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Can someone explain how Google makes money off ads and how online advertising works?

Posted on 2/5/23 at 1:38 pm
Posted by hikingfan
Member since Jun 2013
1709 posts
Posted on 2/5/23 at 1:38 pm
I've never clicked on a single ad in my life at the top of Google search results on their homepage. Same with pop ups and ads that you see when browsing different websites.

So how is Google making money off of me? Do they still make money when I don't click on something? I tried to read up on it and got lost in a world of double click, auctions, adwords, cookies etc.

So can some of the tech experts here explain in plain English how Google makes money off ads and how online advertising works, and how Fox News or CNN or Yahoo make money when they show me those ads at the top of the page and on the sidebar and how Google is involved in serving those ads?
Posted by Fat Batman
Gotham City, NJ
Member since Oct 2019
1555 posts
Posted on 2/5/23 at 2:13 pm to
Online ads are typically sold as cost per impression or cost per click with the former being a lot cheaper than the latter. So just like Lamar makes money selling billboards even if you don't call Gordon, websites can make money just by showing you an ad. It's also not always about an ad leading directly to a sale either. Creating brand awarenesses is another reason to run ads.
This post was edited on 2/5/23 at 2:14 pm
Posted by TigerinATL
Member since Feb 2005
62437 posts
Posted on 2/5/23 at 2:16 pm to
quote:

I've never clicked on a single ad in my life at the top of Google search results on their homepage. Same with pop ups and ads that you see when browsing different websites.

So how is Google making money off of me?


They may not be. Take a look at this pie chart, the green are the organic clicks or clicks on the regular search results, the blue are the ad clicks.



LINK

About 7% of clicks go to the ads. So not everyone has to click on an ad for Google to be profitable.
This post was edited on 2/5/23 at 2:18 pm
Posted by Korkstand
Member since Nov 2003
28997 posts
Posted on 2/5/23 at 2:36 pm to
As already mentioned, some ads are pay per click, some are paid per impression (a fraction of a cent just for you to see it on the page), and some probably a combination.

You've never clicked on a TV commercial either but your attention is still monetized. It's almost a certainty that you have been influenced to buy a certain product even if you've never clicked an ad.

If I want to advertise on google, I will bid for placement for the keywords that I choose. Some keywords are worth more than others, and the bidding reflects that. Some words I might pay 10 cents whenever someone clicks the ad, but others might cost me $10 per click. That's google's AdWords platform. I can also choose whether I want the ads to run on google results, on sites that show google ads, or both. Sites that show google ads are using google's AdSense, it's just the other side of AdWords.
Posted by omegaman66
greenwell springs
Member since Oct 2007
24825 posts
Posted on 2/5/23 at 6:36 pm to
For google to make money you have to click on an ad on a random website. Google can make money off of you even if you have never been to googles website.

Owners of websites put ads on their site. These ads might be supplied by google. Google takes a cut and the website owner gets a cut.
Posted by hikingfan
Member since Jun 2013
1709 posts
Posted on 2/6/23 at 5:26 pm to
quote:

As already mentioned, some ads are pay per click, some are paid per impression (a fraction of a cent just for you to see it on the page), and some probably a combination.

You've never clicked on a TV commercial either but your attention is still monetized. It's almost a certainty that you have been influenced to buy a certain product even if you've never clicked an ad.

If I want to advertise on google, I will bid for placement for the keywords that I choose. Some keywords are worth more than others, and the bidding reflects that. Some words I might pay 10 cents whenever someone clicks the ad, but others might cost me $10 per click. That's google's AdWords platform. I can also choose whether I want the ads to run on google results, on sites that show google ads, or both. Sites that show google ads are using google's AdSense, it's just the other side of AdWords.

Thanks Korkstand and everybody else that responded. I understand this subject a little better now.
Posted by LemmyLives
Texas
Member since Mar 2019
9996 posts
Posted on 2/7/23 at 5:03 pm to
I think we need to back up a step.

Google makes money off of ads, because it knows almost exactly who you are. Therefore, advertisers pay more per ad to know that their ad for plastic buckets and rubber gloves are advertised to a guy that looks up a lot of info related to Breaking Bad characters, episodes, etc.

They're not just leveraging what you look at in Chrome and Google, they're pulling in data from what kind of places you look up in Google maps, where you leave Google Reviews, what the area code of the majority of your contacts are in, how often you look up medical service providers in any of their services, and on and on. Take the above note on Adwords as golden, but there's a whole other world of data about you that Google sells about you to other companies, which may let them target Adwords better, but the data has tons of other valuable uses. I can't remember which company this was, but they discovered that 20 of the top 25 ad words that brought the most traffic were simply mis-spellings of the brand name.

When I worked at Equifax, we had I think 1200 different user profiles we could slice your spending/saving habits to display to people that bought the lists full of names with the attributes they wanted. I expect Google and every other tech vendor have tens or hundreds of thousands of ways to group you. And that's just if an advertiser needs a complete profile, which they usually don't. Do you search for veteran related items, and also shop for Coffee mugs? That's all Black Rifle Coffee needs to know.

Blend all this in with tracking that occurs with third parties and other tech companies, who all sell data sets to each other, and who you are is very valuable, because the more data an entity has about you, the higher the revenue from displaying you advertising, even if you don't click it or look at it.

Keep going down the rabbit hole. Think about those "free" expense tracking and categorization services are, like Betterment, Credit Karma, etc., are. Do you think they only make money when you fund a loan through them? No sir, it's because you gave them access to your bank transaction history, and because they can tell how old your kids are, how often you go to Best Buy and how much you spend, etc.

These are nuclear versions of a Kroger or Albertson's "rewards" program, except they're not limited to one store.
This post was edited on 2/7/23 at 5:08 pm
Posted by Big Scrub TX
Member since Dec 2013
36804 posts
Posted on 2/8/23 at 5:49 pm to
quote:

because it knows almost exactly who you are.
I think a good rule of thumb is: even if you are paranoid about being tracked, take whatever amount of tracking you assume is being done on you and multiply it by at least 10...and that will still be on the low end.
Posted by LemmyLives
Texas
Member since Mar 2019
9996 posts
Posted on 2/8/23 at 7:55 pm to
Any link to Twitter, the 'gram, or any other number of sites gets opened in a Brave InPrivate window. I'm with ya.

In Brave, I actually can't see tweets or insta pics within articles, because that and Privacy Badger tell them to jog on. I have to open in Private to see anything, and then their knowledge about me (other than IP address) evaporates.

There's no place like 127.0.0.1
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