Google strategy 201202


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Google strategy 201202

  1. 1. GOOGLE INC. 2012 KSIM ‘IT STRATEGY’Google’s mission is to organize the world’s informationand make it universally accessible and useful. - Google’s mission statement
  3. 3. GOOGLE INC.The recent take-over of Motorola and fee-charging of the Google Map reflects some of the changesin Google’s strategic approach. Henceforth, as a result of some situational changes for Google, it isan appropriate time to observe if Google is yet to experience relevant strategic changes as well. Thefollowing report regards Google’s current and future strategies based on the analysis of changes andconditions surrounding Google Inc.  WHAT’S GOOGLE’S CORE BUSINESS? [Source: Google 2010AnnualReport] [Source; Net Market Share (2011. 10)] 2010 2009 2008 2007 Google Web 194(24%) 157(9%) 144(36%) 106(68%) Sites Google Network 87(23%) 72(7%) 67(16%) 58(39%) Web Sites Licensing & 11(42%) 7.6(14%) 6.7(268%) 1.8(61%) Other Revenues Total Revenue 293(24%) 236(9%) 218(31%) 166(56%) * Note: % within brackets is the growth rate over the previous year , Google Annual Report 2010 2
  4. 4. FEATURES OFGOOGLE CORE COMPETENCE GOOGLE’S Business Structure INDUSTRY STRUCTURE According to annual reports, Google’s business islargely categorized into3types. First is the Google website which refers to the site operatedby Create and expandGoogle itself. Google mainly makesprofitsoff ’AdWords’ sales aimed toshow searching results. In late 2011, Google website sales recorded $194 its revenue modelsbillion, which counts for 60% of total sales. Google is competing against MS by strengtheningand Yahoo in the searching advertising market. As it is shown in the figuresabove, Google has maintained and sustainedits overwhelming Google’scompetitiveness for a long time. Second isthe Google Network Web Sites. platformleadershipWeb site owners and Blogger operators produce profits using advertisingsolution called ‘AdSense’. Google also shares Ad revenue with its site base on its coreoperators. Revenue earnings from Google website have reached $ 88 competencesbillion. This amount accounts for 30% of total Google sales. Licensing &Other Revenue accounts for 4% of total Google sales. Business Features First, dependency onthe Google website whichis mainly known foritssearch engine is considerably high (66% of total sales). On-lineadvertising revenues withNetwork Web Sites ad sales added captures 96%of total sales. But Google faces a problem due to its poor portfolio. Highreliance on on-line advertising business led to the result of Google’srevenue growth being vulnerable to economy fluctuations. Second, online advertising revenueswhich account for 96% of total salesare dependent on existing PCs.The table above suggests that advertisingrevenues in 2007, 2008, and 2009 are almost zero. The current Androiddevice may have spread across the world, but its advertising revenuesseem quite insignificant. Data traffic flow from desktop to mobile may distortthe current business structure and, inevitably, impacts desktop-basedadvertising revenues negatively 3
  5. 5.  Better Portfolio In terms of Google’s business structure, challenges faced by Google is inneed of effective responses from SNS, such as Facebook, and also must COREconsider new revenue models, according to various portfolios focused on a CAPABILITYnew business model. Ability to provide AdSense for content products/service AdSense for customers AdSense for mobile content AdMob for mobile applications  WHAT IS GOOGLE’S CORE CAPABILITY?Google Search. The goal of AdWords, our primary auction-basedadvertising program, is to deliver ads thatare quite useful and relevantto search queries or web contents are a form of information in their ownrights.WithAdWords, advertisers create simple text-based ads that thenappear beside related search results or web contents on its websitesand thousands of partner websites on Google Network, which is thenetwork of thirdparties that useGoogle’s advertising programs to deliverrelevant ads with their search results and contents. Most ofour‘AdWords’ customers pay Google on a cost-per-click basis, whichmeans that an advertiser pays only when a userclicks on one of its ads.We also offer AdWords on a cost-per-impression basis thatenablesadvertisers to pay usbased on the number of times their adsappear on our websites and our Google Network Members’ websitesasspecified by the advertiser. 4
