Google Executive Summary

Student Number: 1623954

Situation Analysis

From 2004 to 2009 Google’s market share has soared from around 35% to over 60% while

those of competitors like Yahoo!, Microsoft and others have taken a nose dive. Google has built

its way to becoming the most powerful search engine in the world. But will that last? And is this

the best Google can do? The following pages will describe the current situation and competitive

landscape, the key issues, solutions and how these solutions will benefit Google in both the short

and long run.

Google has many key resources, from its cloud based productivity solutions such as

GoogleDocs, to Gmail, and the Chrome browser [see exhibit 2 for further resources and

processes]. Google also has many internal capabilities which have made it successful from its

flexible organization made up of small teams enabling lightning fast responses to trends to its

stable corporate structure ensuring continuity of the company’s mission and vision [see exhibit

8]. Google has exceled in key industry success factors such as its leading Gmail email and

calendaring software to its cutting edge search engine algorithms and constantly evolving

targeted advertising [see exhibit 3]. Google outranks Yahoo! and Microsoft in nearly all of the

industry success factors and has set a place for itself as a first mover and industry leader while

the rest play catch up [see exhibits 4 and 5].

Despite these key success factors Google is still bound by issues that affect the search

engine industry as a whole. Technology is constantly evolving at an ever quickening pace and

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no company knows what the future will hold or what consumer’s exact desires will be no matter

the investments in market research. Like many large companies Google faces anti-trust legal

threats and the ever looming danger of the depressed economy [see exhibit 7].

Key Issues Statement

Aside from factors that influence the entire industry Google faces issues at the individual

level. Google has yet to find a fool proof way to avoid fraud on its online advertising platform

which has led to a series of lawsuits. Its subsidiary, YouTube, lost $470 million in 2009 alone

and every other week there is a new lawsuit being levied against Google for anything from

copyright infringement to user privacy concerns [see exhibit 1].

Google competes with a high level of success in many arenas going head on with industry

giants like eBay, PayPal, Yahoo!, Microsoft, and Amazon. While brave and exciting this has

made for many powerful adversaries and a constant battle to stay ahead of the curve on

countless, often disjointed, fronts. Google has expanded into so many different areas that it has

become uncertain which strategy to follow. Does Google pursue the area where it has the

highest investments, the highest profits, or the one that most aligns with its mission? How did

Google get to this position [see exhibit 9]? Google is known for taking risky long shots that it

believes will pay off, investing a large amount of time and money in R&D and encouraging

creativity among its engineers. While this has been a large part of Google’s recipe for current

success is it the recipe for future success? Does Google know which parts of this formula are

working and which ones are holding it back?

Strategic Recommendations and Rationale

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“It’s best to do one thing really, really well.” This is number two in Google’s Statement of

Philosophy and the guiding principle through which the following recommendations are made:

1. Focus on Google's distinctive competence: developing superior search solutions and

monetizing them through targeted advertising

2. Expand into organizing the world's video content as well; capitalizing on investment in

YouTube.

3. Ensure vetting process for new ideas/services/applications includes a strenuous assessment of

whether or not the new idea closely aligns with Google's mission

There were many strategic options considered as referenced in exhibit 10. The different

options were compared using a variety of choice criteria including amount of resource allocation

needed, whether it addresses competitive threats, if it is profitable and would increase market

share and if it aligns with Google’s mission to “organize the world’s information [see exhibit 11

and 12]. The above recommendations require a below average amount of resource investment as

these are areas Google is already highly invested in. In addition Google is already the leading

search engine and a leader in the targeted advertising market. Recommendation number one will

protect and grow Google’s market share in an area it already has a core competence in. Google

has already made a $1.65 billion investment in YouTube and it is currently losing money so it

could only benefit Google to invest in this area to improve profitability. YouTube is already a

force to reckon with in the video streaming industry so this would be a matter of protecting and

growing its market share in a way that is profitable for Google.

