Started by licensing its search engine to third party sites eg. Yahoo!
In Dec. 1999, they started using the Paid Listings Model ”Sponsored links that appeared either adjacent to or interspersed with web search results for specific keywords.
In March 2003, Google launched Contextual Paid Listings
Top Management: Sergey Brin, Larry Page, Eric Schmidt
Went for an IPO April 2004 with a dual class equity structure
Class B 10 votes
Class A 1 vote
(Top management would own 1/3 of shares but control 80% of votes to allow for stability over long time horizons.)
Don’t be evil.
Make own rules.
Managing innovation part of culture.
Never settle for the best.
To hire the right people for the job
Facilitating efficient team dynamics and communication
To make decisions based on data
“ Don’t be evil”
Brief overview of problem
Over the past few years, Google has grown immensely and is still growing. Product innovations has expanded its domain beyond search into domains like:
Portals (Google vs. Yahoo, MSN)
Planned Payment Service (Google vs. EBay)
Ad Supported Software (Google vs. Microsoft)
What moves should Google make next?
Competitor Analysis Competitor Competitive Advantage Strategic Direction Yahoo! - Leading “full fledged” internet portal
Steering searchers to Yahoo!’s own services
Human intervening in search results
Microsoft - Dominant in the PC software industry (Windows, Office etc.)
Developing “software as services” (Windows Live)
eBay - Largest ecommerce facilitator - Owns Paypal - Acquired Skype to leverage on VoIP for e-transactions
Had a corporate structure which allowed quick decision making & encouraged innovation unlike competitors
Higher focus on innovation , 20% policy, resulted in products like Orkut, Google news
Offered free software to marketers so they could optimize their investment in Google
No adoption of commercial agendas unlike competitors, focus only on improving algorithms for better results
Focused search engines like Froogle which are for specific products, these were free.
Faster, better search with many enhanced features like search history , language flexibility etc.
Differentiation Strategy Google Microsoft Yahoo CTR model, assist marketer CTC model Lesser assistance CTC model Lesser assistance Owned by essentially 3 people Owned by many shareholders Owned by many shareholders Higher quality search results Poor search results High quality but not as good Focused on search engine business A portal, operating system with many business lines A portal, competed in many business lines
Porters 5 force model
Entrants to paid listings business faced considerable expenditure & need competent software developers.
Suppliers: Companies placing ads on Google, get higher revenue splits , better results , more guidance etc.
Buyers: better, faster, higher quality & speed of results reducing chances of users to shift search engine.
Rivals: Diversified firms, not as competent as Google in search engines, fierce competition as low switching cost
Substitutes: other media of communication , given the target market of e-advertisers, rapid increase in online access & surfing time, these hardly proved to be a threat
Porter’s Five Forces Model of Industry Competition New entrants faced heavy investment & technological superiority to enter Users got better, faster, higher quality & speed of results Advertisers got higher revenue splits , better results , more guidance other media of communication , given the target market of e-advertisers, increase in online access & surfing time, these were no threat Diversified firms, not as competent as Google in search engines, fierce competition as low switching cost
Resource Based Approach
Resource based model emphasizes the use of a firm’s unique resources to target and apply them to new markets
Unique corporate structure
Strategic alliances e.g. partnership with AOL
Strong focus on innovation
Unique 70/20/10 corporate strategy
CTR advertisement rate model
Superior search engine & other products like Gmail
Superior software tools & services
Strong support to advertisers & personalized search to users
Second Mover Advantage
Google entered e-search market after Yahoo this helped them improve search results using algorithms
Google developed a CTR model which was an improvement over Overture’s CTC model
Developed “contextual based advertising” where listings appeared on editorial pages like blogs, news etc.
Developed many new products like Froogle, Gmail , personalized home page before their competitors
Developed brand ads & video ads which attracted brand advertisers
Google should offer personalized features like personalized search, search history
Expand service range add features like desktop search , base , search Gmail,
Higher quality of accurate search results obtained faster
Competitive rates to advertisers & better services like Google wallet, to increase their sales and reduce costs
Google should lock itself as dominant design preferred by customers & firms who would incur switching costs if they changed their search engine
Technology Paradigm Shift
A new technology getting its start away from the mainstream of a market, and invades the main market, as its functionality improves over time
Firm which develops a technology that changes they way an industry functions gets majority of market share of that industry
Google discovered 2 killer applications
Page rank algorithm to improve search results
CTR paid listings model
It leveraged on these 2 competencies to make Google a favorite with buyers and advertisers and changed the way online search is conducted
What we do is search. Yahoo is a portal with a myriad of specialized services. What Google does is sufficiently limited. It's not really targeted at what Yahoo or AOL is trying to do. Our business strategy is not to compete, because we want them as customers … Eric Schmidt, CEO Google
Other Future Offering
Extension of existing services in order to diversify
Close potential gaps in service provision
Further partnership with AOL (biggest service provider in America)
Create as much awareness as possible
Brand awareness plays a major role in search engine selection
Yahoo pays 900 million to ‘facebook’ to capitalize on the youth market, Google has ‘orkut’ which can be further developed to this purpose
Very successful with project to provide free WiFi in San Francisco and Mountain Valley (California)
Extend such projects worldwide
To zoom in…4 Alternatives to Venture into
Focus on Comparative Advantage:
Develop superior search solutions + monetizing through targeted advertising
Make it the trusted third part info escrow agent for all the world business
In line with its aim of organizing all of the world’s information
Up to date and subjective searches
Classified by relevance
Build trusted networks to provide intermediary function as an online payment inter phase (like PayPal)
Extending to purchasing journals, copyright articles via Google Channels
Compete head on with Microsoft as rumored
Desktop searches, office alternatives (provide support to development of open source initiatives like Open Office)
Provide interfaces compatible with Linux users to extend market base
Why not build their portal?
According to Eric Schmidt, CEO of Google, Google is not in the portal business.
Data also show that using websites as portals is the least important factor for respondents (internet users), among factors such as relevant results, speed of website, best features and the way results are presented.
There are already 2 big players in the Portal business, namely Yahoo! and MSN, due to high market commonality and high resources similarities, Google should practice mutual forbearance and not enter the portal business to prevent counter attacks by Yahoo! and MSN.
Yahoo! has first mover advantage- loyal customers, who may find it difficult to switch to another portal format. Google may find it difficult to take the market share away from them.
Google has enough expertise to enter portal business.
Portal can be use as a complement service to their search engine.
May be a relatively easy investment.
Why build their own portal?
Why not focus on ecommerce?
Already has big player Paypal
87million accounts in US
Next big thing
Have enough capabilities to create a payment service
Because Google Wallet is coming out
Competitors are not into it yet
Why focus on ecommerce?
Why not build their own OS?
Not consistent with Google’s philosophy
“Its best to do one thing really, really well”
Google does search best
Difficult to compete with Microsoft
Microsoft already has positive feedback loop
High installed base of users
High switching cost
Possible in the long run
Given that Google gain the technology
Why build their own OS?
Why should Google focus on Core Competency?
Shows a consistent image of the Google
Low threat of new entrants
Rivalry: defend against competitors due to better search functions
Well-positioned relative to substitutes because of brand loyalty
Market Commonality – high
Resource similarity – high
have mutual forbearance
should focus on their core competency to avoid from multi-market competition