Google makes money by:
1. AdWord : businesses can buy (through bidding & other Google heuristics) search terms so that your website pops up on the sponsored/ad section of a Google search. Businesses whose links are clicked on are charged by Cost Per Click (CPC).
side note : Google displays search results in two distinct areas : 1. "organic" or "non-paid" search results and 2. "ad" or "sponsored" search results. Search Engine Optimization (SEO) is the art of bumping your website to be on top of the organic search results through giving as much information to your site. Search Engine Marketing (SEM) involves bidding heuristics to ensure that your website is at the top of the "sponsored" search section.
2. AdSense : Allow advertising from other businesses on your content rich site. For example, if you are an expert on airplanes, you can allow Google AdSense to place ads from a local RC shop. Revenue is collected via Cost Per iMpression (CPM), not click.
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