The search industry is one of the largest industries in the world with Google Inc. bringing in $15. 7 million in advertising revenue alone. Google was the leading Internet search firm in 2010 with over 60 percent market shares in both searches performed on computers and mobile devices. The search industry is impacted by numerous forces that have strong, moderate and weak impacts on the industry. Rival firms, new entrants, buyer power, supplier power and substitutes are the five largest forces that impact the search industry. A rival firm is a strong force in the search industry.
Google Inc, Microsoft Corporation and Yahoo! Are all competing for market share in the search industry in the United States and across the world? The fact that these three companies search engines are relatively the same to most users, it is hard to consumers to see the difference between them and it forces the companies to find various ways to distinguish themselves from each other. Microsoft’s Bing has tried to distinguish itself from Google by using an algorithm that looks at the context of the words in a search instead of just the words themselves.
Microsoft Corporation has also launched a very strong advertising campaign to demonstrate the difference between Bing and Google search. Yahoo! Has recently adapted Bing as its default search engine but is competing with Microsoft’s MSN and Google for number of viewers and advertising income. The competitive force of new entrants is moderate to weak in the search industry. Google and Bing have such a large market share that it is difficult for new entrants to gain market share and make a large dent in these companies market share.
Bing was the last new entrant to affect Google’s search dominance and they entered the market in June 2009. Microsoft had previously already had a search engine under the name Live Search which was discontinued when Microsoft purchased PowerSet which was the developer of the semantic search engine that looks at the context of words rather than just words themselves. Instead of companies starting their own search engines to compete with Google and Bing, many companies just license Google’s search engine or Bing to increase traffic and gain revenue from ads. Buyer power is a strong to moderate force in the search industry.
There are relatively zero buyer costs for switching to competing sellers, as buyers don’t pay anything to search through these various search engines. The buyer’s power is mostly in the mobile search field as Google’s Android platform and Microsoft’s Windows Phone compete for mobile search results. Google wants more and more people to purchase Android mobile phones, not because they make money on the phones, but more because mobile search is one of the fastest growing segments of the search industry and Google’s search engine is the proprietary search application throughout the phone.
The other buying power is companies who are looking to advertise on Google. With Google making almost all of its revenue through its search engine, the advertisers are the people Google wants to keep happy. One of the ways Google does this is by allowing users to pay a cost-per-click rate lower than their bid price if their big was considerably more than the next highest bid. This allows Google to keep its advertising partners happy by showing them that Google is also looking to decrease their costs instead of selling advertising at a price that could be a lot higher than what others bid.
Supplier bargaining power is weak in the industry. The main thing suppliers have power over is the server that powers the search industries inquiries. Many different companies manufacture servers and companies can purchase servers from a variety of companies and not all simply from one company. Substitutes are another weak force in the industry as there aren’t many substitutes for search inquiries on the Internet. Many people heavily rely on searches for their Internet browsing and many people believe the only way to get to a website is to type it into Google.
The search industry is changing rapidly as technology evolves and more people start to get smart phones and do Internet searches on the go. By March 2010 the number of Smartphone users had reached 49. 1 million and that number continues to grow. Many people want searches on the go to be quick and precise. Instead of links, many consumers would rather just find answers to their questions or directions to the nearest restaurant. Google is starting to focus on these needs by developing more mobile programs such as Google Maps, Gmail, Chrome, and search.
Microsoft has also started to focus a lot of its resources on its own mobile operating system Windows Phone to directly compete against Android and iOS. Microsoft’s Bing and Google’s search also are battling to be the default search engine across mobile devices such as the iPhone, Android and Window’s phones. Rival firms seems most likely to bring about major change to the industry within the next three to five years as each firm tries to out compete each other to offer better, quicker and more accurate search and while trying to find new ways to bring in advertising revenue.
Mobile advertising has been looked at as an untapped market that many different firms are trying to capitalize in. Apple has started iAds, while Google has purchased AdMob, which had developed technology to deliver banner ads to smart phones and other mobile phones able to connect to the Internet. Rival firms will also play a large role in the fight to control the desktop. Apple, Microsoft and Google have all released desktop operating system software that focuses on being mobile.
