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Google Business model

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  1. 1. Members: Davide Sigillo Lorenzo Atti Lucia Gramellini Sofia Mambelli Marco Morselli Giovanni Vascellari
  2. 2. Google Googlers Googley Google’s revenue over the last several years. Number of Google employees between 2007 and 2014 Google remains fast and flowing as it was composed only by Page and Brin, their goal is to let employees consider Google not only as a place to work, but especially as a state of mind Did they really succeed? …but… Since it was founded, Google keeps growing and growing, becoming one of the emblems of our time
  3. 3. 2002 2007 REVENUES 439 508 $ 16 593 986 $ TOTAL COSTS (as % of revenues) 253 092$ (57%) 11 509 586 $ (69%) 0 2000000 4000000 6000000 8000000 10000000 12000000 14000000 16000000 18000000 2002 2007 Costs and Revenues Revenue Costs Google scale up good! The success of Google Big G has been able to grow in terms of revenue and market share, keeping costs under control and always ensuring an income, but most important it continues being “googley”
  4. 4. Why did google scale up good? Keeping and entrepreneurial atmosphere with small and nimble teams Changing processes an think on what can be eliminated, automated, outsourced. …never changed value proposition… 2010 2011 2012 2013 2014 17.77 % 15.3 % 13.51 % 13.6 % 12.63 % …always ensure a payoff from rapid growth… Google’s ROI 5 year avg: 14.56 % Sector ROI 5 year avg: 13.74 % Google Annual Return On Investment Source: …its business model encourage rapid growth… INCREASING RETURNS TO SCALE A lot of people use Google as search provider + Clicks on Ads + Impressions + Income from Ads
  5. 5. So operating profit margins vary over the range of volume that Google targets Why did google scale up good? WINNER-TAKE-ALL DYNAMICS PREVAIL Google’s rapid growth in the period from 2006 to 2010 ensure an high market share, now that the market decrease its growth rate, Google puts high barriers to entry to other competitors thanks to: HIGH SWITCHING COSTS ADVISORS DEPENDENCY ON GOOGLE ADS If online publishers purchase AdSense to be part of Google Content Network giving spaces on his pages available to advertisers, then advertisers who want to have ads on that particular type of sites are obliged to purchase AdWords, so they cannot switch to another Ads provider Thanks to this, from 2011 Google keeps leading the Online Ads market with constant market share 0% 20% 40% 60% 80% 100% 2011 2012 2013 2014 Other AOL IAC Microsoft Yahoo! Facebook NET DIGITAL AD REVENUE SHARE WORLDWIDE Source:
  6. 6. Structur eDecision making: Build consensus Senior executives organized by function, but team works in Meshes/ Matrixed structures Cultur e“Innovative culture and can-do attitude” Fast moving Continuously up to date Identity Free training classes to help develop its employees Peer performance reviews: not seen like a punishment , but like a way to improve themselves Not managed but mentored Key of the success Ask forgiveness instead of permission! Innovate even if you are new! Move ahead only if 80% of the decision makers agree!
  7. 7. RECRUITIN GData driven hiring process Research of people who fit culturally with the organization Didn’t want to overhire RETENTION The importance of being a Googler 20% work time is for personal projects Benefits for families «Genius» co-workers Unparalleled career opportunities Collaborative thinking
  8. 8. How motivate? Engineers spend 20% of their time working on their own ideas. No hierarchy. Contest + awards. How? Risk taking and innovation Act fast Accept the cost of resulting mistakes as a natural consequence of working Where ? Open office environments Attraction Motivation Teamwork What is unusual about Google ? “Ideas are most important. Things get done through a common mission, shared goal, and personal responsibility. People are self-managed and self-motivated at every level.” “I know it may sound like a cliché, but failure is really OK here.”
  9. 9. What practices support Google BM CORE BUSINES S Free BM based on advertising. Google helps advertisers create text-based Ads and extend their Ad campaigns to the Google Network members’ websites through : “Online advertising generated 99% of Google’s revenues” “70% of the company’s research and development resources are dedicated to their continued success”
  10. 10. Problems at the end of the case U.S.A. Economy is slowing down. This could affect Google’s employees and let them change attitude. Focusing on revenues, they could lose some of their entrepreneurship at their work place… Google as company is keep growing, so an improved organizational structure is required. Study Environmental and business trends Focus on trends Improving core activities Improving information flow
  11. 11. Bureaucracy Too much Too little Slow down of creative processes and less ideas development Google’s values are going to fail People who doesn’t work without inspiration Chaos at the work place
  12. 12. “Hackathons” It’s a way to resolve some of the company’s problems and at the same time to make employees work Google could establish Hackathons for example twice per month Bureaucracy
  13. 13. International consistency Virtual team to improve work among international offices and to avoid replication of efforts. Share solutions for local problems in order to help the solving of global problem  no competition between different plants, encourage the communication! Employees overseas rotation (respecting people willing) to maintain “Googley” culture  right balance between cultural diversity and cultural homogeneity among Google offices around the world. Google ERASMUS!
  14. 14. How to keep google Googley? Put some flyers all around the offices just to remind people what does it mean «be googly» Share an ancedote or a keyword every day through employee’s PC and e-mail. This story would motivate them to be googley Divide employees into the care*potential matrix in order to improve and their motivation and skills employees POTENTIAL CARE
  15. 15. More suggestions… Institute Bootcamps: To keep offer a unique service all over the world, Google should introduce new entries to their culture and products. In those Bootcamps there are senior engineers or other expert employees able to provide technical advices, too. Support ideas: Foster best ideas from employees by giving them the opportunity to develop them entirely, without giving it to a developing function and having no possibility (or only occasionally) to work on it. Small and heterogeneous teams: To avoid delegating efforts and achieve a fast decision process.