Key Factors Behind Google early Success

Google leads the search engine market globally with a market share of more than 85%. The main reasons behind this early success of Google Search are : Conventional System used How many times the word appears in the website technique for search. Google developed the efficient PageRank algorithm. The algorithm displays result as per relevance. Relevance of a Page was calculated by taking into account the number of other pages referring to the Page and the importance of those pages. Thus a system of site-scoring and page-ranking was developed. Quantifying relevance and importance has thus helped Google to deliver searches as per users expectations

Main reasons why Google became a favorite among advertisers : The Ads were targeted as per relevance increasing the chances of their exposure and thus traffic. Google changed the cost structure based on CPC and expected CTR. Google reached mass content providers through Google Adsense contextual listings which became highly popular.
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Result
Google was successful in changing the networked market for Web Search. Google Web Search platform revolutionized the web search and in turn usage of the Internet. And thus created a network of users, advertisers and content writers Google enjoys a better pricing mechanism with more negotiating power due to the vast majority of Users. Advertisers can reach larger audience with contextual listings and have to pay lesser costs as compared to other available Search providers

The platform has both Same Side effects and Cross side effects As the number of web-users increases they result in creating content or using content on internet Which in turn increases the importance and relevance of Web- Pages PageRank algorithm captures the same and helps in delivering better search
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Do you expect the search engine business to be more concentrated? Is it a WTA market?
Search Engine industry

Factors influencing concentration : Cost Structure -Entry barriers are high. Huge server infrastructure and R&D investments are high. Switching costs for users and advertisers is also high. Network Effects-A search engine which has the maximum users can gain information about their activities and can improve quality in the best way. This will attract more users and reinforce improvements in search techniques. These factors do point towards an increasingly concentrated industry structure in case of search engines.

Conditions for a Winner Take all structure to exist Multi-Homing Costs Low. Users can simultaneously use a variety of search engines without incurring costs. Some costs might be borne by advertisers , but not high.High for those who develop applications Preference for differentiation Not very high. Some search engines may be focused on language and geography.

Do you expect the search engine business to be more concentrated? Is it a WTA market?
Network effects-Strong on the side of the search engine , more and more developers and advertisers tie themselves to Google search , enhancing it further. However, there is no such strong network effect to tie users with Google. It can be concluded that although the software industry is expected to be concentrated , it may not be a winner take all business. High concentration is not only substantiated by strong network effects and high cost structure but also because of the virtuous cycle created. Increase in revenues of the dominant firm enable it to invest more in technology improvement , thereby leading to more revenue generation. Large number of users and advertisers offer a base for accelerated growth for a search engine. Market Share : USA
Google Yahoo! Microsoft Others

Outside US, Google has almost 90% of the market share of search engines.
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GOOGLES REVENUE MODELS

Licensing search technology to Yahoo! and other sites Till December No Advertising

1999

December 1999

First introduced paid listings Sold on a cost-per-impression basis Charged an advertiser a fixed amount, each time a user viewed the ad, whether or not the user clicked the ad

February 2002

Modified Cost-per-click model Weighed CPC bids by the ratio of an ads actual click-through-rate to its expected CTR (based on Googles predictions) Weighting ensured that the relevant ads received the most prominent positions

March 2003

Introduced Adsense contextual paid listings Presented ads on webpages containing editorial content Used their index of webpage content to map keywords to appropriate editorial pages

THE GOOGLE-AOL PARTNERSHIP

Creating an AOL Marketplace through white labeling of Googles advertising technology enabling AOL to sell search advertising directly to advertisers on AOL-owned properties; Expanding display advertising throughout the Google network;

Making AOL content more accessible to Google Web crawlers;

Collaborating in video search and showcasing AOLs premium video service within Google Video;

Enabling Google Talk and AIM instant messaging users to communicate with each other, provided certain conditions are met; and

Providing AOL marketing credits for its Internet properties.

