New Product Development (Google)

Google
Whistle

Prepared for: Kapil R. Tuli, Professor for MKTG215 New Product Development, G3
Prepared by: Freda Luo, S8938889I, Student of SMU

April 5, 2011

Executive Summary
Google is poised to introduce a wholly new product in the internet industry by integrating
physical attributes in a virtual channel. Google Whistle offers both consumers and businesses a
social media platform to connect with an even larger pool of people and an alternative targeting
method respectively.

With the mobile internet industry growing at an incremental rate, Google could tap on this
increasing trend at an early stage and acquire a high market penetration at an early stage
through its brand equity just as the social media industry approaches a saturation point.

In terms of advertising sales revenue, Facebook poses a threat a Google with a predicted 678%
increment in in 2012. With a similar advertising service, Google needs to offer additional value to
marketers to retain it’s market leadership.

By targeting US businesses, a moderate estimation of the project would require an approximate
initial investment of US$36.6 million to obtain an NPV of US$235 million with IRR at 193%.

Industry Overview
The use of social media has been on the rise since it was first introduced in 1997. On average,
! of the global internet users base accesses social networks or blog and there has been a 66%
increase in the total amount of time spent on these channels from almost 6 hours in 2010 to 3
hours, 31 minutes in 2009.1 In 2010, social media penetration generally increased across major
countries. Even though US is the largest absolute social media market, close to 80% of
Facebook users reside outside the country. The use of social media is mainly dominated by
youths aged 18 to 24, and usage decreases as age increases.2

Competitive Analysis
As evident from Exhibit 2, the US market is largely dominated by 2 social networking sites,
Facebook and Youtube, in terms of total site visits, making Facebook Google’s greatest
competitor by market penetration.
Both Facebook and Google generate the bulk of their revenues from internet advertising sales.
Through targeting filters, Facebook could match advertisements to users according to personal
particulars as indicated on their profile pages. Similarly, Google employs a targeting technique
by matching advertisements to keyword searches, and an extremely controversial method of
tracking users’ web browsing behavior through cookies. The Gap Analysis of various internet
companies in Exhibit 3 shows a distinct void in the top right hand corner of the chart, creating a
viable market for Google to enter.

In terms of advertising sales, Facebook is forecasted to increase by 678% to US$5.74 billion
worldwide in 20123 . Google’s a In order to remain competitive amidst growing competitors
such as Facebook and Twitter, Google needs to create a new product that offers a new user
experience for both consumers and businesses alike.

Opportunities
Increasing number of smartphone and mobile data users
According to the Cisco Visual Networking Index (VNI), smartphone penetration worldwide will
experience a rise from 10% in 2010 to 17% in 2014. North America will achieve the highest
smartphone penetration from 33% in 2010 to 54% in 2014.4 Similarly Parks Associates analysts
forecasted data revenues for global mobile carriers will increase by approximately 40.8% from
2010 to 2015.5 Essentially, mobile internet activity will experience growth over the next 4 years,
creating a viable market for Google to target in the near future.
Increasing business activity on Social Media
The 2 most commonly used social media tools for marketers are Twitter and Facebook.
Research shows that marketers in general are keen on investing more in the use of social media
channels in future, with at least 67% planning to increase activity on their blogs, Facebook,
YouTube, Twitter and Linkedln pages.6 With a positive outlook of the social media industry
amongst businesses, Google would beneﬁt greatly by having a signiﬁcant and credible brand
heading the increasing trend.

Product Description
With vast opportunities in the market, Google should
implement a new social media channel that incorporates
the use of internet-on-the-go and a new user experience
that could excite the consumers. The introduction of
Google Whistle (GW) marks Google’s entrance into the
growing mobile internet market using existing Google
tools such as Google Search Engine, Google Trends,
GMail, Google Maps, etc. GW should ideally create a one-
stop mobile application that consolidates all Google’s
mobile tools into one, while at the same time incorporating
them in a fresh medium.
GW comes in the form of a social media channel that

allows users to connect with people in the same network.

However instead of posting them onto a friends-only portal like Facebook and Twitter, GW

allows to connect to anyone in the same geographical proximity, but on a virtual space. Some

main features available on GW are Direct Message, Whistle, Paste and Trendspotting (Exhibit 1).

