Google’s Market Analysis

Abstract

This paper takes Google’s business strategy as a starting point to examine how it is competing in the one-cloud, many-screen market. The paper set out the performance of Google in relation to its main competitors from 2006 until 2013. It conducts an economic analysis of Google and its market in a wider macro context. It points to the development of Google’s products and their effect on market completion. There is a revelation of the effectiveness of Google’s strategy and more so in the face of the 2012-2013 economic downturn that affected many companies. The paper finally identifies key features of the company’s strategy in regard to the competition and market share.

Introduction

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Started in 1998 by Larry Page and Sergey Brin, Google is a company that has specializes in internet search and advertising technologies (Google, 2013). The company has diversified its base after mergers; acquisitions and partnerships to include products such as desktop and mobile phones. It has 22, 0000 employees and the leading search engine in the world. The year 2006 saw the company extends its web presence beyond search engine to other applications. This changed and expanded its advertising revenue base with Ad words and AdSense positioned as major income generators. After that, the company has gone ahead to incorporate various strategies in order to stay ahead of the competition. It is in this light that this paper examines Google’s performance between 2006 and 2013 analyzing its business strategy.

Google’s Performance from 2006 until 2013

In the year 2006, Google’s market share was at 59 percent. This translated to an average of 59 percent of search queries that year. Three of its main competitors, Yahoo, MSN and Ask posted poor results, way lower than Google’s. Yahoo’s market share in 2006 was 24.7 percent; MSN’s was 8.7 percent and Ask’s was the lowest at 4.2 percent. In the same year, Google’s revenue went up to $10.6 billion from the previous year’s $6.1billion. Yahoo, on the other hand, earned $6.4 billion in the same year with MSN earnings totaling approximately $ 600 million and Ask at 2.1 million. In 2007, Google increased its market share from 59 percent in the previous year to 69 percent. This put the company’s market share 10 points higher than the previous year, translating to an increment of 2 billion queries every month. Google made $16.5 billion almost 6 billion more than it earned in the previous year. 2007 saw Yahoo one of Google’s main competitors drop below its previous year’s performance; it earned 17.4 percent from the previous year’s 24.7percent. MSN and Ask, on the other hand, gained market share to record 9.2 percent and 3.9 percent respectively. Yahoo earned $6.9 billion at the end of the year, 8 percent from the previous year.

Google continued dominating the market and by 2008, 69.5 percent of all searches done online were from its search engine. This was a 0.5 percent increment from the previous year’s 69 percent (Shankland, 2009). This growth was largely seen as at Yahoo and Microsoft’s expense. That year, Yahoo recorded 19.2 percent of the market share, while MSN recorded 5.9 percent. Despite the fact that Ask maintained its bottom ranking, it gained 1 percent to record a market share of 3.8 percent. In 2008, Google performed much better than the previous years, earning a total of $21.7 billion up to $5 billion while Yahoo and MSN earned $7.21 billion, and $2.47 billion respectively.

In 2009, Google had increased its market share to 66.3 percent with Yahoo registering a 15.3 percent market share drop from the previous year. Microsoft introduced its new search engine, Bing and upon its debut registered 9.34 percent while Ask came in at the fourth position at 2.65 percent. It seems that both Yahoo and Bing lost a total of 7 percent combined. Google does not also seem to be the recipient of the 7 percent since it has steadily maintained the same figure with a 1 percent increment. Saad Kamal (2009) posits that this market share is slipping away to a new entrant, the social search. Social networking sites are increasingly becoming popular and especially Tweeter that users can use in asking questions or ‘social search.’ Nonetheless, Google maintained its market dominance in throughout this year with revenue of $23.6 a difference of almost 2 billion from 2008. Yahoo, on the other hand, generated revenue worth $6.4 billion. While MSN’s Bing and Ask came in the bottom ranking.

In 2010, the situation was different for Google as it lost its market share by a considerable amount of points to 64.4% percent in April; it, later on, grew to 66.3 in October. Yahoo gained to 17.7 percent from 16.9 percent while Bing went up to 11.8 percent. Despite that fact, Google’s revenue for 2010 went up to $29.3 billion from the previous year’s $23.6 billion. Yahoo reported a drop in its revenue from $6.4 billion to $4.9 billion while Bing earned $50 million. Google’s market share grew from 65.3 percent to 65.6 percent, and this is a decrease from the year to year figure of 66.3. Yahoo continued to decline and registered 15.2 percent while Bing increased to 14.8 percent (Goodwin, 2011). Ask declined 3 percent to 2.9 percent while new entrant AOL claimed 1.5 percent of the market share. Google continued to grow its revenue and in 2010, it reported $29.3 billion (Google, 2013), while Yahoo earned $4.9 billion. In 2012 Google’s percentage was at 66.9 of all searches conducted. Bing recorded a 16 percent indication of increased market share from 15.9 percent in the previous year. Yahoo showed signs of stabilizing by recording 15.2 percent of all online searches for the past 15 months. Ask recorded 3.2 percent while AOL was at 1.8 percent drop from 2.9 in the previous year. That year Google earned $31.2 billion, with the Online Services Division that Bing falls under-reported $707 million revenue (Sterling, 2012). Yahoo also remained stagnant with its revenue at $4.9. The year 2013 saw Google drop 2 points to 66.7, and Bing at 18.1 percent, and Yahoo increased a percentage to record 11.2 percent (Miller, 2013).AOL recorded 1.4 percent.

An Economic Analysis of Google

Google’s strategy has propelled it to the pinnacle of the market and kept it there for many years. The company has successfully implemented its open-source products as well as services. As the company underlines in its mission, universal access to information is one of the reasons its products are increasingly used. Google has a number of valuable open source products including maps, earth, calendars, drive, and many others. However the most important is its web ranking tool, web directory, and the search engine optimizer that have made it most sort after the company on the internet. Google also seems to succeed as a result of its quality offering and good customer experience. Strategic Management Insight (2013) claims that everything that the company gives its customers is of premium quality and most importantly, they are aimed at solving their user's problems and needs. Google is stable financially and is one of the most profitable organizations. Strategic Management Insight (2013) explains that it has $48 billion in assets and $7billion in debt. This makes it very easy to deter any kind of competition.

The company has access to the highest number of internet users. As seen in the above paragraphs, from 2006 until 2013 there is no other company that has stood unbeaten in user numbers other than Google. It has access to 80 percent of the world computer search market and 90 percent of the mobile service search market. By 2012,, the company had added over 1000 patents and was ranked 21 in all companies that have the highest number of patents. This gives it a strong portfolio as compared to its competitors in the market. The company either strives to or has integrated its products. Google has enabled its products to operate on any system without any challenges. It compares to no other company in regard to product integration. According to the Boston Consulting Group (2013), Google is one of the most innovative organizations globally. It was also recognized as the second patent creator globally in 2012. The company recognizes innovative work cultures as its main assets.

Economic Analysis of Markets

The advertising market is rapidly on the rise, and this is good for Google. However in the long run this might be detrimental to the revenue collection. Personal Computers are on the decline in the market, and these formed that bulk of the desktop engine search market. The company needs to find ways of pushing back this competition in order to avoid losing its source of income. The company is also faced with the challenge of turning the growing mobile device market into money. This is the market that has the potential to grow beyond desktop computers. In addition, the growth of advertising or emerging market is seen in the developing economies where the prices are lower than in developed economies, this is an indication that the growth of advertising will be insignificant to the company in the near future. Google has a number of high-quality products that are unprofitable. They seem to add no value to the company, and this is detrimental to its future.

Wider Macro Content

In 2006 Google launched Google Finance, Translator, and Calendar and announced its acquisition of YouTube, as a strategy to expand its market. In the following year, it announced Android, and also expanded its partnership with YouTube. In 2008 Google acquired Double Click and also dedicated a website to the United States Elections. Later in 2009 Google launched Google Voice, Ventures, and voice search on its Android and also announced Google Chrome. Google on the other hand has not fully maximized its potential to perform better and maintain its market share based on a number of issues based on its strategy. The number of mobile internet users is rapidly increasing, and this gives it the opportunity to establish an advertisement display platform on such devices so as to open newer markets.

In addition, the company can get patents through mergers and acquisitions. This will enable the company to grow and compete successfully. Google's innovative culture has led to its introduction of a driverless car a concept that can be used on a wide-scale, in future automobile models. The company though not an automobile company can license these models to manufacturers as an additional income channel. Google with the introduction of the Google Chrome book Pixel Touch Screen Digitizer, Google Nexus One, and HDMI Streaming Media Player have given an indication of its intension to capture the electronic industry. This is a new opening for the company and is receiving a warm reception in the market. According to Strategic Management Insight (2013), Google is currently working on fiber cables that will revolutionize the speed of content delivery online. This is consistent with its strategy of getting people to use the internet as much as possible; universal access. This would integrate the company vertically since it would have no competition in such infrastructure (Fine, 2009).

Effectiveness of Google’s Business Strategy

Google generates more revenue from its web-based products; this is the Cash Cow. In particular, its web ranking has made it monopolize the internet business. It is impossible for any online company to operate without Google web ranking and Google has used this product to exert its might in the industry. Most major companies are at the mercy of Google’s algorithm a product that determines the success or failure of any online business. It is the unseen hand that controls all businesses online. JC Penny unsuccessfully tried to break into this system and lost a considerable amount of its revenue in 2011 (Fox, 2011). Google took advantage of the increased traffic and web ranking to survive the challenges associated with the global GDP fall in 2012. This was the year that the company made the greatest gain in its history commanding 66.9 percent of all internet searches.

Key Features of Google’s Strategy

Google’s business strategy might seem successful and one that has seen the company rise over the years, however, a close analysis of this strategy reveals monopolistic business practices. Google is a company that is financially stable and is capable of introducing as many products in as many markets as possible to divert the attention of critics. In addition, Google’s greatest asset has always been its innovation. The company unveils new products and technology constantly and this has kept it ahead of the competition. Google’s strategy has also been a disadvantage to the company; the company has focused on acquiring online companies and grown in that regard, but it has failed to tap considerably into other streams of income. It is not easy to point at any of its electronic products as state of the art or as a market leader. The leadership’s vision focused on the internet as the basis of its business.

Conclusion

Google has aggressively positioned itself in the market; it is continuously becoming volatile with competitors and other stakeholders viewing Google as unfairly taking advantage of its strength to stay at the top. Google has successfully positioned its self in the market and with this coupled with a stable financial base, has been the reason for its success. The company through innovation continually introduces new products that are instant hits in the market and this will be able to help it dominate. However, as seen above there are areas that the company needs to take notice of in order to stay ahead of the competition. Dependence on products is detrimental to its financial future and call for the creation of multiple streams of income.

Reference

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