This inspired me to dig into the fact of Google business model and revenue sources. I was trying to answer the question: “Is really Google offering its services for free?”.
If you think deeply in the question, you will find that Google is already not offering its services for free. Google is one of largest internet-based companies (no. 2) and it is the 10th ranked one (from revenue perspective) in information technology industry as per 2012 report.
So these facts negate that Google offers things for free. People always think of Google free services such as Gmail, social network (Google+), Google reader, Google drive, Android, etc. If you see the internet now you will find tons of articles talking about “Google stopping Reader services“. Also you find a lot of on the web who are grieving this decision by Google along rumors for preparing other chargeable services.
I think Google does not need to charge for its services (for individuals). Google revenue stream comes mainly from advertisers. Google is very similar to a giant advertising agent like those you are used to find across streets with their blank boards.
We need to understand Google business model to know why Google does not charge for its services for individuals. I have a previous post discussing business models building. It is interesting to apply business model generation concepts on Google to get its business model elements. Below diagram depicts Google business model elements following the canvas method.
In the revenue streams box of above model diagram, there are multiple sources for income. However, the fact is that Google built its business model around internet advertising. At the bottom line, advertising represents 96% of Google’s revenue. The bottom-line fact is Google does not have diversified revenue streams, however Google has diversified value proposition.
Google uses its value propositions to attract more audience (individuals) in order to be more appealing for advertisers. As long as this pool of audience is large, Google advertising business is booming and the whole company accordingly. Anything will cause a decrease of audience pool will threaten this bottom-line income. If Google will start charging on its services for individuals, this would decrease the audience pool and accordingly will impact the advertising income stream.
Below I got a nice infographic representing revenue stream from advertising in one day only! This will help you to track down sources of Google advertisers.