Value Proposition

Complementary Product to Google Search Engine

To prevent cannibalization, GW should act as a complementary product to the Google Search

Engine instead of an independent service. In a study conducted by BIGresearch, Face-to-Face

Communication ranks the highest amongst other channels such as internet advertising and

social networking sites as the most influential medium to trigger an online search. 41.4% of

social media users rank personal recommendations and conversations as the most influential

reason for them to run an online search for products, events, etc.7 GW acts as a channel to

break social barriers for strangers who are located in the same physical space, but whom

society does not permit to speak freely with each other. Eventually with GW, more people will

engage in face-to-face communication hence higher internet searches. Google will benefit most

from this change as it currently stands as the number one online visited brand at 82% of the

world’s internet population, and also through brand association and direct links on the

application to Google Search Engine.

Encourage community sharing amongst Users

GW gives users an alternative option of communicating with others in the same geographical

proximity. With a more convenient and subtle channel to communicate via technology,

community sharing could be done instantly with little effort. Generally GW offers an option of

communicating freely with strangers instead of being constrained to their network of online

friends. Through this new offering, GW would be able to attract a new consumer base and offer

marketers an alternative medium for advertising.

Google Whistle to Businesses

Businesses could target consumers based on a similar word-recognition technology as Google

AdWords. Based on the webpages visited by users when logged into their GMail account,

marketers could have access to psychographic and behavioral data of these users through their

Google searches. GPS tracking service would be linked to the IP address of the user’s mobile

device, allowing marketers to track their foot activity when logged into the application via their

business account. These services are not previously available on social networking websites

such as Facebook and Twitter.

Additional Value to Businesses:

• Since GW provides instantaneous updates, consumers have more incentive to spend more

time on GW as compared to other social networks.

• Alternative promotional strategy: Allows businesses to connect with their consumers easily in

the physical world, complementing their use of social network channels such as Facebook and

Twitter. By creating a link between virtual and physical, marketers could capitalize on this

alternative medium to create creative campaigns.

• Allows marketers to track the coverage of their social media campaigns or target specific

consumers via informal conversations on GW through keyword search similar to AdWords.

Marketers could, for example, track the number of people or deliver promotional tools to

consumers who mentions a certain keyword.

Marketing Strategy

Consumers GW would be positioned as ‘The Only application a smartphone user will ever

need’ to stay connected and informed of movement in trends on an instantaneous basis. It

focuses on a “no limitations” style of connectivity as users could connect with virtually anyone in

the same geographical location regardless if they are “friends” or not. Usage and downloads of

the application will be free-of-charge to consumers to encourage membership.

Businesses GW would be positioned as a alternative social media channel to complement a

company’s current online advertising strategy by offering geographical coverage online. GW

offers marketers a more proactive marketing strategy by allowing businesses to giving an

alternative outlet to unleash their creativity through promotional campaigns. Firms will be

charged solely on a pay-per-click and per-Whistle basis as variable costing offers justification of

their Return on Marketing Investment (ROMI) (Figure 1).

Product Launch GW will first be rolled out in the US as a market test, followed by North

America, Western Europe, and APAC, which are forecasted to make up approximately 80% of

global mobile data consumption in 20138. Product deliverables will be applications on iPhone,

Blackberry and Android phones, as well as an additional page linked from Google’s main

webpage. Promotion of this application would be done through cost effective online mediums

such as a product video on YouTube, direct promotional emailers to all GMail account users and

a customized GW Logo to replace all Google homepage logos for 2 months following a local

launch.

Financials

Financial data for GW is forecasted based on an initial launch in US only. Revenue for GW will

be contributed from revenue generated by ad sales. Hence, our primary target audience for GW

will be businesses in US. Figure 5 shows the estimated number of Whistles posted by firms and

number of clicks generated by consumers, with SMEs generating lower revenue as compared

to large companies.

The ATAR model in Figure 2 gives a prediction of the potential number of businesses to adopt

GW upon launch in 2014. Figure 3 projects the market size for GW, which is the number of

businesses as stated in the US census data. As GW is capitalizing on existing Google

infrastructure, the initial startup cost would only include development of mobile applications,

website and OS for the program. An R&D cost of US$20 million would also be incurred prior to

launch.

As shown in Figure 6, with an initial investment of US$36.6 million, GW is expected to generate

an NPV of approximately US$235 million from 2014 to 2017 with an IRR of 193%. These

estimations are based on the assumption that the economic outlook is relatively positive as

companies are stated to recover from the 2008 financial crisis, and are hence more willing to

increase advertising budgets. In the case where business confidence is lower than expected,

GW will still generate an NPV of US$89 million at 80% IRR. In the worse case scenario where

businesses are unwilling to widen their marketing expenditure, GW will nevertheless generate a

positive NPV at US$36 million at 21% IRR.