Apple’s Mac OSX has focused on integrating the iOS user friendliness, while Microsoft is starting to use the Windows Phone interface as the foundation for Windows 8, and Google has focused on cloud computing for their operating system, which is simply a browser that takes advantage of Google’s online tools and software. Google is also trying to expand search to television through its Google TV. Google TV was supposed to be the next generation of TV in the United States as users could search the web, watch online videos, stream videos from Netflix among many other things.
Google TV never really caught on as many hardware manufacturers have dumped Google from its TV’s. Apple has had quite strong sales of its Apple TV which allows users to have their iTunes accounts on their TV’s, while also renting TV Shows and movies, as well as streaming content from any of the user’s iOS devices. In the industry of search engines, there are certain factors that allow companies to be successful. In order for Google to become a successful search engine, they made an innovative way for users to search the Internet for certain topics.
Google creators Larry Page and Sergey Brin developed the first search engine to rate sites based on relevancy to the topic, based on the number of back links pointing the search towards the site. From this jumping off idea, Google grew to a search engine that offered more than just a simple topic search. In the years following their initial success, Google added Google Earth a web-based virtual world map, Book Search, Music Search, Video Search, Google News dating back to 1900, G-Mail (online e-mail server), Web-Based Calendar, Web-Based Document and Spreadsheet software, its Picasa Web Photo Albums, and a 51 language translation system.
They also developed mobile systems for smart phones that were easily usable. Google’s success all stems from their success with their original search engine, which has the fastest response time as well as ads that do not interfere with users searches regarding relevance. Google’s business model is one that was established to cater to their customers. Google’s number one Principle of Corporate Philosophy states: “Focus on the user and all else will follow”. Google uses this principle because they have a theory that placing the user first, even if that means small sacrifices may have to be made, builds a loyal customer base.
Everything is clear and easy to navigate, pages load extremely quickly, searches are based on relevance not who can pay more money, and advertising on the site must be relevant and not distracting. This customer first business model has gained Google 147 million frequent users of the site. Google initially introduced a differentiated product from all other search engines. Their searches were the first of its kind. Since Google’s establishment other search engines have been trying to match their consistency, but none have.
In an attempt to catch Google, Yahoo attempted to buy the newest technology in searching, but in doing so violated some United States’ copyright infringement laws, that wound up in an exchange of Google stocks to Yahoo for this technology. Google has taken steps to ensure their companies growth by venturing into other aspects of computer business, but like their Principles of Corporate Structure states, “It’s best to do one thing really, really well. ” This means ”Google does search. ”
Google’s search engine is what made them the company that they are today nd they are always looking for new ways to better their search engine as the advancement of technology continues. Principle number 7: “There’s always more information out there. ” Having the best search technology in the world is not enough because the last principle that Google lives by states that “Great just isn’t good enough. ” This means that Google believes that being at the top of a certain industry is a starting off point for the company, and they strive to further their company as long as other aspects of the industry are being furthered.
Google's business model and strategy has proven to be very successful. This company is geared directly towards the user. This is shown in Google's "The 10 Principles of Google's Corporate Philosophy. " The first of the ten is "focus on the user and all else will follow. " From the beginning, Google has focused on providing the user with the best experience that they can possibly have. Google is simple and easy to use with a simple layout, the pages load instantly, and ads are relevant not distracting to the user. "It's best to do one thing really, really well. " Search. It is what Google does.
They are constantly trying to find ways to improve and how to solve search problems for the user. Google is very fast, and information is accessible from just about anywhere. Great just isn't enough for Google. The evolution of Google's business model began when the company introduced revenue that went far and beyond the licensing fees that were charged to corporations that needed searching capabilities on company websites. In 2000, keyword-targeted advertising developed and led to expansion for the business model. This was to include revenues from placing highly targeted text-only sponsor ads next to the search results.