Both recommendations one and two closely align with Google’s mission to organize the

world’s information. Video streaming is growing more and more popular as it becomes

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enmeshed in the growing virtual social networking industry. Despite growing popularity there

have been few major innovations in how to store, search, and organize videos and the

information stored in them. This is an area that Google is uniquely poised to contribute to and it

could become the next frontier for searchable information along with print and mobile data

sources. These are strategic areas where Google has more to gain than loose and can be funded

through Google’s innovative and evolving targeted advertising competency [See exhibit 13].

See the balanced scorecard in exhibit 6 for suggested key performance indicators that will help

Google to remain profitable in these areas. Lastly, recommendation three will ensure a more

targeted and strategic direction for areas of investment going forth.

Conclusions

Google has come far from its humble beginnings. It has grown to be an industry giant and a

household name but Google’s success story is far from over. Following recommendations such

as concentrating on investments in superior search solutions, expanding targeted advertising and

focusing on organizing video content will only help move Google forward. With targeted

strategies that align with Google’s current investments, core competencies and mission Google

will continue to grow in a way that not only protects its current market share and profit but

enables Google to grow and sustain itself into the future.

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Exhibit 1

Strengths, Weaknesses, Opportunities, and Threats Analysis

Users trust Googles' objectivity Diversity and range of product and service offeringsLargest market share among search engines Leader in cloud applicationsCompetence in developing superior search solutions and monetizing them through targeted advertising

Largest index of webpages

Launch of contextual paid l istings allowing advertising in previously uncharted areas

Wide variety of investments and acquisitions makes competitors wonder what Google's plans and strategy are. Which makes Google harder to counteract.

Google's robust team of engineers Google earns 38% more revenue per search than leading competitor Yahoo!

Popular offi ce program with Gmail, GoogleDocs etc. Reputation as a leader due to innovative Gmail user interface design, asynchronous Javascript and XML

Distinctive governance structure and corporate values Lack of middle management and small team configuration makes it a flexible organization

Flexibil ity for engineers has spawned many different initiatives

Financial abil ity to place high risk, long term bets on projects

Corporate structure designed for stability over the long term

Management is secretive to outsiders Advertisers view some charges as improperAffected by clickfraud Large scale law suits levied against GoogleLoses on YouTube due to high bandwidth and low advertising revenues

Users have privacy concerns with Google

Continual copy right infringement issues both with book publishers and video producers.Fraudulent links on Google pages

Google currently has a 41% share in the growing online video industry with vast advertising opportunities. Google could capitalize on this and expand its market share in this area.

Could expand GoogleDocs product offerings to outcompete Microsoft.

Since Google is so diverse, competing in so many areas there are a large number of high profile competitors

Their cloud based applications and solutions if breached would lead to a user privacy nightmare

DOJ's repeated remarks regarding Google's "Monopoly in internet online advertising" and its "gathering market power" may indicate that Google is a possible target in the future for anti-trust suits.

Strengths

Weaknesses

Opportunities

Threats

5

Exhibit 2

Four Box Business Model Analysis-Google

Customer Value Proposition Key Resources Key Processes Profit Formula

Google aims to organize the world's information through developing superior search solutions and monetizing them through targeted advertising.

GoogleDocs

Competence in developing superior search solutions and monetizing them through targeted advertising

Provide mostly free services and products making the bulk of its money off of advertising revenue

Android operating system building on Google's real time and voice communication efforts

Lack of middle management and small team configuration makes it a flexible organization

Largest index of webpages Content hosting abi lities

GoogleMaps with faster scrolling and browsing than competitors

Large infrastructure investment in Linux which makes Google capable of scaling quickly

Google's robust team of engineers

Flexibility granted to engineers has spawned many new initiatives

Google Analytics which benefits their advertisers by optimizing paid listing campaigns

Rapid execution abilities due to small working groups.

Personalized search, Local search and Verticle search

Greater organizational flexibility due to lack of middle management.

Largest market share among search engines

Ability to run many small projects at one time due to scale and small working teams.