Conclusion

With GW, Google could potentially tap into the growing mobile market by having a new take on

social media. The application integrates many aspects of Google’s existing services and use

them to create a new all-rounded experience for mobile internet users. With Google’s high

brand equity and the lack of direct product competition, the launch of GW would require less

but still attain high consumer membership. With US emerging fresh out from the economic

downturn, businesses could be predicted to be more receptive to alternative marketing

channels. Finally, a US launch in 2014 would generate an optimistic NPV of US$235 million with

IRR at 193%.

Appendices

Figure 1: Google Whistle Advertising Charges for Business Accounts

How are companies Amount Description
charged?

Per Whistle 0.2 For every Whistle a company posts on to GW, 20
cents will be charged to it's account.

Per-Click 0.05 Whenever a consumer clicks on a company's
Whistle and is directed to another page, 5 cents will
be charged to the company's account.

Per Account 0 A business account is free-of-charge to set up.

Figure 2: ATAR Model for Google Whistle

ATAR % Assumptions

Awareness 0.72 Market penetration of Google Search Engine. Since promotion of GW is done on
Google's main page, the assumption is that for all who uses the search engine would
be aware of GW. Google share of searches at 72% in 2010 according to Experian
Hitwise.

Trial 0.186 According to the Social Marketing Report, 57% of businesses in US are B2B while
43% are B2C. With 70% of local businesses utilizing Facebook in US, a reasonable
assumption for trial given Google's high brand credibility in terms of online advertising
services for B2B companies would be 10%, and 30% for B2C companies.

Availability 0.7 Assuming that 70% of ﬁrms listed in on the US census have access to the internet.

Repurchase 0 Repurchase doesn’t apply.

Total Market Size (No. of Businesses in US) = 33,211,584
ATAR = 0.0937
Projected No. of adoptions of GW = 3,113,387

Figure 3: Market Size of Google Whistle to Businesses in US

Employment Number of Firms Deﬁnition from ICC

None 27,281,452 Micro

1 to 9 4,661,829 Micro

10 to 99 1,159,448 Small

100 to 499 90,386 Medium

500 to 4999 16,513 Large

5000 or more 1,956 Large

* Source: US Census Data 2008. http://www.census.gov/econ/smallbus.html

Figure 4: Developmental Startup cost for Google Whistle

Google Whistle Startup Cost Cost

Apps for iPhone, Blackberry and Android $600,000.00

Coding for Website $1,000,000.00

Development of OS $10,000,000.00

Total $11,600,000.00

Assumption
Cost to code "Twitterific" app on iPhone is $200,000. Assume that cost of coding all 3 handsets are similar.

Figure 5: Yearly Estimates for 2014 to 2017 of various statistics

Assumed Growth Number of Number of clicks
Type Number of Firms Rate whistles per firm per Whistle

Micro Business 31,943,281 0.1 26 5

Small businesses 1,159,448 0.1 52 20

Medium 90,386 0.05 365 50
businesses

Large businesses 18,469 0.05 730 100

2014 2015 2016 2017

ATAR 0.093744 0.113688036 0.137875166 0.167208107

Number of Micro firms using GW 5304923 7076900 9440762 12594213

Number of Small firms using GW 192553 256871 342672 457133

Number of Medium firms using 11355 14459 18412 23446
GW

Number of Large firms using GW 2320 2954 3762 4791

Number of Whistles 153779023 204791044 272745572 363275369

Number of Clicks 1266494499 1666699297 2194339419 2890274667

Assumption
ATAR is estimated to increase with awareness stated to increase by 5%, trial by 10% and availability by 5% annually.

Figure 6: Calculations for NPV based on 3 scenarios

Scenario 1: Optimistic 2011-2013 2014 2015 2016 2017

Revenue

Revenue from Whistles $30,755,804.57 $40,958,208.85 $54,549,114.49 $72,655,073.74

Revenue from Clicks $63,324,724.93 $83,334,964.85 $109,716,970.95 $144,513,733.37

Total Revenue $- $94,080,529.50 $124,293,173.70 $164,266,085.44 $217,168,807.11

Variable Cost

R&D $20,000,000.00 $9,408,052.95 $12,429,317.37 $16,426,608.54 $21,716,880.71

Site and App maintenance $- $18,816,105.90 $24,858,634.74 $32,853,217.09 $43,433,761.42

