Ηοw Do Search Engines like Google Make Money?

We all use Google and other search engines daily to find useful information and websites online.

We can use their services for free but how do they make money? Search engines make money by showing ads related to the keywords the user typed on the search engine bar. When a user clicks on some of those ads, the advertisers pay google an amount of money based on the competition and initial budget they have set.

We will present the exact ways a search engine like Google makes money:

Google Ads is a tool for companies that want to advertise their services or products on google network. They set a budget for their campaign, the maximum bid for their targeted keywords and they create the ad. Advertisers compete and they don’t know the bids of the other parts.

An automated process is in place from google where a combination of a high bid with a good related ad wins the auction. This is happening for each keyword each user type and not always with the same winner. The auction results decide on what order and on what page the ad will be placed.

In the photo below you can see the google results after a search I did. Most of the first results are ads and below those ads, you can see the organic ones (meaning without paying for this position). Insurance is a competitive keyword and a lot of advertisers want to promote their services to people interested in purchasing automotive insurance online.

When a search has commercial intent then this is a signal that the user will likely click the ad and make a purchase. These kinds of searches are very valuable and cost more. Most of the users actually ignore the ads and check the rest results but it is still a win-win situation for both Google and advertisers as they pay only for the clicks.

In the next photo, you can see how things look like from the advertiser’s view. You can even target your audience not only by the keywords or search phrase they type but also by location, device, certain demographics (like age) or even gender. Consider that Google has a lot of information about its users since we probably use a google account either for Gmail, google maps, google calendar or other products.

* Here is the link from google itself about their ads: google.com

Google doesn’t make money per search but when someone clicks an ad. But if we want to make a very broad estimation (it will not be 100% accurate) google revenue from advertising is nearly 120 billion dollars per year. Google searches are around 2 trillion per year (approximately since we don’t have data here) so on average google makes $0.06 per search.

If we try to make an estimation for the average cost per click, we can divide the annual revenue with the clicks per year. To find out clicks per year we multiply annual searches with the industry-standard – 2% conversion rate. Meaning for every 100 people that see an ad, only 2 of them click it. That gives us an average cost per click of $3.

Consider that cost per click varies based on country, keywords and so many other factors. Targeting the audience on countries like the United States, Canada, Australia or UK is much more expensive than other non-english speaking countries. There is also a big difference between industries and if the search reveals a commercial intent from the user.

If a user types an information question not related to any commercial intent then they might see no ads. For example, if you type a question like: “What is the biggest country in the world” probably no advertiser would be interested and you will see no ads.

*You can see here the financial results of google from its parent company: abc.xyz/investor/

An additional way for Google to have another stream of income is the Adsense. Website owners use that service to set up ads on their web pages so they can have some revenue from their traffic. Google’s search engine is one way that helps to show relevant ads for the people that visit those sites. They call it “Personalized targeting”, meaning the information Google has collected from the user based on his search history.

Of course, the ads also are related to the overall content of the website. If most of the content is related to fitness then probably the user will see ads from gyms or sites that sell products like fitness equipment.

Bing follows the same approach as Google. They make money by ads and their service is called Microsoft Advertising (the previous name was Bing Ads). They have identical filters like Google Ads and the competition for the ads works the same. * Source about.ads.microsoft.com

Bing has a big market share especially in the United States and the UK. 36% of the US Desktop search and 22,7% of the UK desktop search is done on Bing.

1.)Browsers take a cut from search engines’ ads revenue. The agreement is that they promote a specific search engine as the default one so when you use the browser and try to search something you will be redirected to Google (most of the time) or to other search engines.

Let’s take the example of the Mozilla Firefox. Based on their annual report the revenue from royalties (mostly search engine ones) was 429 million dollars! *Source: assets.mozilla.net

2.)Another source of revenue is the marketplace each browser has for its extensions. Browser extensions are additional pieces of software developed by independent developers or companies. These run within the browser and add additional capabilities. An example of browser extension can be one that is checking your grammar when you type something on a site.

Browsers take a percentage of the income the developer earns from those extensions. Here are 2 examples of this kind of marketplaces: chrome.google.com/webstore/category/extensions , addons.mozilla.org/el/firefox/. Chrome Apps and Extensions charge a fee of 5% for any purchase a user does for features or virtual goods.

3.)Sell other products indirectly. When you use google chrome then the company has the chance to showcase other products like a professional email or the extensions I mentioned earlier. If you are happy with your browser usage then it is most likely to use other services from the same company. This usage can provide additional revenue for the company behind the browser.

4.)Data Collection from your activities within the browser. This activity might seem that it doesn’t provide revenue but it is really important. The data is used to personalize the ads shown from other products of the company (like Google Adsense).

For those that don’t know we will briefly describe how search engines (like google and bing) work. They have created some programs that they call web crawlers. Their goal is to scan the web continuously for new web pages or for updated ones.

1.)They start their search by checking the existing database of websites they already have. Most of the website owners submit their site on search engines directly. The owners want their sites to be discovered so they can start to have traffic from the search engines. Google has Google search console for the website owners and Bing has Bing Webmasters.

Web crawlers continue their search by visiting the links of the existing web pages they already have. Usually, this process leads to the discovery of new web pages or finding updated content of existing ones.

2.)This information is going back to the servers of the search engines. The next step is for all these web pages and websites to be organized like a library. The organization is related to the content, keywords or industry. So the information is actually already there before you even start to type a search.

3.)When you actually type your search on the bar the search engine considers multiple factors of what results they will show you and in what order. They consider the keywords you used when you type the search, your location and what is the nature of your question (information, news, commercial) . They try to provide the most helpful answer to you by considering which is the best resource on the web.

Your answer should come from a reputable site and from an author that has knowledge of the subject. Search Engines have already data about searches to similar queries from other users and they know what was helpful to them. They include that data too as an additional factor. If you want really to know these factors in detail and how search engines rank the web pages you can read that guideline from google static.googleusercontent.com

If you are interested to find out how a website works, you can check the next article: How Does a Website Work (simple but detailed explanation)