b
= 28% of revenue in FY22

○ Other content costs, such as licencing of video content, etc

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○ Direct cost in relation to data centres and other operating costs as well
as depreciation, among others

● R&D costs (14% of revenue FY22)

● Sales and marketing (9% of revenue FY22)

● General & Admin (6% of revenue FY22)

Beyond that the biggest difference is that Google has been profitable for many years
(which seems to be worth calling out these days in the tech space).

Learn more about the cost structures of digital business models here.

© Murat Uenlue | DigitalBizModels.com

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