Fixed Cost

Site and App Startup cost $11,600,000.00 $- $- $- $-

Selling/General/Admin $5,000,000.00 $5,000,000.00 $5,000,000.00 $5,000,000.00 $5,000,000.00
Expenses

Total Operating Expense $36,600,000.00 $33,224,158.85 $42,287,952.11 $54,279,825.63 $70,150,642.13

Net Operating Income -$36,600,000.00 $60,856,370.65 $82,005,221.59 $109,986,259.81 $147,018,164.98

Annual Discount Rate 0.2141

NPV $234,878,512.59

IRR 193%

Scenario 2: Moderate 2011-2013 2014 2015 2016 2017

Revenue



Total Revenue $- $40,802,873.85 $48,485,118.46 $57,636,274.24 $68,540,756.54

Variable Cost

R&D $20,000,000.00 $4,080,287.39 $4,848,511.85 $5,763,627.42 $6,854,075.65


Fixed Cost


Expenses




NPV $88,990,346.29

IRR 80%

Scenario 3: Pessimistic 2011-2013 2014 2015 2016 2017

Revenue



Total Revenue $- $20,277,583.36 $23,630,251.87 $27,547,867.69 $32,127,055.48

Variable Cost

R&D $20,000,000.00 $2,027,758.34 $2,363,025.19 $2,754,786.77 $3,212,705.55


Fixed Cost


Expenses




NPV $36,465,845.14

IRR 21%

Assumptions

Assuming that R&D requires a duration of 2 years, coding and setup for 1 year, GW could be launched in 2014.

Annual Discount Rate of Google Inc. is 21.41% as quoted from Reuters

R&D cost is 10% of Revenue as the amount of R&D is dependent on app usage.

Site and App maintenance is 20% of revenue.

Growth rates of number of businesses on an annual basis is estimated assuming that the economy is recovering from the 2008 Financial Crisis.

Exhibit 1

Description of Main Google Whistle Functions

Users ﬁrst log into Google Whisper via their GMail accounts and a green dot would be

superimposed on a Google Maps page that marks the location of the user. Through the wireless

3G network, GW could track their instantaneous locations, similar to technology used by

Assisted GPS navigation technology. Other users in the network could appear as red dots. A

web version of GW would also be available to computer users and they could similarly log in via

their GMail account.

Direct Message

The direct message

function allows the

transfer of private

messages from one

user to another

without and these

messages are

unaccessible to other

people in the same network. There is no limitation on the number of characters contained in a

single direct message, and to whom the message is being sent to.

Whistle

This Whistle function

allows users to post

short exclamations

that can be viewed

by people in the

same network. Users

could comment on

each o t h e r ’s

exclamations and create a conversation with other users nearby. Whistles are limited to only 20

words per post regardless of the number of characters to keep messages short and prevent

congestion on the navigation page. Each Whistle would only appear for 10 minutes per post to

increase rate of return to the application.

Paste

The Paste function

allows users to tag

photos onto

geographical spots

on the map, and they

will remain stationery

regardless where the

photographer is.

They will appear as camera icons on the map and when clicked on, photos would be enlarged

from them. By default, these icons will remain on the map for 30 minutes. Users could choose

to comment on these photos, increase or decrease the amount of time this photo remains on

the map to prevent inappropriate or spam photos.

Trendspotting

The Trendspotting

function shows users

where an abnormally

large group of people

are congregating.

This will be shown on

the sidebar of the

screen, depicting the

number of people who are currently in the stated area. By clicking on “Trendspot me here”,

users will be directed to the area on the map, coupled with navigational instructions.

Exhibit 2: Market share of Social Networking sites by volume of visits

Exhibit 3: Gap Analysis of various Internet Companies

End Notes

1 Based on a global survey conducted in 9 major countries. Source: The Nelson Company. Jun 2010.

2 Ofcom International Communications Market Report 2010. Eurmonitor International. Web. 2010.

3 Facebook Ad Revenues, 2009-2012. eMarketer, Jan 2011.

4 Singh,S. Smartphone Penetration Worldwide, by Region and Country 2009-2014. eMarketer. Jun 2010.

5 Mobile Data: Analysis and Forecasts. 2011 Park Associates.

6 2010 Social Media Marketing Industry Report. SocialMediaExaminer.com.

7Social Media: An inside look at the people who use it. Retail Advertising & Marketing Association of the National
Retail Federation. 2010.

8 The Future of the Internet. Datamonitor 360. Published by Business Insighs on 23 Feb 2011.

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