How does Google give you everything for free?

Unless you’ve been living under a rock for
so long, you’ve probably come across Google at some point in your life. For the majority of us, including myself,
Google is an integral part of our typical day. We use their products or services for all
kinds of things: like Android, which is the operating system
we use on our smartphones, Gmail, which powers our personal or work email,
Maps, which helps us with navigation, and YouTube, for watching fun videos (like
this one!). Even if you intentionally avoid using any
of these products (which is unlikely), almost all of us have certainly used Google search
at some point to find something on the internet. If you spend some time listing down all of
the Google products you use, you’ll be surprised at how many you’ll end up with. For most of us, this list isn’t likely to
include some uncommon but familiar products like Chromium, Express and Firebase. It most certainly won’t include rare ones
like Fuchsia, Sunroof and Takeout. We also need to make sure we don’t count
discontinued products like Picasa, Buzz and Reader. At the time of making this video, Google has
a total of 251 products available for everyone to use. While this is insane and impressive in itself,
the best part about Google is that most of these services are either completely free
or come with a generous free offering. This is particularly surprising considering
the fact that Google offers its’ products for free to billions of users across the world. How is this possible? And how can Google give you all of these things
for free? One word: ads. For the most part, Google makes a lot of money
from its advertising solutions, like Adwords and Adsense, that allow businesses to find
more customers online. If you’re a business owner, you can pay
Google to run ads anywhere on their platform: on search results, website banners, YouTube
videos and whatnot. These ads can help you target almost anyone
and can work for any kind of product you want to sell: a book from your online store, a
software application on your website, or even a mobile app you want people to install. Google takes this part of its business seriously
and does it really, really well. During its earnings call for the second quarter
of 2018, Alphabet, the parent company behind Google, announced that it had generated more
than $32 billion in revenue. More than 85% of this came from its advertising
platforms, which together brought home about $28 billion for the company, while everything
else put together made about $4 billion. The real question is, how can Google sustain
its advertising services that makes so much money? And what about all of those free services
its giving away to literally everyone? Surely they must be coming at a cost? The short answer is yes, they do. According to the earnings report, almost all
of Google’s expenses can be broken down into four broad categories: Traffic acquisition costs (or TACs): to pay
partners, like phone manufacturers, to use Google services on their devices. $6.4 billion in Q2 2018. Capital expenditure: including running, expanding
and promoting it’s cloud services. $5.5 billion in Q2 2018. Operating costs: to run offices and pay salaries
for up to 90,000 employees. $10.9 billion in Q2 2018. Other bets: On cool things like self-driving
cars, internet balloons and some external investments. $732 million in Q2 2018. In other words, Google spends a lot of money
to build an audience to whom it can show ads. But it makes even more money selling these
ad opportunities to businesses who are ready to pay for them. Despite its’ expenses, the company still
ended up making a profit of $8.9 billion in this quarter. Turns out, this has been happening for several
quarters in a row, and Google has over $100 billion in cash reserves. Long story short, Google has a good reason
to give you all of that stuff for free. Sometimes, even if it feels like they’re
being a little too generous, it ultimately doesn’t matter because they have predictable
ways to make that money back elsewhere. The only thing you’ll need to know is that
by using their free products, you’re making some of your information available to businesses
who might want to sell you something. Depending on who you are, that’s completely
okay or not at all. No matter how you look at it, all of this
is possible thanks to the amazing business model Google has put together as a company. It’s so unique that it allows them to offer
incredible value to its users with free services, and at the same time, continue to be one of
the most successful businesses in the world. Based on what we’ve seen so far, they aren’t
going to be stopped by anyone anytime soon. If you enjoyed watching this video, please
show us some support by hitting the like button and subscribing to our channel. You can also check out some of our videos
on climate change, which talks about how we can come together to save our planet, and
on currency, which covers the idea of using a common currency across the world.

Author: Kevin Mason

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