There is a very eye-opening interview with Peter Norvig, Research Director at Google. The interview is available here

I finally understood why Google is always funding these initiatives that are unlikely to translate to revenue. It’s about growing the customer base by making the Internet more useful. Brilliant, and very healthy, strategy.

Despite all the experiments Google has initiated since it began, the vast majority of your profits—I’ve heard between 97 percent and 99 percent—come from just one thing: advertisements related to search. Obviously, then, income generation is not the metric you’re using to decide if a product succeeds or fails. What is?

You’re right that most of the money comes in through ads. But you can think of everything else as bringing in customers so that they’ll click on the ads. We know the value of adding a new customer, and we can see what the usage is of individual sites. So we can say, “This feature is popular, our usage is going up, and because usage is going up, we’re making more money.” We do things to make Google better so people will come to Google and click on the ads.

What’s interesting, though, is that we’re now at the scale where we can also do things that just make the Web better. We do a lot of open-source projects, because if we release code and some other company makes something really cool that makes the Internet better, we benefit, too. About half of Internet users are using Google search, so if another company builds something and two people start using the Internet because of it, we’re going to get one of them.

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