Friday, January 16, 2009

How Google makes money

Google blogoscoped has put together a very interesting list of how Google makes money from paid members, Adwords and Affiliate links on its many different websites. What is most fascinating is the large number of sites that uses neither.

It would be very interesting to get an understanding of the processes at Google when they decide which products and services to charge for and what business models to use. Given that they have so many different services, value propositions and business models, and the fact that users of free services build loyalty to and also visit other paid for or ad-financed websites, makes it very complex. No company in the world can have so much user data as Google, knowing exactly how one service builds traffic for another and what the habits of its users are. If anyone knows more about this please let me know.

Loyal and happy users is a very strong control mechanism and providing many of its services for free without any advertising Google is surely making users happy.


  1. An interesting summary indeed, if not else to get an overview of sheer volume of Google's product, they have a lot of things going on!

    For some insight on other ways they are aiming to make money on their products take a look at this slideshare preso (Some pretty bold statements but interesting none the less)

    I agree that sitting in on a couple of the Google Product Portfolio Steering Group meetings would be interesting but I wouldn't count on them being so rational and goal oriented in all of their decisions. I would think many of their services have been largely about "blindly" getting users not unlike most other internet startup just trying to create anything that people will spend their precious time in front of. The difference of course being that Google already has an enormous ad machine to plug in to anything that manages to attract a few eye balls.

    Still even the mighty G is not always successful in their portfolio decisions and has recently announced they are scrapping a number of their products previously acquired (see article on Arstechnica etc)

    Some people argue they are feeling the financial crisis, personally I think they were as clueless to what to do with these services when they bought them as eBay was when it bought Skype and they are just taking the opportunity to lay off people when everyone else is doing it.

    They do indeed have huge amounts of data on user behavior etc and are for sure thinking about ways on how to monetize this but I'm not sure it's going to be so easy. Arguably the Telco operators have had as much data about users for ages but have yet to make any real money directly off of it. Privacy is a mega issue here; you just can't get around it.

    I think it's more about gaining control of content than user data. They are making huge investments into opening up their APIs (such as Google Maps, Open Social etc) for developers while making their Terms of Use clauses effectively making everyone using their enablers granting Google the right to their content. More content equals more places to show Google ads.

  2. Thank you for your insightful post Richard!

    I'm surprised to hear that you don't count on Google being so rational and goal oriented in their business model decisions, given the presentation you refer to with "Why Google doesn't monetize all of its services" and "Network Value Creation Model" It would be interesting to hear what you base your assumption on and if you believe this is a general culture within large Internet companies or specifically with Google.

    I understand that the privacy issue is a brick wall to get over. Personally I would not mind if Telco operators used all my data if I as a subscriber could chose for what services my data was used and got better services, lower prices etc in return.

    Interesting statement in the SlideShare you refer to "Google wants to become the social data search engine and to monetize this data, leveraging network effects"

    Gaining control of and extract value from content is of course extremely interesting and I plan to write more about the subject and look forward to your input and comments!


  3. The NY Times recently had an article relating to the discussion above, supporting Richard's view of how project prioritization is handled at google:


  4. Good article, thanks Jonas!
    I've been interested in how Google employees spend their 20% "free time" and it was interesting to read that a product manager has to attract and recruit colleagues and their free time, for ongoing projects. It was also interesting to get a glimpse on how Google determines continued incubation of projects:
    - Popularity among users
    - Ability to attract Google employees to develop them
    - Solving a big enough problem
    - Internal performance targets "objectives and key results"
    If anyone knows what kind of internal performance targets Google uses, it would be interesting to know.