Sylver - 7:28 pm on Jul 31, 2010 (gmt 0)

Search made no money. Advertising made money. Google virtually owns the online advertising market.

Semantics. Advertising brings money only to the degree that they are able to deliver targeted audiences. That audience was (and is still) mostly acquired thanks to search (still 2/3 of the revenue, even today). Without their success on the search arena, nothing else would have been possible, including the content network

Webmasters accepted to deal with Google because Google had such a huge rep in the search market. Without search, Google would have been unable to create the content network.

So, yeah, advertising is how they turned their audience into money, but Search is the only reason they had an audience in the first place.

Where would you suggest they find another growth model in advertising?

As you say, they have cornered the online advertising business, so IMHO, they don't have a high growth potential in that arena. Advertisers only spend so much, and when you get 85% of the pie already, the growth you can expect is the market's growth combined with squeezing down the costs (commissions paid out to webmasters)

In the last few years, my feeling is that they have increased their margins to the breaking point and that a number of webmasters are jumping ship.

Concurrently, users increasingly develop ad blindness. They simply parse the page and ignore the ads. This trend will probably continue, not to mention ad blockers. Even though they reach more and more people, these people may be becoming less likely to click the ads.

All in all, I don't think that Google can legitimately expect a lot of growth in advertising revenues. Some, yes, but nothing like what they have had over the last few years.

On the other end, just because most of their money so far as been made through advertising doesn't mean they couldn't make some cash through other avenues, just like every other company on the market. Microsoft earns more than twice as much as Google, and advertising is certainly not a major item on their balance sheet, so there is no reason why Google would be limited to ad revenue.

Google needs to find another big problem to solve and solve it. I am not sure what. If I knew that, I might just be a tad bit richer than I currently am.

I have some ideas, but I lack data points to validate them.

Google Apps could be a good source of revenue if they offered a real advantage over Ms Office and OOo.

If they made a deal with content creators, YouTube could implement a subscription model. Not big money, but the effort would be relatively minimal.

On the same line, turn youtube into a music/video store following the iTunes model. Extend Chrome and Android to allow them access to the store and play the content. Allow users to sell their video content through youtube and pocket a commission.

The iTunes store sold $1.8bn worth of music in 2009. It's not a small market, and Google could get a share of that pie.

Anyway, those are just some ideas thrown together in a few minutes. Nothing really revolutionary there, but the point is that with their quasi monopoly on search and online advertising, the growth potential might not be that great, but nothing is stopping them from generating revenue for other sources aside of ads.