What Is Google TAC? - Small Business
Google pulled in $50 billion in revenue in 2012, largely because of its global advertising efforts. There's another side, though, to Google's "big money" coin: the traffic acquisition cost. Rather than representing how much Google earns, the TAC reveals how much Google had to spend at a given time in order to make its Google-sized amount of ad revenue.
Background
Plenty of people willingly use Google's search engine and visit Google-owned websites and services, such as YouTube and Gmail, on which Google ads run freely and plentifully. Google makes money from these ads. However, to get even more exposure to its ads, Google partners with other websites via Google's AdSense and AdWords platforms, and by other means. Google then pays its partners a portion of the ad revenue it earns. That amount -- the amount that Google pays to its advertising partners -- is the TAC.
Advertisement
Article continues below this ad
Positive
By dispersing more of its ads through advertising partners and by paying the TAC to those partners, Google keeps the money coming in. This money helps keep many of Google's services, including Gmail, YouTube, Google Drive and more, free of charge to most people. So, in that respect, average Google-using consumers win from the Google TAC. Other winners are the recipients of Google's TAC, such as AdSense and AdWords partners. Beyond that, even large corporations, like Apple, benefit from the Google TAC; Google pays Apple millions of dollars to make Google the default search engine on Apple's Safari mobile platform.
More For You
Is Google Update Needed on Startup?
Is Google Update Needed on Startup?. Google Update, also known as Omaha, is needed at...
Ethical Issues Among Stakeholders in Google
Ethical Issues Among Stakeholders in Google. When Google took its company public in 2004,...
Examples of Digital Advertising
Examples of Digital Advertising. Digital advertising refers to marketing media that is...
How to Add a Link to a Google Chat Window
How to Add a Link to a Google Chat Window. With Google Talk, also known as Google Chat,...
The Similarities Between Google & Yahoo
The Similarities Between Google & Yahoo. Google and Yahoo have been fierce competitors...
Negative
Although Google makes earns a lot of revenue each year, the TAC means that Google must part with a lot of that advertising money. For example, the "Business Insider" reports that Google earned just over one billion dollars in revenue from traffic to Google ads generated by Apple. But Google had to pay Apple about 75 percent of that, meaning that out of that one billion dollars, Google really only made about $335 million dollars -- still a high number, but only a fraction of total earnings.
Advertisement
Article continues below this ad
Future
To continue to capitalize on ad revenue, the Motley Fool and other sources report that Google is wise to continue to pay large amounts of cash for the TAC, seeing as how it expands Google's reach and fights back against competing search engines, especially Microsoft's Bing engine. To continue to stay competitive, Google must also make greater efforts to ensure ad exposure on mobile devices, as more people become less reliant on their PC's and laptops and more dependent on their smartphones and tablets, sources say.
References
- Investopedia: Traffic Acquisition Cost
- TechCrunch: Google Could Pay Apple $1 Billion Next Year to Remain Default Search Engine on iOS, Report Says
- The Motley Fool: 4 Numbers That Google Investors Need to Watch
- Dawn: Google 2012 Revenue Hits $50 Billion, Profits Up
Aaron Charles began writing about "pragmatic art" in 2006 for an online arts journal based in Minneapolis, Minn. After working for telecom giant Comcast and traveling to Oregon, he's written business and technology articles for both online and print publications, including Salon.com and "The Portland Upside."