How Does Google Maps Make Money?
Google (GOOG) is a popular search engine that has dominated the Internet landscape since its creation in 1998. As intertwined as this company has become in our day-to-day lives, most of the company's popular products remain free to use to the end-user or customer.
However, Google–along with its parent company Alphabet–has transformed from merely a search engine into a company that offers several products and services, including Google Cloud, Gmail, Google Books, YouTube, and Google Maps. Google Maps, in particular, is a popular navigational tool that is just as powerful on a mobile device as on a desktop computer.
Although Google doesn't charge the end-user searching their websites, the company has generated billions of dollars through fees, advertising revenue, and ad-sharing programs.
- Google offers several products and services, including Google Cloud, Gmail, Google Books, YouTube, and Google Maps.
- Google doesn't charge the end-user searching their websites, but the company earns billions of dollars through fees and advertising revenue.
- Google's AdWords program allows businesses to place ads on Google's websites.
- Google earns over 70% of its revenue from ads placed on their websites, including Google Maps.
Understanding How Google Maps Makes Money
Google earns the majority of its revenue through advertising on the company's various websites. Google's AdWords program allows businesses to place ads on Google's websites, including its search engine, map, video, and email platforms. In turn, Google charges those companies to advertise while the companies get the benefit of brand exposure to the millions of people that use Google products.
For example, a search for a map of Boston on Google.com would yield, among other things, a detailed map of the city via Google Maps. The Maps program allows users to zoom in and out and move the map to search neighboring areas. Along the right side of the search results screen are a number of small advertisements for Boston-based businesses, hotels, restaurants, and links to other sites selling hard-copy maps of the city. This type of paid advertising is the primary way in which Google earns its revenue.
Google also generates revenue from its AdSense program. Companies can have advertising on their websites, which use Google's proprietary algorithms based on the user's Google search activity. In other words, AdSense ads are similar to Google’s onsite advertising but instead, are placed on a company's website. These company's–called members–get paid from the advertiser when a visitor clicks on the ad located on their website. Google is paid a portion of that advertising revenue.
Although Google does not report specific figures identifying the financial performance of its Maps product, the financial statements show the revenue by segment.
Google's revenue is outlined below according to Alphabet's quarterly earnings report or 10Q as of September 30, 2019.
- Revenue from Google properties was $28.6 billion for the quarter in 2019 (highlighted in green). AdWords revenue would be included in this figure.
- Revenue from Network Members was $5.2 billion for the quarter, which would include the AdSense program.
- Total revenue from all segments was $40.3 billion in 2019 (highlighted in orange).
Google properties or websites generated over 70% of the company's $40.3 billion in revenue, which included Google.com, Google Maps, YouTube, Gmail, Finance, and Google Play.
We can see from the financial results that Google increased its total segment revenue by more than $6.5 billion from the same quarter in 2018 ($40.3 - $33.6 billion). The vast majority of that increase was due to higher ad revenues from Google properties totaling approximately $4.6 billion ($28.6 - $24 billion).
Google also generates income from its free Maps program through another, more subtle, form of advertising. Google maps are highly detailed. Each map shows individual businesses on the street level, making it easy to find an exact location.
Each type of business has a different symbol associated with them, such as hotels, restaurants, banks, bars, and retail stores. However, it can still be challenging to locate a specific company without knowing its address.
As a result, Google allows businesses to use their company logos instead of the generic icons–for a fee. For example, Hilton (HLT) can pay a fee to have its signature H logo embedded in each map, instead of having the usual bed icon used for hotels. The logos are in full color and easier to identify versus the generic icons. For those who travel, finding a familiar coffee shop or hotel is much easier with the brand logos, which might include Starbucks (SBUX) or the Holiday Inn (IHG).
Although each Maps user might not convert to a business transaction for each company listed on Google maps, the site essentially provides advertising and brand recognition.
Google Maps Platform
Google also earns revenue through its Google Maps Platform from companies and industries that need navigation, tracking, and mapping. Google Maps API is geared towards businesses that benefit from having a tailored version of the Maps in their online or mobile applications.
For example, ride-sharing companies could connect their app–or software application–on their website to Google maps. Drivers and customers can track each other's movements to help communicate where and when to meet as well as help reduce wait times.
Trucking or delivery companies, for example, could use Google maps to track the whereabouts of specific trucks in the fleet. The program helps companies analyze costly trips and make efficiency improvements.
Goggle charges various price points depending on the level of use from the company. Google also offers 24-hour technical support and ability to sell products with Google Maps integrated into them, along with increased search and request capacity, higher-resolution imaging, and advertising control.