Google was able to target its ads to users based on their search and browsing history. Revenue from advertising enabled Google to increase its annual revenues from $220,000 in 1999 to over $86 million in 2001. Google's search appliance was added to third party websites where searching was necessary or important to the customer. This means that on a website, other than Google. com, a Google search bar would appear somewhere on the site to perform searches throughout the site. Companies could use this on their website for as little as $100 a year.
Many companies used this search appliance for employees to search through company documents. The Google Mini Search Appliance was designed for small businesses with 50,000 to 300,000 documents that was stored on local computers that ranged from about $3,000 to $10,000 Another version of the appliance had the capability to count up to 30 million documents for larger companies ranging from $30,000 to $600,000. As technology increased, AdWords and AdSense arose. AdWords allowed advertisers to create text-based ads that would appear alongside the search results.
The users of these AdWords were able to evaluate the advertising effectiveness with the use of performance reports that showed the effectiveness of each ad. Keyword targeting was added by Google that would suggest synonyms for keywords that were entered in by the advertisers. Changes were able to be anticipated by potential advertisers because of a traffic estimator that showed how many "clicks" and usage for each ad. Additional services were also offered by Google to aid larger advertisers in targeting potential customers and increase click-through and purchase rates.
Bulk posting services were also offered to help manage and launch campaigns with ads using thousands of keywords. An auction system is used by advertisers to bid on keywords for their product or service. Cost-per-impression (CPI) and cost-per-click (CPC) were used to make bids for the auctions. Googles AdSense program allowed the revenues generated by Google's text ads to be shared with web publishers. For example, the case uses "Reuters. com" and in which a relevant ad would appear. Google network members would share in the advertising revenue when a visitor would click on a Google ad on the site. million in the Google Network did not have to pay for participating in the program and would receive about 60 percent of the generated revenue from the ads.
This was soon added to mobile devices. Google's 2006 acquisition of YouTube led to advertising revenues for the ads that were displayed during videos, and its 2008 acquisition of DoubleClick which enabled the company to generate revenues from advertising on banner ads. In 2008, Google also launched GoogleCheckout that generated fees from purchases made at participating e-retailer websites that could be as much as 2 percent of the transaction amount.
Further expansion of Google's business model included licensing fees that were paid by users of the web-based Google Apps spreadsheet and document software in 2008. Investors should be impressed with Google's financial performance. Since its' initial public offering in 2004, Google has been one of the most talked about companies in the stock market. After the first day of trading, Google's shares increased by 18 percent which made the company about $3. 8 billion. Everyone was making money from Google and issued a second public offering of 14,159,265 shares of common stock.
Google just kept growing and growing. The initial search "search engine" now included Google Earth, which was launched in 2005 which lead to Google Maps, and also Book, Music, and Video Searches, Google News, Gmail, web-based calendars, documents, spreadsheets, Picasa, and a translation that covered 51 languages. Google was also moving up in the mobile world including a mobile web search, Blogger Mobile, Gmail, Google News, and maps for the mobile. No one knew what was coming next. Google was taking over compared to Yahoo and Microsoft.
Google's debt-to-equity ratio has been consistent from 2003 to 2009 ranging from 14%-18%. This is a good indicator for the company because it shows the relationship between the shareholders equity and the total liabilities for the company. Google's long term debt-to-equity ratio has been between 2. 7% and 4. 8% over the past few years. It has increased since the start of the company and this shows that the company's relative proportion to shareholder's equity and debt. Google's times-interest-earned ratios have varied over the years from . 88 to 121. This measures the company's ability to meet its debt obligations.
This is a good aspect for the company because it shows that it is able to pay off its debts and continue to be a profitable company. Google crushes the competition of Yahoo and Microsoft and is and has been the world's number one search engine. As a company, Google has shown that it has many key resources and competitive capabilities that make them stand out amongst others. Google has become very popular and so has its technological advances. This is to provide users with the greatest experience possible. One of its biggest competitive advantages is the success of brand equity and brand loyalty to Google.
