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2016

Economy Updates - May-2016

GOOGLE ECONOMICS

  • There are three dominant tech giants, i.e. Apple, Microsoft and Google. We all know how apple and Microsoft make money but we always wonder how does Google makes money as virtually it is providing everything free. So meteoric is the rise of the Google that every one wonders how it earns. In the year 2014 Google had revenue of whopping $66 billion and net profit of $14 billion. That's an astonishing figure.

HOW GOOGLE EARNS

  • We all know Google's major revenue comes from advertisement. 96% of Google's revenue comes from advertisement. But still question remains how? The answer to the question is Google AdSense and Google AdWords.

GOOGLE ADSESNE

  • Google AdSense allows over a million publishers like us to make money by displaying relevant ads on our websites or blogs. AdSense allows owners of other websites to join Google's network and run Google-branded ads. Google's algorithms do all the work. Website owner just have to sign up for the network and his website might end up running ads for property, loans, books etc. Companies that pay Google to run those ads indirectly benefit site owners who use AdSense.

GOOGLE ADWORDS

  • Google AdWords generates the maximum ad revenue for Google. It allows to advertise business on Google's search result pages. When we search anything on Google, we see “Ads” across search result pages. For example, if we search for “loans” or say “insurance” on Google then we'll find ads relevant to “loans” or “insurance” itself. These ads are sponsored by advertisers on Google AdWords who pays Google every time we click any of those ads. It is also known as cost per click

PRICING OF ADWORDS

  • The price an advertiser pays for a click usually depends on a lot of factors. Google is using a kind of bidding system. The advertiser has to select the keywords for which he wants to show ads so that when someone searches for those keywords on Google, his ads is shown. For example, an insurance company wants to find customers, then the company has to bid on keywords related to “Insurance” like “buy insurance”, “life insurance” etc. So, whenever a user searches for “buy insurance” or “life insurance” on Google.com insurance company's ads will be shown. However, if there several other bidders bidding for the same keyword then insurance company has to bid high to show their ad on top. The Cost per Click varies from $0.01 to $100 (or maybe even more). For example, advertisers are willing to pay as high as $54 per click for insurance, mortgages, and loans related keywords.

CONCLUSION

  • Google's success lies in the revolutionary advertising model it has adopted. This is contrary to traditional banner advertising where advertisers are required to pay whenever their ad is displayed on a banner network. Google makes money from their advertisers only when someone clicks on their ad and the consumer who is searching for something on Google sees only ads related to what he is searching. So, it is this advertising model that creates a win-win-win situation for Google, Advertisers, and the Consumers.
    • Being the main driver of the economy, the service sector has contributed about 69% of the total growth during 2011-12 to 2015-16. It has, therefore, expanded its share in the economy to 53% from 49%.

OTHER KEY POINTS

  • The Goods and Services Tax bill will mark an unprecedented reform measure.
  • The year 2015 was a landmark year for India in terms of climate change initiatives.
  • India ranks first in milk production, thereby accounting for 18.5% of the world production.
  • The emphasis is on widening tax base, increasing tax rates on property and reasonable increase in taxes from rich agriculturalists.
  • Stock markets in India are more resilient vis-à-vis its peers. India is the fastest-growing major global economy despite emerging economies affected by a slowdown.

 

Financial Management