Largest index of webpages

Acquisitions of YouTube and Doubleclick leading to expanded online video and display advertisingAd-supported software Google Analytics which benefits their advertisers by optimizing paid listing campaigns Popular Chrome browserLarge investment in infrastructure, Linux system can scale readi lyGoogle CheckoutFroogleCloud Based applicationsCommunication applicationsGoogle BooksGchatUnique governance structure and corporate values that drive its mission

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Exhibit 3

Industry Key Success Factors

Email softwareCalendaring softwareEffective display advertising Algorithmic search engineLarge variety of accurate search results Paid listings Advertiser featuresFast searching

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Competitor Analysis Grid

Google Yahoo! Microsoft Office

Objectives

To protect and grow its market position in the online search engine and advertising market. To "organize the world's information".

To provide leading search engine and online portal.

To lead the market as a decision engine, and successfully differentiate their product from other search engines.

Strategy

Innovative and differentiated technology that enables it to be a first mover and build a following among both the professional and personal user market.

Insulate itself from external threats (ex, ended dependence on third parties for searching algorithems, tried to merge with Microsoft), continue to compete head on with Google as long as they are able (ex. Search and paid l istings, local search, map options). Continue to build up web applications such as job search and dating as well as online stores.

Enhance privacy and security due to running web apps through their own servers, be seen as a decision engine rather than just a search engine, cutting edge ad software enables greater revenue generation.

Market Positioning (Leader/Follower/Nicher)

Leader: Often a first mover that is immitated.

Nicher/Follower- ex. Nicher-really built up online portal and web app options, follower-hasn’t introduced much new content and is just struggling now to compete.

Follower- ex. "Office Web"

Strengths

Innovative technology, largest portion of market share granting it market power, range of product and service offerings that are tightly integrated.

Broad reach due to portal organized into channels, easy access to wide range of third party content, portal, early insight into Google, manages own algorithmic search and paid listings, job and dating sites,

Enhanced privacy and security, possible partnership with Yahoo! to place Microsoft ads on its pages, hover previews of web pages, cash-back feature, strong foothold in Microsoft Office.

Weaknesses

Vulnerable to lawsuits especially regarding anti-trust actions. Is a direct competitor with many large companies, privacy concerns among users, copyright concerns among content providers and fraud concers among advertisers.

Not enough attention focused on sponsored l inks which generate revenue, delays in upgrading infrastructure, shrinking share of internet search queries.

frequent change in branding i.e. MSN --> LiveSearch --> Bing, neither Office Web nor it's online portal are meaningfully differentiated from the product offerings of Google or Yahoo!

Recent PerformanceFastest growing company with ever diversifying products and services

Shrinking market share, droping stock price, unstable, massive staff turnover

Shrinking marketshare, desire to grow into a larger marketshare to compete with Google (i.e. its thwarted acquisition of Yahoo!), still providing new or enhanced product offerings.

Likely Competitive Response

Continue to create products that compete directly with both Microsoft and Yahoo! While xpanding into other online categories

Insulate itself from external threats (ex, ended dependence on third parties for searching algorithems, tried to merge with Microsoft), and continue to compete head on with Google as long as it can (ex. Search and paid l istings, local search, map options).

Will let another company be the first mover and if they are successful Microsoft wil l imitate and attempt to enhance.

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Exhibit 7

PEST AnalysisAnti-trust laws threaten the ability of large scale search engine providers to either grow or merge. Lawsuits over advertisement placement, and source material from external providers threaten the profit margin of those in the industry. General economic depression can deflate stock prices and increase volatility harming the profits of publically traded search engine suppliers. Economic depression could reduce the advertising budgets of many companies resulting in less profit generating ad revenue for search engines.

SocialGrowing privacy concern among users may harm marketshare if the users don’t believe their personal information is safe.The advent of improved search algorithm technology could change the competitive landscape. Many search, sort, or social applications make it possible to circumnavigate traditional search engines. In the technology industry change is fast paced and if a company is not constantly innovating they can quickly loose their customers to easy subsitutes.

