How Google Maps Makes Money?

Ethan
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GOOGLE MAPS

I’m sure you’ve all used Google Maps. Whether it’s to get directions to a new restaurant or stalk someone’s house through street view, we’re all familiar with the tremendous resource that is Google Maps. Something that most of us likely take for granted is that just like all of Google’s other products, Maps is completely free to use for as long as you want. 

GOOGLE MAPS


This sort of freemium model isn’t too surprising with search or email where everything you need is virtual, but maps is a pretty grueling business that requires a lot of physical resources. From the dozens of satellites and hundreds of street view cars that constantly monitor and take pictures of the Earth to all the servers and supercomputers required to complete millions of hours of processing to seamlessly stitch together petabytes of data. 

And let’s not forget about all the hours spent on blurring out license plates, faces, houses, and other personally identifiable information. Clearly, there’s no question that Google Maps takes a lot of resources to keep functional and up to date. And while its value proposition to Google wasn’t too clear in the early days, Maps has grown to be one of Google’s most lucrative businesses. 

In fact, Morgan Stanley estimates that Google Maps will pull in over $11 billion in revenue in 2023 alone. For perspective, that’s about the same as TikTok. And if we valued Google Maps the same way as Alphabet, Google Maps itself would be worth roughly $62 billion. That’s about the same as Mercedes Benz and more than Volkswagen and PayPal. 

Heck, that’s enough to be a top 250 company by itself. But how does Google even monetize Maps? They don’t show video ads or search ads, and there doesn’t seem to be much opportunity to collect and sell our data based on just our Google Maps usage. 

Well, it turns out that Google has come up with some pretty creative ways to indirectly monetize Maps while staying surprisingly ethical. So, here’s the insane rise of Google Maps and how Google Maps makes so much money. 


AN UNDERWHELMING START 

Taking a look back, the story of Google Maps takes us back 20 years to 2003. Like many of Google’s products, Maps wasn’t something that Google created house, it was actually something that they bought from 4 men named Lars Rasmussen, Jens Rasmussen, Noel Gordon, and Stephen Ma. Together, they had founded a startup called Where 2 Technologies in Sydney Australia. 

The idea for the platform was pretty simple: create a desktop map program. But it turns out that this was a lot easier said than done and pretty soon, they needed a lot more resources leading them to meet up with Google in late 2004. 

Initially, Google wasn’t actually convinced about Where 2 Technologies until the founders suggested the idea of converting the desktop application into a web platform that could be accessed much more easily. With that, Google would agree to take a flier on the company for an undisclosed amount which was likely well below $50 million.

Where 2 Technologies wasn’t the only map-based company that Google purchased in 2004 though. Around the same time, they would purchase two other map companies called Keyhole and ZipDash. Like Where 2 Technologies, Keyhole was a desktop application unlike Where 2 Technologies, Keyhole was more focused on the macro scale. Aka, viewing the earth and various countries as opposed to specific streets and directions. 

I don’t think you’d be surprised to hear that this is what would turn into Google Earth, and Google got this entire company for just $35 million. But, in terms of value, nothing comes close to ZipDash. In fact, ZipDash might be Google’s most bang for the buck acquisition of all time as they were able to purchase the company for just $2 million. 

What did ZipDash do you ask? Well, they specialized in using location data from mobile phones to create approximate real-time traffic data. This tech would be underappreciated and underused by Google for several years, but once smartphones started taking off, all of that would completely change. 

But anyway, going back to 2004, after all the acquisitions were done, Google would spend a few months refining the technologies before finally launching Google Maps on February 18, 2005. Apparently, Google Maps would get Slashdotted the night before its launch. 

If you also don’t what that means, it basically means that Google Maps went viral on a forum the day before launch which led to an explosive launch right out the gate but this traffic didn’t last. You see, for a lot of us, myself included, 2005 probably sounds like the Stone Ages when it comes to the internet, but it turns out that there were already some pretty great mapping solutions on the market before Google Maps specifically Yahoo Maps and MapQuest. 

And while Google Maps was superior to these offerings from day one, that by itself was by no means enough to displace the market leaders. For most people, Yahoo Maps and MapQuest already accomplished what they needed, and they had no reason to use Google Maps instead. 

So, the general consensus for year 1 was that Google Maps did just okay. It pulled in a decent amount of traffic but nothing too crazy. Google could’ve easily just called it here and kept Maps a small side business, but they were determined to make Maps much more than just that. And as such, they would scrap everything and start over. 


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A COMPLETE DO-OVER

Given the underwhelming response, Google would decide to do a complete rewrite of Google Maps. In turns out that while Google Maps was better than MapQuest and Yahoo Maps, for modern standards, it was still rather slow, so their number one goal with the rewrite was to maximize speed and optimize the user experience. 

