How Google’s parent company generates revenues
Add disclaimer that certain elements from the article are directly taken from the company’s latest annual report and quarterly earnings statement.
Link to ABC’s Q4 2024 annual report.
Business overview
As our founders Larry and Sergey wrote in the original founders’ letter, “Google is not a conventional company. We do not intend to become one.” That unconventional spirit has been a driving force throughout our history, inspiring us to tackle big problems and invest in moonshots. It led us to be a pioneer in the development of AI and, since 2016, an AI-first company.
Alphabet is a collection of businesses, typically broken down into two segments: Google, and Other Bets. The company aims to offer accessible technology to everyone, and to make AI helpful for everyone. Since the creation of Google in 1998, the scope of the business has evolved from Google’s original service (a search engine that that helps people find answers) to a growing range of core services (such as Android, Chrome, Gmail, Maps, Play Store, YouTube) and smaller bets that the company refers to as “moonshots” (such as Waymo).
Google comprises two reporting lines:
- Google Services contains all products and platforms aiming to make information more accessible and helpful. It includes products such as Ads, Android, Chrome, Devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search and Youtube.
- Google Cloud contains all products and platforms aiming to provide cloud-based infrastructure and services (such as Google Cloud Platform and Google Workspace).
Other Bets comprises all initiatives that try to solve big problems that affect a wide variety of industries, such as transportation (Waymo) and health technologies. This segment includes early-stage businesses that come with considerable uncertainty, but also companies that are already generating revenue and making important strides in their industries.
How the company generates revenues:
Google services generates revenues from two sources:
- Advertising. These revenues come mostly from Google Search, YouTube ads, and Google Network from a “paid-per-click” basis or a “per-impression” basis.
- Subscriptions, which primarily include revenues from YouTube subscriptions (YouTube TV, YouTube Music, YouTube Premium), NFL Sunday Ticket and Google One.
- Platforms, which primarily include revenues from Google Play sales and in-app purchases.
- Devices, which primarily include sales of the Pixel family of devices (phones and watches).
Google Cloud:
- Google Cloud Platform generates revenues from consumption-based fees and subscriptions for infrastructure (AI infrastructure, Vertex AI, Gemini for Google Cloud, cybersecurity, data and analytics)
- Google Workspace which includes subscriptions for cloud-based communication and collaboration tools for enterprises (such as Calendar, Gmail, Docs, Drive, Meet)
Other Bets generate revenues primarily from the sale of healthcare-related services and internet services.
Historical revenue growth and drivers:
