Subject: Strategic Management
Topic: Google Strategy & Business development
- Google Inc. is an American multinational Internet and software corporation specialized in Internet search, cloud computing, and advertising technologies.
- The company was founded by Larry Page and Sergey Brin while they were both attending Stanford University.
- Google was first incorporated as a privately held company on September 4, 1998.
- Google Inc. currently owns and operates 6 data centres across the U.S., plus one in Finland and another in Belgium.
- Google supports more than 104 languages or dialects and offers a personalized version of his engine for more than 115 countries.
SLIDE 2 – Google Strategy & Business development
Organize the world’s information and make it universally accessible and useful.”
“To develop a perfect search engine.”
SLIDE 3 – Google Strategy & Business development
CORPORATE LEVEL STRATEGIES
PRODUCT DEVELOPMENT: GMAIL
“From this innovation machine came strategically important products like Gmail, product that were the result of entrepreneurship at the lowest levels of the company.” -PC WORLD
SLIDE 6 – Google Strategy & Business development
The market share of email providers before GOOGLE
Yahoo mail – 46%
Hotmail – 32%
Outlook – 12%
Others – 10%
STARTING WITH GMAIL
- Gmail is Google’s free web-based email service, which was a product of Google developed by Paul Buccheit, one of the Google developers, initially serving as email client for Google employees.
- It was announced as a public service in April 1, 2004. As compared to other email service providers, Gmail service offers better spam protection, lots of free mail storage and access via mobile phones, with a provision of inbuilt chat facility.
BENEFITS OF GMAIL
The main benefit that Google received from Gmail was attraction of customers to the core features of Gmail. At that time, giant email service providers like Yahoo, MSN Hotmail and Rediff were already occupying a big market space, but the new features and security that Gmail introduced and provided were the main source of customer base. Some of the new features of Gmail are listed below:
- Gmail provides a storage capacity of more than 7 GB, which was increased by 1GB on its first anniversary. As per the product management director, George Harik it aimed at giving people more space each time.
- The Gmail Labs feature allows users to test new or experimental features of Gmail(like bookmarking), which was introduced in June, 2005. This lets the user enable or disable it based on which the feedback is receiver which allows Google engineers on data required for improvement.
- Google released a plug-in that provides integrated telephone service within Gmail’s Google Chat interface in August 2010, that allows people to make free calls from their Gmail account to U.S. and Canada and other countries based on extra-fees.
SLIDE 9 – Google Strategy & Business development
SLIDE 10 – Google Strategy & Business development
Comparing usage post launch of Gmail.
- Gmail was an immediate success due its storage feature.
- Storage space has been Gmail’s best since its inception. It was introduced with 1 GB of storage in an era when few web-based email providers offered more than 25 megabytes.
- As other email service providers added storage to compete, Gmail added other features such as chat, draft auto save, keyboard shortcuts, and of course continually increasing the available storage space.
PRODUCT DEVELOPMENT: GOOGLE ADWORDS
- Google’s main advertising product .
- Main source of revenue.
- Google’s total advertising revenues were USD$28 billion in 2010.
HOW DOES IT WORK?
- Listings at the very top and on the right side. Google.com charges money for those listings.
- Google also runs these ads on websites that participate in Google’s AdSense program.
- Google also places ads on other sites that they run, like YouTube and Gmail. Google.com makes most of its money from paid advertising.
- AdWords offers pay-per-click (PPC) advertising, cost-per-thousand (CPM) advertising, site-targeted advertising for text, banner, and rich-media ads.
- Includes local, national, and international distribution.
BENEFITS OF GOOGLE ADWORD
- Introduction of Google Adword- main monetization source. • Almost 97% of the total revenue recieved by Google is through Advertising.
- 10% comes from ads running on other sites.
- 5% comes from “other,” which includes Google Apps subscriptions, search appliance sales, etc.
- About 85% of Google’s net revenue comes from ads running on Google sites.
SLIDE 16 – Google Strategy & Business development
SLIDE 17 – Google Strategy & Business development
How it works?
View, edit, track and import digital images
Share online with friends & family
BENEFITS FOR GOOGLE
Apart from the cost saving plan, the main reason for Google to acquire Picasa was that its technologies fitted with the company’s existing capabilities
SLIDE 19 – Google Strategy & Business development
1) Integration with other products.