Google has been able to distinguish its services from others, like Microsoft and Google. Even through times of recession, Google still remains profitable because of its advertising. Advertising is a huge revenue source for Google because of AdWords. Google is plain and simple and easy for users to use. Google continues to supply the world with endless search knowledge and various software technologies. Google embraces opportunities, with perfecting weaknesses, and acknowledging threats, Google is able to continue to dominate as highly respected and well recognized search engine.
Privacy may be considered as one of the weaknesses for Google. Gmail and Google Search have had some privacy issues that have arose because of a new feature see see past searches and to actually be able to search for people on Google. Filtering may also be considered another weakness because some pictures or sites may slip through the filter and may be seen by the wrong person and be considered inappropriate. Microsoft and Yahoo may be considered as threats to Google just because they are the competition, but this is nothing in the way of Google.
Google is ahead of the time, and have some products that users don't even know exist. Google's opportunities are almost limitless. The demand for eBooks is growing rapidly and Google is taking all of the steps possible to filter the way consumers are able to access books. Telecommunication products, like PDA phones with internet access is a huge opportunity for Google to gain revenue. Google has grown so much that it is even considered to be a verb. "John do you know what this means? I don't know, I'll just Google it. " Google’s international strategy is very complex and multifaceted.
It trends towards a global strategy since they think global and act global and it has been wildly successful. Their ability to become the world’s most widely visited Internet site as of 2010 speaks volumes to this. Utilizing a variety of strategies, Google generated more than 50% of its revenue for 2009 from international business. Since the product being distributed was an intangible asset, it wasn’t as difficult for Google to expand internationally as it might be for a company that distributes material goods. The Internet is everywhere; they just bringing information to peoples fingertips.
By using a combination of focused low cost strategy, focused differentiation, acquisitions and mergers they created their empire. With a drastic competitive advantage in place, and a fast, reliable engine created, the international transition was only a matter of translating information and finding advertisers. Their search based advertising made the latter relatively simple. As far as translating goes…it’s Google. The only blemish in the international expansion is the crisis that occurred in China. Censorship regulations imposed by the Chinese government hindered the freedom of Google to provide it’s full repertoire of services.
Because of this Google tried to use outside servers to relay information and get it to the Chinese people through different outlets. This was met with hostility on the part of the Chinese government, and as a result Google was never able to capture the majority of the Chinese demographic. The success of Google in becoming a household name all over the world is evidence enough that they’re strategy implementation was a good one.
Creating programs such as AdSense to keep shareholders happy, as well as giving the world the android technology created loyalty to the name Google that puts them on the level with Apple and Microsoft. . If I were to get a chance to talk to the board of Google inc. , the first thing that I would do would be to take my cap off to them. They have done an outstanding job at staying at the fore front of technology, let alone business in general. The next thing that I would do is I would tell them to keep it up. Other than a plummet around the time of the recession, the stock price has remained relatively constant. The ability to keep coming up with new technology, whether it is Android, or Cloud technology, or Google earth, will bring them success for as long as they can continue it.
They have diversified and become a business powerhouse. Bill Gates knew it at the Google IPO in 2004, and now it’s confirmed. The one piece of criticism that would be passed to the board is to keep your nose clean. The controversy involving Google street view is bad press, and it dissipates the public’s trust in the brand. People value their freedom, and that has to be respected. In regards to the China scandal, violating the wishes of the notoriously strict Chinese government was foolish.
Good intentions were there in the perspective of the Chinese public, but going behind the government’s back was disrespectful and as a result they lost out on a very large and profitable market. When Google lobbied for president Obama and contributed funds to his campaign they were only doing what has been going on in this country for decades, this however doesn’t make it right. The principles of Google’s philosophy are innocent and positive, focused on growth and the greater good like most companies.
Google however makes it a point to be fair and use statements like “you can make money without doing evil. When the evidence of this scandal came to light, Google lost a lot of trust. Regardless of their woes, Google is still one of the most powerful companies in the world for a reason. Android is gaining popularity on iphone because of Google’s willingness to distribute technology to multiple manufacturers, The cloud system has been adopted by both Microsoft and Apple as a stock feature on all new computers, and they still have the most popular search engine in the world that provides the company with millions of dollars in revenue annually.