How profitable is Google?

According to the 2018 results,Google's revenue in the first three quarters exceeded $97.6 billionThat's the equivalent of $270 million a day in revenue, and even at that level, it's growing at a high rate, with third-quarter revenue up 21 percent and profit up 37 percent. Baidu has just celebrated the completion of 100 billion yuan in revenue this year, while Google completed its own 100 billion yuan last year, but Google units are in U.S. dollars.Much of this is due to Google's powerful advertising system, like a money printing machine, it continues to contribute revenue to the world's top technology companies

Today, advertising revenue accounts for 85 percent of Google's total revenue, making it the absolute number one source of revenue, and Google is at the top of the U.S. advertising market with 22 percent.Today, let's take a look at Google's advertising system and analyze how this "money printing machine" works

We know that google was founded in 1998, in the first two years of its establishment, Page and Brin focused on the optimization of search technology, Google did not consider commercialization at all, so it was not until October 23, 2000 that Google first launched its own advertising products, and now we can see the press release "Google launches self-service advertising system" in Google News.In their first month of opening, they harvested 350 customers, the first of which sold fresh lobster.

It's not mature to start the system, in Redefining the Company: How Does Google Work? At the start of the book, Google Chairman Schmidt tells the story of this system improvement

Eric Schmidt

He served from 2001 to April 2011 Google CEO

On a Friday afternoon in May 2002, founder Page wandered around Google's website, typing "Kawasaki H1B" to see the ad "How to get a U.S. H-1B visa" and "French cave murals" to see the ad "to XX to buy French cave murals", which he was not satisfied with, so he printed out the search results and posted them on the company's rest room board and went home.

To his surprise, two days later, on Monday, a search engineer named Jeff Dean sent out a complete problem analysis and solution that did not belong to the advertising department, but he and five colleagues analyzed the causes of the Cases in detail over the weekend and gave themThe solution, with "relevance" as its core, was the prototype of Google's advertising system's famous "advertising quality division", is also an important evolution in the history of Adwords.

At that time, Google's average daily search is 20 million times, today, Google's average daily search volume has been more than 5 billion, Google advertising has grown into an annual revenue of more than $100 billion super system, let's take a look at this super system several important milestones -

In May 2002, Google began to fully adopt the bidding ranking methodand began bidding for the "GSP" auction.

In March 2003, Google launched AdsenseAdSense is an ad traffic alliance, the site director joined AdSense after the site's advertising space contracted to Google, Google is responsible for soliciting customers to run, after the two sides split, this model allows Google to break through its own traffic bottleneck, simply from the first card to Mummy.

In April 2007, Google paid $3.1 billion for DoubleClickDoubleClick is a full-service advertising technology service company, from advertising creativity, to delivery to monitoring, through this acquisition, Google has perfected its advertising all-chain service capabilities.

In November 2009, Google acquired Admob, a mobile app providerAdmob can be understood as the mobile APP version of AdSense, that is, it is responsible for contracting small and medium-sized APP idle advertising space, Google is responsible for the sale and delivery of advertising, the two sides split, which also allows it to expand its advertising boundaries in the mobile era.

In May 2015, Google launched UAC (Universal App Series ads).), specifically tailored for APP advertisers from delivery, optimization to conversion of the APP full-link solution, which is Google in the field of APP promotion to do an important action.

In May 2018, Google turned all its advertising product lines into "Google Ads"In order to unify the overall image of Google advertising, the company unified all product lines into one brand on July 24, 2018 , and launched a brand new logo.

Second, the basic principles of Google's advertising system

In fact, many trading patterns and important mechanisms in the field of Internet advertising today are, in a sense, Google's first large-scale use and definition.

Before Google, even mainstream online advertising, mostly display-based, pricing ads, that is, offline advertising simply moved online, although Google is not the inventor of the "bid ranking" model (inventor is Overture), but Google is the first large-scale use and set off a revolution in the advertising industry, as a starting point, technology become an important competitiveness of advertising,Advertising has crossed from the Big idea era to the Big data era。

Many people believe that with the development of Internet technology, the accuracy of advertising is constantly improving - search is more advanced than portals, social networks are more advanced than search....