After about a year, they would get the platform to be nearly instantaneous, allowing them to make much more ambitious moves starting with Satellite view. Google would stitch together all of the imagery that they got from the Keyhole acquisition to create a satellite view. 

Fun fact, satellite view isn’t actually satellite view in most cases. It’s actually an aerial view taken from low-flying planes. The Google team was actually debating on whether to call it arial mode or satellite mode. But when Sergey Brin made the decision to call it Bird Mode, the rest of the team decided to unite and defy Sergey by just calling it Satellite Mode. 

Apparently, Sergey would never comment on this name change. But anyway, Satellite Mode would come out in late 2005 and this was immediately a selling feature for Google Maps. Putting the actual utility Satellite Mode aside, most users just liked messing around with it. Being able to see your house and city from a bird's eye perspective was super neat. 

You kind of felt like you were top top-secret spy or something. Google would simply take this novelty to the next level on May 29, 2007, with the debut of Street View. Street View was obviously an extremely ambitious project. Google was basically signing up to bankroll cars driving around every single street in the entire world. 

It turned out to be a really popular feature though. Now, not only could you see your city from an aerial perspective, but you could literally walk through it as if you were actually there. But while satellite mode and street view definitely made Google Maps unique and drove popularity, the number one trend that made Google Maps ubiquitous was of course smartphones. 

In fact, smartphone-based revenue accounts for nearly 90% of Google Map’s revenue which is not that surprising. Android is the most popular operating system in the world used by billions of people. And you know what comes preinstalled on Android devices? It’s of course Google Maps. So, most Android users are naturally just gonna use Google Maps whether it’s the best or not just like how everyone used to use Yahoo Maps and Mapquest. 

All of this has allowed Google Maps to reach over 1 billion monthly active users. But, while they were eventually able to get to a dominant position, it was by no means an easy road. While Google was able to acquire the core 3 companies that make up Google Maps for less than $100 million, actually making Google Maps successful cost a lot more money. 

According to one professor, just the upfront cars, cameras, computers, and manpower alone cost over $400 million. And Google never stopped updating their imagery. If anything, they actually do it more and more often with time. So, there’s no question that creating and maintaining Google Maps has cost Google billions of dollars over the years which brings us to the question of the day: how did they make all of this worthwhile? 


Monetization

Google’s monetization strategy when it comes to Maps breaks down into 2 main categories. Given that Google is an advertising company at the end of the day, I don’t think you’d be surprised to hear that the first category is ads, but it’s actually done in a really tasteful helpful way. You know when you pan around Google Maps, you see businesses like Walmart Home Depot, and Starbucks?

Well, listing a business or location on Google Maps is actually completely free and basically anyone can do it provided you have the right documents and rights. If you wanna take this to the next level though with custom branding and high visibility, you can pay Google a fee and basically make your listing a premium listing. 

To be honest, this seems like a win-win scenario. Users are able to find businesses more easily with their logos and companies are able to increase their brand presence in a discrete non-intrusive way. But that’s only half the story. Google’s other mode of monetization is honestly far more interesting which is through APIs. You know how when you go to the website of a restaurant or a local bowling alley, you’ll sometimes see a small map showing you the location of the avenue? 

Well, companies are able to do this thanks to Google APIs for which they have to pay. And that’s more of a small use case. Imagine what happens when someone like FedEx, Uber, AirBnB, Zillow, or DoorDash implements Google Maps. All I can say is that that would cost quite a bit of money, and that’s just the most obvious implementation of Google Maps API. Likely the most commonly used Google Maps API actually has nothing to do with Maps directly. 

Do you know how when you start entering a billing address or a shipping address, the address auto-fills? Well, that’s thanks to Google Places API. Basically, every company in the entire world that collects address information uses Google Places or a direct competitor like Microsoft’s Azure Maps. 

If they don’t, they’re probably stuck in the 1990s. On a per-user basis, Google Places is relatively cheap. It’s only about 3 cents per use but think about how many times you yourself might use this every year. Maybe 10 times? That itself is 30 cents worth of revenue for Google. If 3 billion people were to do this every year, that itself is $1 billion worth of revenue for Google from just one API. 

I think you can start to see how all of this can add up to $11 billion when you throw in hundreds of different APIs and use cases. But even putting the financials aside, thanks to Google Maps, Google has been able to map out the entire globe in pinpoint detail. This means knowing the exact address and location of any and every commercial and residential property in the entire world. 

And if that wasn’t enough, they know the exact location of billions of people on this highly detailed map at any given point in time. If that isn’t an insane amount of power, I don’t know what is. And that’s why even if Google Maps never even made a single dime, Google would be the real winner when it comes to Google Maps.

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