Google is one of the most valuable public companies in the world, after Amazon and Apple. In 2020, Google's parent company Alphabet Inc. (GOOGL) became the fourth U.S. company ever to reach a $1 trillion market value.
Unlike companies such as Apple's reliance on more singular business lines like the iPhone to drive revenue, Google has multiple major business lines providing streams of income. Many of Google's revenue sources have experienced tremendous growth over the years.
- Google is a major tech company, with a market cap approaching $2 trillion.
- It has created (or acquired) a number of successful brands and businesses over the years, including AdWords, AdSense, Google Fiber, and Nest.
- Ad revenue continues to be key revenue driver for Google, accounting for 80% of revenues last year.
- Google has an entire segment called "other bets," which includes its autonomous vehicle ventures and Pixel line of phones.
- Over the last five years (ending July 2021), Google's stock price has generated an annualized return of 2.1.2%
1. Google AdWords and Search Advertising
The company's proprietary advertising service, Google AdWords, continues to be a major business line and contributor to Google's revenue. In 2020, Google's paid clicks, a key advertising measure, rose 19% from the previous year—driven by user adoption growth on mobile devices and growth in advertiser activity.
The number of impressions increased from 2019 to 2020 by 15%. This comes from growth in Google Ad Manager. Meanwhile, cost-per-impressions fell by 8% in 2020. The fall in cost-per-impressions was a result of less advertising spending due to COVID-19.
2. Google AdSense Network
Google AdSense is another one of Google's most well-known lines of business. Google AdWords enables businesses of all sizes to advertise across Google's websites—including Gmail, YouTube, and Google's search engine—and also enables third-party websites to display Google advertising on their pages.
Ads generate 80% of Google's revenues. Through its AdWords and AdSense advertising products, Google also seeks to continue its dominance on the mobile web.
3. Google Fiber
First announced in 2010, Google Fiber is a broadband service offering high-speed gigabit Internet and TV at rates up to 1000 Mbps. Currently, Google Fiber is available and operating in 19 cities, including Kansas City, Mo., and Austin, Texas.
At the time during the 2015 Q4 conference call, Porat indicated Fiber was the most costly project out of all of Google's other projects. Google's Fiber Phone, which operates as both a home and mobile phone, can also be added to a phone plan.
4. Google Nest
The Nest Learning Thermostat was one of the first Internet of Things products for homes to gain a wider audience. On Jan. 14, 2014, Google acquired the startup Nest Labs, a home service of smart interconnected thermostats and smoke detectors, for $3.2 billion.
At the time of the acquisition, Nest Founder and CEO Tony Fadell claimed that Nest devices were in over one million homes. Under Google, Nest continues to focus on thermometers and other smart home technologies.
5. Verily Life Sciences
Formerly known as Google Life Sciences, Verily focuses on a wide range of life science and human health projects, including a bandage-sized glucose monitor and a perfect "baseline" of human health. Verily is focused on finding solutions to diseases and other global health problems, including smart contact lenses, assistive eating devices for people with hand disabilities, and other healthcare challenges.
Google's Other Bets
One of the main challenges of identifying Google's major non-search lines of revenue is the secrecy around those projects. Waymo self-driving cars have sprung out of X.
However, Google's other projects had operating losses of $3.56 billion, up from $1.9 billion in 2014. During its Jan. 26, 2017, earnings call, Alphabet and Google CFO Ruth Porat indicated the most profitable of Google's other projects are Fiber, Nest, and Verily.
For fiscal year 2020, Google's "other bets" generated $657 million in revenue, but operating losses came in at $4.5 billion.
The Bottom Line
Fueled by the high profitability of its AdWords and AdSense products, Google stands as one of the five most valuable companies in the world. From July 2015 to July 2021, Google provided an annual return of 21.2% to its investors.
Despite some investors' perspectives that Google's other projects are driving down the profitability of the company, its diversification of major business lines continues to take the company to reach new financial milestones.