But this is not the case, for Facebook, Weibo, WeChat, social media, it is more to obtain the user from the personal dimension of the long-term interests and characteristics, but the current user's intentions, social media is very weak,Real-time intent is critical to ad performance, you search for watches on behalf of you have a great probability to buy watches, to push you watch ads is very appropriate, and social media is difficult to calculate according to your gender, age, interests and other aspects of how likely you are to buy watches ... ...

So Google was at the top of the internet's advertising accuracy from the start, which is an innitable logic that Google currently has overseed compared to Facebook, even though it doesn't have the best user time.There is no more accurate expression of a person's true intentions than search.

As a top technology company, Google has spared no effort to bring in the best talent in the field in the design of business models, and in 2002, Google Chairman Schmidt invited Van Ryan, dean of the University of California, Berkeley School of Information, to join Google as chief economist.

 Google's chief economist, Van Ryan Vilan, said: "We're not a good economist

In factAn important part of the distinguished economist's job is to design an auction mechanism for Google adsBefore joining Google, the legendary economics professor published "Information Rules: Strategic Guidance for the Internet Economy", which specializes in the impact of online economic behavior, and after joining Google, he pushed Google to make a full transition to spot advertising, and second, pioneering Google's use of GSP (broad second price) as a bidding mechanism.

GSP is an intuitive bidding mechanism that does not conform to common senseThe highest bidder wins the auction, but it only costs the second bid, say Adi out of 10, Nike offers 5, then Adi wins the ad show, but it only needs to pay 5, which seems counterintuitive, but it is an extremely rational design from a game theory point of view. Today, many advertising platforms, including Baidu, use this mechanism.

Google has also pioneered the mainstream bidding of CPC, with advertisers only bidding for clicks, and has relied on its technological edge to introduce it"Advertising Quality Score"This concept,The statistical dimensions of quality score include the click-through rate of ads, the advertising nature of keywords, the quality of landing pages, and the historical performance of advertisers.

Whether an ad can win depends on two factors, namely, if the quality of the ad is poor, even if the higher price, the ranking may come last, of course, there are a lot of technical factors involved, such as to calculate the quality score of which you need to know the click-through rate, then before the run, click-through rate is not known, you must predict the click-through rate, click-through rate forecast this module, there will be an extremely large technical team to support, understand the common sense of ad click-through rate prediction, see my other article"Machines know you'll click on ads - talk about ads CTR estimates"。

Designing and perfecting the advertising system is an extremely complex project, in a sense Google is indeed bringing together "the smartest minds of this era to study how to get people to click more on advertising", the founder of the multi-doo Huang Qi, xiao red book CTO Xiaohu were previously members of Google's advertising department, it is these top talents continue to optimize to make the system so efficient.

And according to The Tiger, Google's combined hits are as high as 3%-4%, whileTop-of-the-page click-through rates are typically as high as 30%-40%that's a particularly scary number.

Third, Google's design of the experience

In addition to the technological and data leadership, Google advertising on the user experience is also very profound understanding, many excellent advertising design mechanisms have become a model for follow-up companies to follow,Advertising system is an extremely balanced and complex project, it has to take care of at least three interestsThe interests of advertisers, advertising platforms and users need to form a delicate balance among the three parties.

Google YouTube's skip ads are a classic example:

First it solves the user arrival problem for the first 5 seconds with the skip buttonSecondly, it adds an effective direct monitoring of the advantages and disadvantages of advertising, again it only pays for real broadcast to solve the problem of advertisers' budget control, and finally through the underlying bidding mechanism to optimize the quality of advertising, this design is extremely subtle to solve the interests of advertisers, platform interests and users, and really achieved three wins.

There are many similar cases, such as as google as an advertising platform, Google certainly does not want users to block ads, but in fact in Google's Chrome browser, Adblock such ad blocking plug-ins are unimpeded, and Adblock has now gained 40 million users,So why does Google turn a blind eye to such ad-blocking plug-ins?

Ad plug-in Adblock

Google's logic is thatThose who install browser plug-ins themselves are not interested enough in advertising, which is equivalent to installing a blocking plug-in itself to screen Google's artificial audienceInstead, it improves the performance of ads that were not filtered.

