Google and its adwords program is an example of a disruptive business model

[v] Fiona M. Scott Mortin & David C. Dinielli. “Roadmap for a digital advertising monopolization case against Google.” Omidyar Network, May 2020. https://omidyar.com/wp-content/uploads/2020/09/Roadmap-for-a-Case-Against-Google.pdf

CEO & Founder of MoreThanDigital. Serial entrepreneur since he successfully founded his first companies at the age of 13. He has always questioned the "status quo" and is committed to innovation, disruption and new ideas. As International keynote speaker, consultant for companies and governments & states, lecturer and published digital transformation expert, Benjamin tries to advance the topics of digitalization, digital transformation and innovation internationally.

Google Search/Properties: This represents the set of products that Google owns, from the search engines to all the other vertical platforms that the company operates (Google Discover, Google News, Google Travel, and more). In 2021, this segment generated over $148 billion!

YouTube: This is of course one of the most successful business acquisitions ever done. It was acquired by Google for $1.65 billion in 2006. It’s important to notice that Google was able to integrate YouTube and scale it up. A feat that not every other company would have been able to achieve. At the time YouTube was getting sued for various copyright infringements (the platform is comprised of user-generated content, often posting copyrighted materials) that would have most probably bankrupted it if it had stayed a startup without Google’s backing. By 2021, YouTube has become an advertising machine generating over $28 billion (this doesn’t count the YouTube memberships, which are reported separately).

And Google Network Members’ properties: this is the set of publishers that decide to opt into Google’s advertising network (either AdSense for desktop, or AdMob for in-app advertising). Here Google shows advertising on the network members’ properties, thus splitting the revenues with them. In 2021, Google’s network members generated over $31 billion of revenue.

Google’s search advertising has been driven by growth in search queries. In fact, since the pandemic hit, more and more users started to use Google’s products. This trend has continued. However, most of it was driven by mobile users’ growth. This is an important aspect, as it shows that Google’s main driver of growth is based on mobile traffic. This changes the way the company needs to prioritize its product developments efforts, its ad formats served to users, and also how it experiments.

YouTube growth was driven primarily by improved ad formats. This means that Alphabet (as it’s evident to anyone going on YouTube) has ramped up the advertising operations on YouTube. In short, on YouTube now there are way more ads than before. This “improved ad formats” is the result of YouTube’s extreme stickiness with users, which enables Alphabet to play with its ad formats.

Google’s network members’ properties were primarily driven by AdMob. In short, the mobile advertising platform, powered up by Android devices through the Google Play store, was the main driver of revenue growth in 2021. This shows how Google has shifted also its focus on the mobile advertising platform.

Google’s Alphabet has become a two trillion-dollar company in 2021. Back in the early 2000s, the company had started to build its advertising machine. This journey culminated in 2004 when the company had managed to put together the various pieces (Google AdWords and Google AdSense) of its advertising machine, thus scaling up its revenues on top of a growing search platform. Indeed, in 2004 Google generated almost a billion dollars in revenues, and it was worth about $23 billion as it IPOed. In 2021, the company passed the $257 billion mark!

Among the biggest drivers of its revenues were the increased adoptions from users as the pandemic hit. This trend continues from 2020-to 2021. The increased search query traffic was primarily due to mobile users. Therefore, Google had to push more experimentations through its mobile platforms.

YouTube, driven by mobile traffic growth saw also an important growth. Alphabet here pushed through more ad formats, and more advertising to monetize it further. Thus, taking advantage of the increased mobile traffic as a consequence of the pandemic.

The above led to increased profitability, given the ability of Alphabet to reduce/or keep its costs stable as traffic increased. And yet its ability to keep monetizing the traffic through increased ad spending, but also by serving more ads on its platforms.

Google ads platform remains the strongest segment of the company, with massive profitability.

Google has negative margins on its Cloud Platform and its further bets. However, both play a critical role in the future (Google Cloud Platform in the next five years, while the other bets in the coming ten-fifteen years).

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