SLIDE 20 – Google Strategy & Business development
2) Lock in the customers
SLIDE 21 – Google Strategy & Business development
3) Indirect Source of Monetization
YouTube is a consumer media company, founded in the year 2005, made for the purpose of sharing videos on web and watching them worldwide.
- Revenue: low in the beginning. Grew up to $ 2.5million.
- Just a site sharing home made videos worldwide.
- Viewers: few millions per day.
- Revenue: 18 months later increase to $ 5million.
- Commercialization of videos and introduction of channels for television viewers.
- Viewers: increased billions per day.
SLIDE 25 – Google Strategy & Business development
- $1.65 billion in a stock-for-stock transaction paid by Google to YouTube as the cost of acquisition in return of which Google gaining an aggregate of 32,17,560 shares, and restricted stock units, options and a warrant exercisable for or convertible into an aggregate of 442,210 shares.
- The two companies shared a common financial bond, which is The Menlo Park- based Sequoia Capital, an early Google investor that owns a roughly 30 percent stake in YouTube.
- Under the terms of the deal, YouTube shall operate as a separate brand with its headquarters in San Bruno. Google shall keep running Google Video.
- 12.5% of the transaction shall be held in escrow for a year to cover “indemnification obligations.
- Merge Google AdSense with Google videos for video commercials, advertising and promotions shall be handed over to YouTube.
- YouTube being in the Top 5 most viewed websites shall significantly bring about a boost Google’s advertising revenues, the key spin being “social networking” aspect.
- Google’s ad platform shall integrate perfectly into YouTube, the culture of “innovative technology” being common to the two .
SLIDE 27 – Google Strategy & Business development
Taking a look on the benefits and possible drawbacks.
- It gave Google “the no. 2” search destination after Google.com.
- Also, a massive amounts of display advertising inventory alongside the player
- An inventory to serve overlay text ads from Google’s paid search listings.
- Failure to receive regulatory approval for the acquisition.
- Failure to retain the levels of traffic on the YouTube site.
- Failure to compete successfully in this highly competitive and rapidly changing marketplace.
- Failure to retain key employees.
- Other factors affecting the operation of the respective businesses of Google and YouTube.
SLIDE 28 – Google Strategy & Business development
Success or Failure?
Taking a view over the deal, it has brought about a great success to Google.
Increasing no. of viewers.
JOINT VENTURE WITH GOOGLE
- Paul Otellini, CEO of Intel, announced the joint venture in September 2011
- Primary purpose is to design the new Android OS for maximum performance on Intel Processors
- This tie up shocked everyone because Intel had been a major failure in the mobile processor market
- This Joint Venture marks Google treating Intel as a first class citizen
- Most Smartphones run on ARM processors, including the Apple iPhone
- The Intel x86 architecture is inefficient on mobile phones and drains battery really fast
- Google will design the new Android OS keeping Intel’s chip as the primary chip it wants to run it on
- This will promise optimum performance of Android on Intel chips
WHAT’S IN IT FOR INTEL?
- Intel is struggling to survive with its lower end atom processor chips in the Smartphone market
- They drain out the limited battery available on these Smartphones very fast
- Intel’s previous partnership with Microsoft was failure
- Huge opportunity since Android captures more than 40% of the global Android Market Share
- Crucial for Intel to survive in the Smartphone Market
WHAT’S IN IT FOR GOOGLE?
- The smartphone dominated by ARM chips, leaves very little competition.
- Google helping Intel will increase the competition. This will bring down costs in manufacturing smartphones
- Google recently launched the Chromebook project, which works on a Chrome based Operating System and relies heavily on cloud computing and the internet
JOINT VENTURE CONCLUSION
- Google has to ensure this does not affect it’s market share in the Smartphone market
- A tricky partnership which can literally make or break both the companies
- Main provider is Google.
- Serves in 34 languages.
- Phones are very cost affective
- Competitive pricing.
- Copyright videos and content.
- Doesn’t provide with full privacy system.
- Multimedia support.
- Developing countries.
- Satisfied providers.
- Choosing the right customers for advertisement by Google Adwords.
- Violation of rules and regulations on YouTube.
- Increased competition-RIM, Microsoft etc.
- Storage capacity increased by Yahoo ,Hotmail etc.
- Picasa’s main competition Flickr.