14 DAY TRIAL // Google's bread and butter has been advertising, particularly text ads on its website and on sites running Google AdSense. Google has made billions of dollars from this type of ads, but, increasingly, display ads are becoming a larger part of Google's revenue.
During Google's quarterly earnings conference call last week, Larry Page boasted that Google was on track to making $5 billion, €3.87 billion in revenue from display ads per year.
That's based on the figures from the last quarter alone, meaning that if revenue stays flat, Google will make $5 billion in the next year. Most likely, display ad revenue will grow.
One big component of that, though there's no way to know how big, is YouTube, which has been driving display ad revenues at Google for quite a while.
The company still isn't saying whether YouTube is profitable, but it should be making well beyond $1 billion in yearly revenue at this point.
A good indicator that YouTube is seeing increased revenue is that 60 percent of the video ads it runs are now TrueView ads, aka skippable ads. Viewers are forced to watch the first five seconds of the video and can then proceed to the video they wanted.
Clearly, these ads, which have been introduced about a year ago, have proved successful judging by the figure Google revealed. Things are even more encouraging, these ads, when watched to the end, have an engagement rate of 15 percent to 40 percent.
Advertisers have another incentive to use these ads, they don't pay anything if viewers don't go past the first five seconds. Only the ads that people opt to watch are charged. This makes advertisers happy, since they pay on if people are interested, and it makes Google happy since it can charge more for the ads thanks to the greater ROI.