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Business Operations Business Models

How Does Gmail Make Money (Business and Revenue Model)

The Gmail business model

How Does Gmail Make Money?
Here’s what you should know:
  • What is Gmail, and how does Gmail work?
  • How does Gmail make money?
  • Gmail Ads
  • Adding Additional Storage (Google One)
  • Gmail profit and revenue
  • What is the Gmail business and revenue model?

How does Gmail make money if it’s free to use? Here is a full, in depth, breakdown of their two (2) revenue streams and the different products and services they offer, as well as the Gmail business model, their year over year revenue, and how Gmail works.

What is Gmail, and how does Gmail work?

Gmail is a free email service provided by Google.

Developed and released in 2004 by former Google engineer, Paul Buchheit. Gmail now has more than 1.5 billion active users worldwide.

How does Gmail work? To create a Gmail account, users can start by simply visiting accounts.google.com/signup.

Once there, all they need to do to create a free account is enter in a few basic details such as their name, password, and the Gmail username they want – then they are done.

Some of Gmail’s competitors include AOL Mail, Yahoo! Mail, Apple Mail, Outlook.com, and other email services.

Gmail App in Apple App Store | Gmail Business Model | How Does Gmail Make Money? | How Does Gmail Work?
Source: Apple App Store | Gmail

How does Gmail make money?

Gmail has more than 1.5 billion active users worldwide; per their last official report back in October of 2019.

So how does Gmail make money off of all these active users with accounts?

Below is a breakdown of how much money Gmail makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 2 ways of how Gmail makes money (in 2022):

Gmail has a business model that makes money in two (2) ways; Gmail Ads and adding additional storage (Google One).

#1. Gmail Ads

One of the ways Gmail makes money for Google is through its advertising, Gmail Ads.

Gmail is a part of Google’s larger ecosystem of products they run ads on; along with Google SearchYoutube, Google Maps, Google Play, AdMob, AdSense, and Google Ad Manager. Which, in 2021, collectively generated $209.5 billion in ad revenue for Google.

Gmail Ads Cost:

  • Google Ad’s average Cost Per Click (CPC) is $0.67, and the average Cost Per Thousand Impressions (CPM) is $2.80 (as reported for 2021)
Gmail Ads Cost | Gmail Business Model | How Does Gmail Make Money? | How Does Gmail Work?
Source: Google

Note: Gmail Ads is a part of Google’s larger ecosystem of products it runs its ads on, which collectively generated $209.5 billion in ad revenue for Google in 2021.

#2. Adding Additional Storage (Google One)

Gmail also makes money by selling additional storage to its Google Account users.

Every Google Account starts out with an included 15 GB of cloud storage that is shared between Gmail, Google Drive, and Google Photos.

But if a user wants additional storage, they can upgrade to one of Google’s three (3) paid storage plans; Basic, Standard, and Premium. Basic allows up to 100 GB of storage, Standard is 200 GB, and Premium is 2 TB. Which you can see the pricing below.

Google One Storage Pricing:

  • $1.99 to $9.99 per month depending on the storage plan
Google One Storage Pricing | Gmail Business Model | How Does Gmail Make Money? | How Does Gmail Work?
Source: Google

Gmail profit and revenue

While Google does not specifically mention how much money Gmail makes by itself, we can narrow it down a bit by looking at the revenue segment on Google’s annual report where Gmail makes its money in.

Gmail is a part of (but does not make up entirely) Google’s “Google Search & other” ad revenue segment on their annual report. Which, in 2021, generated $148.95 billion of Google’s total $257.63 billion in revenue.

Note: Because Alphabet Inc. (Google) is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Google’s publicly released financial reports, including annual reports, through Google’s investor section on their website.

What is the Gmail business and revenue model?

Gmail makes money through a few revenue models that they combine within their company, they are:

  • Freemium (upselling) business model
  • Cross selling business model
  • Advertising business model
  • Subscription business model