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» About Google (phases of search engine) » Revenue Model » Algorithm Updates » Earnings since inception » Google’s Branding Strategy » What made Google better

If we take a look at the annual sales of Google since 2001, we see an exponential growth in the past five years.

According to Google’s annual reports and other financial data, it has been found that since the inception of the Google Network in 2002 through the first quarter of 2004, the growth in advertising revenues from the Google Network members’ web sites exceeded that from Google web sites, which had a negative impact on their operating margins. The operating margin realized on revenues generated from ads placed on the Google Network members’ web sites through the AdSense program is significantly lower than revenue generated from ads placed on Google web sites because most of the advertiser fees from ads served on Google Network member web sites are shared with the Google Network members. But this trend saw a change after 2004 when the growth in advertising revenues from Google web sites has exceeded that from Google Network members’ web sites.

Google’s revenues showed a significant growth from 2004 and 2005 resulted primarily from growth in advertising revenues from ads on Google Network members’ web sites and growth in revenues from ads on Google web sites. This increase resulted primarily from increases in the number of paid clicks rather than from changes in the fees charged. The increase in the number of paid clicks was due to an increase in the number of Google Network members and aggregate traffic at their web sites and on Google’s web sites.

Google also attributes this growth to “improvements in our ability to monetize this increased traffic on our web sites.”

 Growth in advertising revenues from Google Network members’ web sites from:
The increase in the growth rate is attributable to growth in the number of page views and search queries, and ultimately paid clicks. This can be tracked to an increase in the aggregate advertisements displayed on the content pages of Google Network members’ web sites under AdSense for content agreements.

Growth in advertising revenues from Google web sites from:

The increase in the growth rate for the third quarter of 2005 is primarily attributable to growth in the number of paid clicks which may be a result of increased traffic due to publicity around Google’s initial public offering completed during this period and conversion of the increased traffic and expansion of their global advertiser base and partner network.

The following table presets Google revenues, by revenue source, as a percentage of total revenues for the periods presented: As you can see the following table Google revenues resulted primarily from growth in advertising revenues from ads on Google Network members’ web sites This increase resulted primarily from increases in the number of paid clicks.

GOOGLE ANNOUNCES FIRST QUARTER 2006 RESULTS:
Revenues – Google reported revenues of $2.25 billion for the quarter ended March 31, 2006, representing a 79% increase over first quarter 2005 revenues of $1.26 billion, and a 17% increase over fourth quarter 2005 revenues of $1.92 billion.
Google Sites Revenues - Google-owned sites generated revenues of $1.30 billion, or 58% of total revenues. This represents a 97% increase over first quarter 2005 revenues of $657 million and an 18% increase over fourth quarter 2005 revenues of $1.10 billion.

Google Network Revenues - Google’s partner sites generated revenues, through AdSense programs, of $928 million, or 41% of total revenues. This is a 59% increase over network revenues of $584 million generated in the first quarter of 2005 and a 16% increase over fourth quarter 2005 revenues of $799 million.

International Revenues- The growth in international revenues have grown as a percentage of our total revenues to 42% in the three months ended March 31, 2006 from 38% in the three months ended December 31, 2005 and from 39% in the three months ended March 31, 2005.

As is evident most of the revenues come from paid advertisements. There have been extra efforts to increase the prominence of Ads by Google since it is the major source of its revenue. The drastic increase in the revenues in the past year is due to more clicks and more ads on Google and its network sites. Organic listings on the other hand are getting all the more irrelevant. After the completion of Big Daddy Update, Google may actually prefer a few irrelevant results in the organic listings for commercial terms. The irrelevance is good for the paid listings that will add to the Google’s revenues because poor organic results (from practices like web spam) mean higher CTR’s on their paid links and more juice for their quarterly earnings.