Gmail or Google Mail is a free email service for everyone to use. But how does Gmail make money? And what is the Gmail business and revenue model? They offer an inbox and also provide 15GB of cloud storage for each account. Now that sounds like overkill as a freemium business model, or is it? Let’s get right down to the Gmail business and understand their revenue model.
How does Gmail make money?
Gmail makes money with Adsense ads and they charge advertisers on a per click and per 1000 ad impression basis. With over 1.5 billion active Gmail users, ad revenue forms a significant part of Gmail’s annual net income.
Understanding the Gmail Business Model
Google and Gmail business model relies on data. The more data they have, the more they earn. So the more users they have on their platform, the more websites accessing the Gmail OAuth API (think “Login with Gmail”) and the more people who search on Google, the more money they make.
Some of the common free services that Google offers to lure customers into signing up with them are:
- Gmail or Google Mail
- Google Drive
- Cloud Computing
- Google Glass
- Android Operating System
- and many more Google Apps…
With this out of the way, let’s move to understand the Gmail business model.
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How Does Gmail Make Money?
Gmail makes money by running personalized ads and sharing user data with advertisers to improve their ad quality. The major revenues for Gmail are based on the contextual inbox ads within Gmail. Additional revenue is generated with their Gsuite subscription that allows custom domain emails for businesses.
Imagine logging into to the many services and websites without the “Login with Gmail” or “Sign in with Gmail” button and keeping track of so many usernames and passwords?
When you create a Gmail account and sign up for Google’s email services, you agree to share with them, the data that’s required to keep their business running.
1. Gmail Displays Personalized Ads
Gmail uses the data that you share by signing up with them to serve you personalized ads on each and every platform that you visit. This is done with Google’s AdSense platform.
Based on the type of newsletters and emails you subscribe you, Gmail serves you personalized inbox advertising like the ones shown in the screenshot below.
So how does Gmail make money? Gmail earns money for each click that a user makes on any of these contextual PPC and CPC advertisements. Considering the billions of users they have on their platform, the ad revenues generated amount up in the billions.
Advertisers are charged by letting them bid on ad spots. The higher the bid, the more prominent the ad spot that the advertiser gets.
2. Gmail Shares Data to Serve Up Relevant Advertisement
When you sign up with Google for any service of theirs including Gmail, you opt-in to share your personal data with them.
With Gmail, the personal data includes the emails that you receive, the contacts that you frequently email, the contacts within your list, and more.
Your data helps Google, Gmail’s parent, get an understanding of what you like, and dislike to serve you with better advertisements and add more revenue for their personalized ads.
But there’s not much to worry since Google doesn’t track data that is personally identifiable. They use algorithms to pick bits and pieces of information that are relevant to getting an understanding of your preferences.
If you do not wish for this happen, Google is very open with their privacy settings and allow you to opt-out of all kinds of personalization with certain limitations on the products that depend on the data.
But why are Google and Gmail serving ads? Can ads really make so much money for Google and Gmail and all their other products? Let’s understand this right now!
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Gmail SWOT Analysis
What are the strengths, weaknesses, opportunities, and threats for Gmail as an independent entity? Let’s do a SWOT Analysis of Gmail.
– Highly integrated within the Google ecosystem
– Users require a Gmail account to use any Google services
– More users on the Gmail platform translates to more personalized data available for Google to make money
– Gmail is very feature-rich and offers really valuable email management features for absolutely no cost
– Concerns over data privacy and data monopoly will shoo-away a lot of privacy-focused users.
– Gmail faces direct competition from many other email providers who offer their custom domain emails at much lower costs like Zoho mail and the likes
– Gmail lacks in the mobile experience department and has quite a lot of improvements that can be made to enhance their user experience on phones
– As people move towards focusing on their Privacy, a similar service that offers better privacy can become a strong threat to the company.
What is the Gmail Business Model?
Gmail is owned by Google as a product to get more customers to use their service. Since we can literally say that Google has the internet under their control, they have the resources to scale their products and become visible to the billions of users searching online every day.
This makes it very easy for Google to display their products to a broad audience and capture the attention of them. Answering how Google makes money is a completely different topic, but here’s a very high-level view of their business model.
Google’s business model is advertising-based. Every single dollar Google earns is through the extremely relevant ads that they serve to users by tracking their activity across the web.
But now Google has begun venturing into freemium business models for some of their products like Google Drive, Google cloud compute (their online servers for processing), and Google suite which offers businesses an option to get in the Google ecosystem at a monthly fee per user.
Guess how much Google makes per day in advertising revenue?
Google makes close to $120 million per day! There’s no typo here. It’s per day.
Now you know why Google wants to offer so many services to you for free. This is also why they make their products so good that none of their competitors stand a chance (though they’re not always successful, that’s okay).
That’s all for today. I hope you now have an answer to your question “how does Gmail make money”. The collective Google ecosystem is what makes the business a multi-billion-dollar internet company that just seems unstoppable. Individually, none of the Google services would have gotten the superior upstart that they have received.
Now if you love reading about the different business models around the world, we have covered some really interesting ones recently.
Do have a look and let us know what you think! If you want us to cover any businesses on our website, feel free to get in touch with us using the contact button above.