Introduction to the Company

Google Inc is one of the largest multinational public corporations around the world. Google Inc has been started by Larry Page in January 1996. In 2003, the company had signed a $900 million deal with the unit of News Corps Fox Interactive Media for providing advertising and unit. The company had also announced thelong-term research agreement for partnership withNASA in 2005 (IT-India, 2016).

The company hosts and develops the internet based products and services. It is one of the most powerful search engines of the world. The headquarters of Google, Googleplex are situated in Mount View in California, USA. The company makes money by advertising related to the internet searches, online mapping, email, social networking, office productivity and video sharing services. Google is a user-friendlyservice, which is completely free, and it returns the results within the blink of an eye(Company, 2017). The annual revenues for the company had been increasing.

There has been a growth in the revenues of around 1400 million in 2003 from just $86 million in the year 2001. Similarly, the net income for the company was also rapidly growing, the company was being considered as one of the main elite pack of the internet leaders. Although, Google faced stiff competition from Yahoo and Microsoft at the start of 2003, however, still Google achieved a revenue growth of around 125% in the second quarter of the year 2004, prior to the quarter in which Google went public(Lawrence, 2010).

Formula for making Money & Analysis of Income Statement, Ratios and Trends

Millions of people use Google everyday and the CEO of the company had recently stated the formula of Google through which it makes money. The company makes money primarily by delivering the cost effective and relevant online advertising. Google is also the largest bus shelter in the world and it derives 96% of the revenue from the ads.

How Google Makes Money

The breakdown of the money made by Google is shown in figure 1 below:

Figure 1: How Google Makes Money

The advertisers bid to have their services and products to be displayed on the relevant search query result pages. The quality of the potential ad and the amount of the bid that has been placed for the ad are the core components, which decides whether the advertisement would be placed at the top of the page or at the bottom of the page.

The bidders are not at all aware of their rival’s bids. When all the bids are complete, then the higher bidder wins who is actually paying the price of the second highest bidder(BBC, 2017). After this, the company also takes the advertisers relevance of the lending page to the search query. This is done based on the quality score.

Ad words remain the primary source of revenue for the company but the company also makes money from advertising and it proportion in the total revenues of the company is increasing(BBC, 2017). There are a range of products of the company which includes Google Search engines, Google Alerts, Google Finance, Google Groups, Google Flight Search, Language tools, Google Scholar, Google Shopping, Web history, Knowledge graph, mapping and many more (Google, 2017).........................

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