Under the guidance of Google's "don't do evil" philosophy, Google will mark ads in obvious places, so that users can clearly identify ads, while Google will have a sound negative feedback mechanism, when you click no longer show ads, will clearly pop up negative feedback reasons - "inappropriate content," "duplicate," "irrelevant" for users to choose, but also clearly inform Google is based on what information you serve ads.

It is these friendly details that allow Google's advertising products to balance the interests of advertisers, users and platforms well.

The challenges facing Google advertising

Google's huge advertising system is bound to face many difficult challenges, and the process of facing these challenges is also the process of Google's advertising system mature.

Like what.For Google, a tricky question is how to avoid putting some branded patch ads in front of violent, racist, sexually suggestive videosEven though advertisers choose the type of video when they run it, Google recognizes the video type and then faces YouTube, which plays up to 1 billion hours a day, but it can't be 100% accurate even with industry-leading image and video machine learning algorithms.

On YouTube, where 400 hours of videos are uploaded every minute, and more than 3 million ad ideas are running every day, it's extremely difficult to make 0 mistakes, but Google is trying to train itself to recognize small differences in videos, such as some offensive words that appear in a hip-hop dance may not be offensive, but appear in other videos differently.

Similarly, there is always a relationship between advertising and privacyGoogle also faces the problem of how to properly handle user privacy, when Google pushes you related ads, it will always be based on your previous information and behavior to match, and even Google in its advertising interpretation provisions clearly inform the ads are based on what information is pushed, as the government and the public pay more attention to privacy issues, Google also faces how to balance precision advertising and privacy.

V. What does Google rely on to laugh proudly in the mobile age?

Next we discuss an important question, is the god horse supporting Google from the PC era to the non-continuous to the mobile era?Why is the same search giant, Baidu in the mobile era is left out?

From the PC to the mobile transformation process, accompanied by the change of information structure, the PC era, the Internet information in the form of a website, in a common HTTP protocol can be freely accessed, so the browser, search as the entrance, Google firmly grasp these two portals, and in the mobile era,Information has become an island, behind the countless apps that can not be interconnected, this time the importance of search has dropped!

An important factor that has made Google a leader in the mobile age is its extraordinary vision - it bought YouTube in 2006 and Andy Rubin's Android in 2005 , and now YouTube has become an important entertainment portal for Internet users around the world, with Google's powerful technology, capital and recommendation algorithms, and the most important component of Google's display advertising, contributing revenue to Google.

The strategic significance of Android is self-evidentAndroid, which spent less than $50 million that year to buy less than 60 people, has been credited with cementing Google's advantage in the mobile age, with Android, an open system that turns the default search for all smartphones except Apple into Google, for which Android doesn't have to pay a penny, according to analysts at Bernstein Research.

Android's ecology has undoubtedly had an extremely strong impact on Google's advertising revenue, with the Google Play Store becoming the entry and default option for Android phones to install new apps.Google launched UAC (Universal App Series Ads) on its own advertising system, dedicated to APP-specific ads for full-process optimization, and usually Adwords by click billing, UAC supports the installation, use, payment and other dimensions to optimize app ads.

The advantage of UAC is that it is Google's app promotion program specifically for APP, because Google has a natural advantage over Android Eco's data, combined with the relevant tools and advertisers' own optimization goals, through machine learning to automatically help APP customers find the right potential customers, for app developers, if you want to promote Android eco, Google advertising is already an extremely important option.

In today's digital advertising market, APP ads already account for a significant share of spending, and Google in this area rely on a far-sighted product strategy and continue to sing, on the contrary, Baidu is not so lucky, when the top of the BAT Baidu in the mobile era few, in the product stop, there is no Android, Chrome, Google Play and other similar moths in the new competition to fall behind.

Perhaps you ask why Google can make so many successful products and Baidu can't?Maybe you should change the question - why did Google make so many products so few successful? The following image shows incomplete statistics for Google's failed products.

Author's Introduction: Wei Xi, senior advertising product manager, is committed to analyzing the basic logic, ideas and techniques of the Internet and commercialization. This article was reproduced from its public number: Weixizhibei

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