Political

Technological

Economic

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Exhibit 8

Competencies AnalysisResource Valuable? Hard to Copy? Capability Valuable? Hard to Copy?

Personalized search Yes, it increases the ammount of accurate results.

Medium. It is just a matter of the other companies utilizing the personal data available to them and creating an algorithem. It wil l most l ikely be immitated if it hasn’t been already.

Flexible organization run by small teams

Yes, it means Google can adapt quickly to changing trends and new information.

Medium, this was an intentional way the company was organized from the onset. It would be difficult for large companies to change and immitate this model now but it would not be as difficult for emerging companies.

Local SearchYes, directs money to local markets and opens up more financing sources for ad revenue.

Medium. It is just a matter of the other companies creating an algorithem to search local ly. It wil l most l ikely be immitated if it hasn’t been already.

Fast searchingYes, this is an order qualifier.

Medium, this seems to be an order qualifier now and it is less of a point of differentiation for large search engines.

GoogleDocs/ Online office applications Yes, this product differentiates Google.No, Microsoft is already coming out with "Office Web" Targeted advertising

Yes, this increases ad revenue.

Yes/No. Google has come up with innovative ways to target advertising and make it more profitable. It Is not impossible to copy but it can be more difficult to make profitable for companies who have less market power than Google.

Cloud based applicationsYes, this is a growing trend that will soon become an order qualifier rather than an order winner.

Yes/No. It seems Microsoft will be immitating this strategy if they plan to launch "Offi ce Web.

Content hostingYes, enables Google to scale into new areas in the future.

Yes, other companies can become content hosts for videos but thus far no other video hosting site has been able to compete with YouTube.

YouTube video hostingYes, this is a very popular video hosting site.

Yes, YouTube has a strong customer following and a large share of the video streaming market.

Paid l istingsYes, is a necessary source of revenue.

No, many search engines use this as a source of revenue.

Search engine algorithems Yes, innovative algorithems are a source of competition.

No, search alogirthems are constantly evolving and changing for every major search engine company.

Advertising focused on the local business market

Yes, opens up new advertising opportunities.

Yes/No. It seems to be a matter of creating a new algorithem. It is l ikely other large search engines will immitate this if they havent already.

Reputation as an innovative brand Yes, increases customer following.

Yes, it is not impossible to immitate but Google has gained a reputation through being a first mover which has made the other companies appear to be playing catch up.

Stable corporate structure

Yes/No. It is valuable as long as the corporate structure is effective if it is not effective it could be a detriment.

Yes/No. Yahoo! certainly could not immitate this. For other companies this may be a benefit or a detriment.

Innovative engineersYes, necessary to keep Google on the cutting edge.

Medium. It is possible to hire other innovative engineers but Google has such large market power that it would be hard to keep these engineers if Google wanted to hire them. Also, Google's corporate structure enables engineers to be more creative and innovative than they may be otherwise.

Effective allocation of engineering efforts i.e the 70/20/10 rule

Yes/No. It seems to have been effective so far but if it ceases to be effective it will need to be reevaluated.

Yes/No. It would require companies being will ing to take greater risks in ventures that may or may not pay off and have the financial resources to be able to recover if they do not pay off. This can also be hard to copy because it is a part of Google's corporate culture.

Strong customer following Yes, necessary to grow market share.

Medium, Google has built up a strong following but it is not impossible to compete with them for customers due to the very low cost of substitution.

Shrewd acquisition management

Yes, this has enabled Google to grow in ways that have expanded their market power.

Yes/No. This requires foresight, finances and leverage. None of which are impossible to gain but it is difficult to have all three when you are competing with Google.

Large servers Yes, enables cloud based applications.

No, It is a barrier to entry for other smaller companies but it just requires the financial resource al location from larger companies.

