Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) is the world's biggest advertising company. It established itself as the industry leader largely due to the strength of Google Search, which has a monopoly-like market share for online search. That business, more than any other under Alphabet's umbrella, has helped give the company a valuation of around $2 trillion.
Digital advertising has proven to be a highly lucrative business for Alphabet, and it's driven superior operating margins at the company for much of its history. After all, Google's search page is among the most valuable digital real estate properties on the internet. It's the first place most users go when they want to get new information about a health concern, a trip they're planning, or a restaurant they're interested in, among other things.
The chart below shows how Google compares to its closest rivals in search around the world.
Image source: Statista.
As you can see, not only is Alphabet light years ahead of Microsoft, Baidu, and Yandex, but there's more to Alphabet's ad business than just search. So where does Alphabet's ad revenue come from?
Let's take a closer look.
Google's ad revenue breakdown
Of the $237.9 billion Alphabet generated in ad revenue in 2023, $175.0 billion, or 73.6%, came from Google Search. The company's trademark search engine remains the primary driver of both revenue and profits at the tech giant.
After Search, it brought in $31.5 billion, or 13.3%, via YouTube, its leading video-sharing platform. Google Network, its third-party ads that are served on partner websites, brought in $31.3 billion, about the same percentage as YouTube.
Google's ad business is still delivering strong growth, up 11% year over year in the second quarter. And based on its dominance of the space and the consistent need of businesses to advertise on Google, it's likely to continue to grow.
Expect Alphabet to maintain its leadership in the digital advertising industry for years to come.
Should you invest $1,000 in Alphabet right now?
Before you buy stock in Alphabet, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $855,238!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 21, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Baidu, Microsoft, and Nebius Group. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
