If you think that a company is foolish to give away its services, you’d be wise to take a look at the Google business model.
In 2011, in spite of offering free email, instant messaging, internet searching and much more, the company netted a $9.7 billion profit. Google offers free services to the masses and draws in 96 percent of its revenues from online advertising. It has been so successful that since 2007, profits have increased by more than 50 percent, up from about $4.2 billion.
Of course, as the company continues to grow, expenses continue to rise. In 2009, the company paid $8.844 billion towards manufacturing, goods and services. In 2011, it paid $13.188 billion for those same services. Traffic acquisition costs are one of Google’s major expenses, totaling $8.811 billion in 2011. Salaries continue to rise as well; in 2011 employees took on a 10 percent base salary bump. That year the company also paid $2.589 billion in U.S. taxes.
Source: Inside Google’s Expenses