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How Google makes its cash

Google ad preferences

How does the search giant make all that money?

Read our full feature on Online Ads: how they make money, how cookies work and how they affect your privacy.

Despite their prominence, display ads account only for around 20 per cent of the advertising market. Search advertising is the biggest single area, with 60 per cent of the market, and this is dominated by Google’s Adwords; the sponsored links that appear whenever you make a search.

Adwords make up around 90 per cent of Google’s total revenue of $25 billion (around £16.5 billion) a year. Google’s search technology is excellent, and the adverts provided alongside are unobtrusive. Adword placement is decided by the auctioning of search terms, with the highest bidders appearing at the top.

Generally speaking, there’s no need for clever targeting here, as you’re telling the search engine exactly what you want already. However, adverts can be targeted over a single search session; for example, if you look up tickets for an AC Milan football match, and then search for flights, you’ll get adverts for flights to Italy.

Funding the Web: Google preferences

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There’s no link between Google’s search and display ad targeting at present. However, the company’s display adverts will soon benefit from recent acquisition, Teracent. Its technology generates bespoke adverts on the fly, allowing for super-tailored ads featuring the exact products you have already browsed for.

Apart from search, Google provides numerous services in return for your clicks, many of which generate further clicks. Services such as Google Maps allow the company to connect its advertising to the real world, selling ads on a location basis.

Even Google may be struggling to profit from its YouTube site, though. An analyst working for Credit Suisse estimated that the service was losing the company almost half a billion dollars a year, with advertising revenues amounting to only a third of the total running costs. We hope a way can be found to budget the books without resorting to unskippable adverts in the middle of videos.

Read our full feature on Online Ads: how they make money, how cookies work and how they affect your privacy.

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