Google invested $1 billion for an effective 5% equity stake in AOL, allowing Google to participate in AOLs future success. Further, it would get much easier access to the AOL content, in its search results
AOL, the largest internet access subscription service in the US at that time, would strengthen its position in the fastgrowing online advertising business and help drive more advertisers to its web properties. It was the owner of several well known brands like AOL service, AOL.com, Netscape, Mapquest etc. Google would place graphics in sponsored ads for the AOL icons 7

MICROSOFT S BID FOR AOLS SEARCH TRAFFIC

It would mark the entry of Microsofts online unit MSN into the online advertising business Microsoft had tried to persuade AOL to set up a shared online advertising business in which both companies held a stake Microsoft wasn't interested in a cash investment in AOL The deal formed between Google and AOL would pose a threat to Microsofts core businesses Would have thwarted fast-growing Googles plans for a while It would have been nice to have the deal, but it would make money from its windows and office franchises

GOOGLES PARTNERSHIP WITH AOL

AOL was Googles biggest customer, accounting for 10% of its revenues The deal was important for the revenues as well as the image as the market share leader AOL would provide Googles search engine to its subscribers, which would mean a large leap compared to its competitors Google would also get access to rich AOL content easily, which would enhance the quality of its search results and thereby lead to increased revenues from various other clients in the future Yes Google could afford to pay more than the industry average to AOL for the volume of business brought in and also the benefits it would derive in comparison with its competitors Also, AOL also had an existing relationship with Google and it would be easier for both to continue the successful relationship than go it alone in the phase of rapid growth 8

Googles next future Action

Google should target eBay and E-commerce business in general : No doubt Google dominates the Internet but the visibility of Google in E-Commerce is very low. eBay dominates this market with a revenue of $ 9 Billion and profit of more than $ 1.8 Billion Google already has good credibility among internet users. Google can take advantage of loyalty of existing users Google can use its marketing insights to guide users with right product Thus Google can create a platform for potential sellers and buyers to connect with each other This can further be supported with Googles payment channel As the reach of internet increases though out the world Google can look forward to expanding such E-commerce operations The Mission of Google Making information universally available can be viewed as providing consumers with information about the right set of products to buy online

Analysts estimation that : 70% of ecommerce transactions originated through web search 40% of web searches have commercial motivation

Suggests

Providing ecommerce service to the masses

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Governance Structure
Dual class equity encourages strategic risk taking by vesting more power in the top management trio Has an audit committee and compensation committee that consists of only independent outside directors Has a Corporate governance committee Regularly reviews the performance of its board Has a CEO succession plan Corporate structure designed for stability and innovativeness in the long run Technology driven with focus on the user experience and innovation Overall, the corporate structure bats for time, stability & independence

Put outside investors at a severe disadvantage compared to insiders Google outperformed only 0.2 percent of the companies in the S&P 500 Ranked at the bottom of ISS*s Corporate Governance quotient Stock trading 11% below its all time high Compared to Apples stock that grew by 587% in the last 5 years, Googles has grown only by 37% No breakthrough innovations in the last 5 years
Thus, the governance structure is perceived by some as creating complacency, overconfidence, and a false sense of security
*Institutional Shareholder Services

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Corporate Culture
Culture revolves around the mission to organize the worlds information and make it useful and accessible Flexible work hours, specific projects and goals for every quarter Freedom and a sense of ownership given to the employees All employees are given a chance to share ideas and opinions and to provide inputs in company decisions Multiple opportunities for employees growth are provided Being serious without a suit laid back attitude and casual work places

Project based work Startup culture Transparency and Openness Personal and professional development Work is fun

For the fourth consecutive year, in 2013, Google was named the best company to work for by Fortune magazine; Microsoft was No. 75, while Apple, Amazon, and Facebook didnt even make the list

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Organizational Processes

Work processes are aligned to achieve innovation and promote an entrepreneurial spirit. Behavioral processes are employee centric and ensure that employees remain happy and contribute positively to the company Change processes aim at long term technical leadership in the market

The organizational processes thus seem to be one of Googles strongholds as it has produced positive results in all three dimensions work, behavior and change.

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THANK YOU

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