How does Google/Yahoo make there money?

[the_only_turek_fan]

Just something I am wondering.

There are little or no advertising on Google.

Yet the guys who invented it are worth like 393847235804 dollars.

[calf]

From http://investor.google.com

We generate revenue by delivering relevant, cost-effective, online advertising. Businesses use our AdWords program to promote their products and services with targeted advertising. In addition, the thousands of third-party websites that comprise our Google network use our Google AdSense program to deliver relevant ads that generate revenue and enhance the user experience.

[calf]

From Yahoo's 2003 Annual report (found here: Annual Reports - go to the 10-K section) "We generate multiple sources of revenue...classified as: Marketing Services, Fees and Listings"...and it goes into great detail after that.

[RougeUnderoos]

Part of the deal they (Google/Yahoo) get paid to put a company/organization/person to put them high up on a search.

ie I searched the word 'cola' and lo and behold Coke was up at the top and Pepsi wasn't far behind. That's not a fluke and they paid for the privelege.

[Neeper]

I was going to advertise on google. If you advertise with them, and someone searches words that hit what you are advertising, it comes up first. Or on the front page. And then, if someone clicks it, they hit you for that too. I think they told me it was like $1 a click.

[Table 5]

A main page banner ad on Yahoo is probably close to $100,000 for one day. If you think about the amount of people who view that page per day, you can see why.....

[Bend it like Bourgeois]

Google and Yahoo are essentially media outlets - no different than tv or newspapers, though arguably a lot bigger.

ie I searched the word 'cola' and lo and behold Coke was up at the top and Pepsi wasn't far behind. That's not a fluke and they paid for the privelege.

Anwhere they can can get sell an ad they will - though they do not sell the listings in their natural search results. Think of it as editorial control. The search results are what bring them eyeballs and from that all their revenues. Coke paid someone to get ranked above pepsi, but it wasn't google.

I was going to advertise on google. If you advertise with them, and someone searches words that hit what you are advertising, it comes up first. Or on the front page. And then, if someone clicks it, they hit you for that too. I think they told me it was like $1 a click.

The pay-for-performance model can range from 10 cents to $20.00 or more per click on google and overture (Yahoo). Neeper if you go that route you only pay when someone clicks, and you can set budgets so you don't end up with an unexpected surprise. For calgary specific keywords the costs are usually pretty reasonable. For example 'calgary hockey' is about 10 cents per click. Calgary dentist is a lote more competative and its about $2 per click.

Google gets about half their revenues from these keywords.

A main page banner ad on Yahoo is probably close to $100,000 for one day. If you think about the amount of people who view that page per day, you can see why.....

I've never done the math but I bet you're not far off. Banners are coming back in a big way because the cost is low and the effectiveness high compared to other mass media. Banners are typically sold on cost per 1000 impressions, but the trick is the price goes up depending on how targetted the ad is. A generic, run of site banner is likely $5 per 1000. Maybe less. A travel banner in the travel section of Yahoo is likely $20 - or more. Local ads for Calgary are typically $20+ because by definition they are targetted.

[dustygoon]

Yahoo makes money through search based revenue, advertising revenue including banner ads, and content subscription fees.

Search based revenue is earned through a bidding process. If i want to advertise a product, I decide what key search words people might enter into google/yahoo when they are looking for my product. I then bid on these words....the higher my bid, the higher up on the list my add will appear when someone searches my key words. If the user clicks on the add, then yahoo makes extra on the click through. This is a pretty transparent way to advertise as you should have a good idea of how much you make from visitors to your site so you won't overbid for ad placement.

Google at the moment makes money on search as described above. They don't have fees for content and don't offer banner ads.

One thing these companies are doing is offering free email. Nothing in life is free!! Notice the ads that show up next to gmail or yahoo mail when you receive a message. These guys scan your email for key words and then put up ads on the side that relate to the content (an email about Los Angeles might result in ads on accomodation in LA etc).

From an investment perspective, I think Yahoo is better value as you have a good revenue stream from search but also other sources of revenue exist to diversify a bit. Everyone and their dog is developing search functionality (MSN, amazon, etc) so it is going to get tight competively.

[InTheSlot]

Yahoo also has an E-mail service that costs money. It offers more space than their free accounts. Just an alternative if you need more storage space. (Though their current limit of 250MB is more than enough for me and most people)