Wil lingness and ability to invest in long-shots

Yes. This has aided Google in R&D through will ingness and ability to try new things that may have a large payoff in the future. Encourages creativity among engineers.

Yes/No. This is a part of Google corporate culture so it could be difficult to make that shift but it is not impossible. However, it does require the financial means to take large risks.

Wide variety of targeted search results Yes, this is an order qualifier for customers.

No, this is an area where Microsoft, Google and Yahoo! are constantly competing.

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Exhibit 9

Problem Defenition: Google has expanded into so many different areas it is difficult to decide which area to pursue as a long term strategy

Google's culture of risk taking and heavy R&D development in many

Google prides themselves in encouraging creativity

Solution: Ensure vetting process for new ideas/services/applications includes a strenuous assessment of whether or not the new idea closely aligns with Google's long term strategy.

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Google prides itself in encouraging creativity

Google's culture of risk taking and heavy R&D development in many areas has led to many disjointed strategies.

Because creativity has led to some cutting edge innovations that have been profitable for the company.

These ideas made it through the vetting process and Google decided to invest large resources in them.

Root Cause

Why?

Why?

Why?

Why?

Exhibit 10

Strategic Options Considered

1. Focus on Google's Distinctive Competence: developing superior search solutions and monetizing them through targeted advertising

2. Branch into new areas, i.e. expand into a full portal, expand checkout functions, and develop more productivity products to compete with Windows and Office.

3. Expand into organizing the world's video content as well; capitalizing on investment in YouTube.

4. Split up the Google company allowing one division or separate entity to expand and compete in the productivity applications that compete with Windows and Office products and retain Google as a parent company allowing Google to return to its focus on organizing the world's information without losing an area of strength and revenue.

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Exhibit 11

Choice Criteria Used to Decide Between Options

Amount of resources requiredAddresses short term competitive threatsAddresses long term competitive threatsWould increase market shareWould increase profitabilityAligns with Google's Mission to "Organize the

world's information"

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Exhibit 13

Reward/Risk AnalysisOptions Potential Rewards Potential Risks

Would build up Google's brand as a superior search engine.

Ignores some of Google's most innovative and popular new products such as its productivity software.

Is predicatble/stable, this is a method Google knows that it is good at

It puts all of Google's eggs in one basket. If the market changes, or an alternative to online search engines arises Google would face a great loss.

Google has a great deal of market power which enables it to generate higher than average advertising profit when contracts are negotiated. Could push Yahoo! out of business and damage Microsoft giving Google a greater market share.

Does not al ign well with Google's mission to organize the world's information

Could build a new strategic competence area for Google.

Is a new portal something that current users actually desire? If it is not it could be a waste of resources.

Would open opportunities in a new market that is quickly changing as far as cloud based solutions and online office tools goWould capitalize on increase in online shopping, maintaining a foothold in a quickly expanding industry

Could satisfy an untapped market that is very popular

May be too narrow a focus

Aligns with Google's strategy to "Organize the world's information"

YouTube is already struggling to make a profit, i f strategy doesn’t pan out Google could be facing a loss

Capitalizes on a resource Google already controls and has invested in

Allows Google proper to focus on it's mission without loosing a profitable avenue that it has already invested heavily in

Would require resources to divide the company and create new facil ities and legal fees for performing the split.

May stave off successful anti-trust lawsuits

Could involve major internal upheaval or restructuring

Allows for greater specialization

Productivity apps within the new company may not be as successful as when they were part of Google due to a change in organizational culture and resources

Focus on Google's distinctive competence: developing superior search solutions and

monetizing them through targeted advertising

Branch into new areas, i.e. expand into a full portal, expand checkout functions, develop more productivity products to

compete with Windows and Office.

Expand into organizing the world's video content as well ; capitalizing on investment

in YouTube.

Split up the Google company allowing one division or separate entity to expand and compete in the productivity applications that compete with Windows and Office products and retain Google as a parent

company allowing Google to return to its focus on organizing the world's information

without loosing an area of strength and revenue.

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