  6. 6. Our AdSense program enables websites that are part of theGoogle Network to deliver ads from our AdWordsadvertisers thatare relevant to the search results or contents on their websites. COREWe share the majority of therevenues generated from these ads CAPABILITYwith the Google Network Members that display the ads. TheAdSense programenables advertisers to extend the reach of their Ability to providead campaigns, improve our partners’ abilities to generate products/servicerevenuefrom their contents, and deliver relevant ads for theirusers. for customersGoogle Display. Display advertising is comprised of videos, text,images, and other interactive ads that runacross the web oncomputers and mobile devices, including smart phones andhandheld computers such asnetbooks and tablets. The GoogleDisplay Network provides advertisers services related to thedelivery of displayadvertising across publishers participating in ourAdSense program, publishers participating in the DoubleClickAdExchange, and Google-owned sites such as YouTube andGoogle Finance.Through our DoubleClick advertising technology, we provide topublishers, agencies, and advertisers the adserving technology,which is the infrastructure that enables billions of ads to be servedeach day across theweb. Our DoubleClick Ad Exchange creates areal-time auction marketplace for the trading of display ad space.Weaim to simplify display advertising so it is easier for advertisers[source: google annual report 2012] 5
  8. 8.  HOW GOOGLE GENERATE CORE REVENUE?• USERS: the best and widest range of searches for free• ADVERTISERS : a more measurable advertising model‘AdWords’,linking directly to search phrases and triggering payments contingent on user actions (clicks)• WEB CONTENT OWNERS : opportunities to monetize from traffic routed by Google, through AdSense revenue sharing model 7
  10. 10.  IN PARTICULAR, WHAT IS GOOGLE’S REVENUE MODEL? Now let us have a look at Google’s revenue model regarding itsbrokerbusiness. Usually, there are compensations for every products andservices, but it may not necessarily bein payment form. In Google’s case, the non-monetary compensation for their search offering is the key to Google’s fortune. In Fig. you can see that Google’s search business basically provides a search service to search customers and a PPC (Pay per click) advertising service to its advertising customers. The compensation for the PPC advertising service is payment per click on an advertisement. The non-monetary compensation for the search service is the data about the user who is searching. 9
  11. 11. Synergy from Google´s Revenue ModelThis business model has two striking advantages:  The information about the search customers is provided to Google for free and Google sells advertising space, perfectly matched with the customer information, to advertisers via an automatic online auction.  So Google leverages a revenue synergy between the search and advertising business.  The revenue model allows the revenue generated in the broker business to be used to carry the sunk cost and operations cost of offerings like Gmail and others. GOOGLE BROKER MAIN BUSINESS MODEL (HYBRID) MAIN SOURCE OF ADVERTISING REVENUE NON-MONETARY YES REVENUE STREAM (BROKER) REVENUE SYNERGIES ADVERTISING AND ALL BETWEEN E.G.. OTHER BUSINESS IMPACT OF EXISTING CUSTOMER AND ECOSYSTEM PARTNER ECOSYSTEM 10
  12. 12.  WHAT DOES GOOGLE HAVE TO DO SUSTAIN?GOOGLE, HISTORICALLY AHEAD IN MANY DIGITALSERVICES, IS BEHIND IN SOCIAL TECHNOLOGY While they have tried in the past with services like Wave and Buzz, they have failed to capture mass attention and usage.ACROSS THE GLOBE,USERS CHOOSE TO SPENDTHEIR DIGITAL TIME IN SOCIAL In December 2010, Europeans spent more time on than on Google sites – comScore, dec. 2010 11
  13. 13. GOOGLE+ WILL BECOME THE CORE OF GOOGLE’SSERVICES “The assumption is that everything will move over to using the Plus infrastructure over time” – Eric Schmidt, Google’s chairmanIT’S TIME TO SHIFT PARADIGMS.PROVIDE BETTER ADS.BETTER ADS MEANS MORE REVENUE. FIGURE 1. CURRENT PORTFOLIO Google+ brings more social factors into other services,such as YouTube and Chrome, and will activate social data across other Google products that millions are already using. FIGURE 2. FUTURE PORTFOLIO 12
  14. 14. GOOGLE SHOULD ALSO BE FOCUSING ON ADS MORE THAN MOBILEPAYMENT BUSINESSES BASED ON PAYMENT FEE. Google has the opportunity to spread the NFC that occurs in off-line payment transactionsand personal information has accumulated based on the BM-based advertising business.Itsvalue base must be expanded into the real economy. 13