Friday, April 6, 2007

How Google Earns 99% Of It's Revenue: From You!

Can You Earn 99% Of Your Revenue From Google?

The 80-20 Rule

In the real world we are all familiar with the Pareto Principle (also referred to as the 80-20 rule). Vilfredo Pareto, an Italian economist, noticed that 80% of income in Italy was received by 20% of the Italian population. Soon this 80-20 rule was being applied to almost every business application, allowing business to focus on the 20% of items that result in 80% of the revenue.

The New 99% Rule

On the Internet, as things often are, the Pareto Principle gets amplified, as in the case of Google (and Yahoo!). Google earns 99% of its income from one source - pay per click revenue. That's it. Pay per click is the driving engine behind all of Google's frenzy, glory and revenues.

If you stick with me for just a bit, I can share with you how this impacts your mortgage web site...

Google's Pay Per Click Ads

When you use Google for a search, there are two main sections that appear in your results. First, and foremost, are the web results, which appear at the left of the page, and occupy about 80% of the page. The pay per click ads (called Google AdWords) show on the right hand side of the screen after you do a search query. These results are in a narrow column, with the words "Sponsored Links" above the column. Every ad in the "Sponsored Links" is paid to be there.

What is Google AdWords?

Google AdWords is how mortgage companies, and others, purchase highly targeted pay per click advertising. Such targeted keywords can include: San Diego Home Loans, Long Island Mortgages, Redmond Home Refinancing, Palm Springs Second Trust Deeds, etc. This type of targeting allows a mortgage company to receive exactly what they want... home loans but no subprime loans, refinances but no VA loans, commercial loans but no farm land.

So, just how do these targeted visitors (who want to be your customer) get to your company. Let's go back to Google.

58% plus 41% equals 99% reported that, "As of the end of the March quarter, Google derived 58% of its sales from paid search advertisements on its own Web sites. It generated another 41% from its distribution partners, which include content sites and other search engines." A quick math check shows the sum of 58% plus 41% equals 99%. In short, virtually every penny that Google earns comes from pay per click ads.

Google Distribution Partners

Google skillfully created their massive income by having advertisers (i.e. mortgage companies) pay for ads, and then besides showing the results at, they also use "distribution partners."

The article further stated, "Excluding the payments Google makes to its content-distribution partners, revenue leaped 92% to $1.53 billion, above analysts' expectations of $1.47 billion." There is a hidden qualifier in that statement... "Excluding the payments Google makes to its content-distribution partners."

Targeted Local Traffic For Mortgage Companies

One of the reasons the Google Content-distribution program works so well for local mortgage companies, is that Google delivers "local ads." In example, if a site is about schools and real estate in San Diego, the Google bots have "indexed" the page and knows to deliver "San Diego Home Loan" ads, not "Dallas Home Loans." This highly targeted ad causes visitors to the sites to be more likely to click on the ad, thus benefiting not only the viewer, but the mortgage company and Google.

Even My Teenager Content-Distribution Partner Site Delivers Highly-Targeted Mortgage Leads

Content-distribution partners are the places where Google ads appear, besides the Google site. In example, my teenage daughter is a content-distribution partner for Google. Certain pages of her site are city specific and can result in real estate and mortgage leads being generated by her visitors. This also benefits my daughter as she has about 60,000 unique visitors a year and earns monies from Google for allowing her visitors to see, and click upon, the Google ads.

Besides the impact from my daughter’s site, Google also receives "sales" from content-distribution partners such as the Washington Post, Amazon, AOL, AT&T Worldnet, EarthLink and the New York Times.

Google Chief Financial Officer George Reyes states that the continued addition of new publishers participating in Google's AdSense for Content program was "significant" in driving sales growth.

Home Loans vs. Salads

The amount paid to be listed varies on the competitiveness and on the value of on the keyword. Generally, financial or money-related terms tend to generate higher bid amounts. In example, the top five bids for "Home Loan" currently range between $5.02 and $5.83 per click, while there are only a few bids for the term "Salad" and they are between $0.10 and $0.11 per click. Even a highly searched keyword like "Jessica Simpson" has a top bid of just $0.12 per click.

Furthermore, money related domains frequently have even higher bids for highly targeted searches. Again, the top five bids for "Home Loan" currently range between $5.02 and $5.83 per click, while the top five bids for "Nevada Home Loan" range between $5.99 and $7.01 per click. The top five bids for "New York Home Loan" currently range between $5.13 and $6.25 per click and for "Miami Home Loan" the range for the top five bids are from $5.00 and $6.88.

If a visitor clicks on one of the pay per click ads from the site, then Google keeps 100% of the amount of the click. If a visitor clicks on one of the pay per click ads from a distribution partner, then Google pays a portion of their earning to that partner as a commission.

What Does All This Mean For Your Mortgage Company?

Given the expense of advertising mortgage services, you can highly target which “exact visitors” you want to see your ad. And exclude all other visitors outside your geographical location or exclude those seeking a mortgage related service that you don't provide.

So Google may earn 99% of its earnings from companies like yours, but you in return can earn a substantial amount of your revenue from Google by buying pay per click ads for highly targeted keywords.

For online mortgage leads please visit our mortgage leads page.

Originally published July 2006.

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