Googles Search Engine Market Share - Research Paper Example

Company Analysis Table of Contents II. Mission and Vision Statement 2 III. Strategy 3 IV. Objectives 4 V. SWOT Analysis 5 A. Strengths 5 B. Weaknesses 6 C. Opportunities 6 D. Threats 7 VI. Porter’s Five Forces 7 A. Competitor Rivalry 7 B. Buyer Bargaining Leverage/Power 8 C. Supplier Bargaining Power 8 D. Threat of New Entrants 8 E. Threat of Substitutes 9 VII. Competitor Profile Matrix 9 VIII. EFE 10 IX. IFE 10 X. Brief Financial Analysis 11 Works Cited 13 I. Company History Google is in the business of providing targeted ads culled from its search engine capabilities, and touts itself as the organizer of the information present in the world, and in particular on the Internet. As a worldwide concern, its key business growth drivers revolve around advertising, funneled through its search engine,operating system, enterprise, and gaming and apps platforms. Its key advertising platforms are AdWords and AdSense, and has come to compete in social networking too, with its Google+ social networking platform to rival Facebook. It is the developer of the Android smart phone operating system, the dominant mobile platform at present. Its most recent acquisitions include Motorola Mobility, Zagat, PushLife, Wildfire, Virus Total, and Nik Software. It has a growing presence in the enterprise too, matching up against Microsoft in this crucial arena with a host of solutions related to the backend and to productivity (Reuters; Google Finance): Through Google Apps, which includes Gmail, Google Docs, Google Calendar, and Google Sites, among other features, the Company provides hosted, Web-based applications that people can use on any device with a browser and an Internet connection. In addition, the Company y provides its search technology for use within enterprises through the Google Search Appliance (real-time search of business applications, intranet applications, and public Websites), on their public-facing sites with Google Site Search (custom search engine), and Google Commerce Search (for online retail enterprises) (Reuters) It’s Google Plus platform is said to have accumulated a total of 90 million members as of the beginning of 2012. As a platform, this is touted as a future source of growth in revenues, alongside its other dominant and emerging platforms, including the Chrome browser and OS, Android, Googe TV, Google Books, its Google eBookstore, as well as its emerging eBookStore and Google Play platforms for selling apps and books content. The company was incorporated in 1998, but was established two years earlier by Sergey Brin and Larry Page. It has a current market capitalization of US 220 billion dollars. Its key competitors are Microsoft, Facebook, Yahoo!, eBay, and Amazon. Aside from Brin and Page, its other key officers are Eric Schmidt, Patrick Pichette, and Nikesh Arora (Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch). II. Mission and Vision Statement Google describes its own mission as the firm that is to “organize the world’s information and make it universally accessible and useful” (Google). Its mission can be gleaned from the way it interprets that mission in terms of what the company does for its users: With all our technologies—from search to Chrome to Gmail—our goal is to make it as easy as possible for you to find the information you need and get the things you need to do done. This means making search smarter and faster...It means making our products work intuitively, so that you can share documents with Gmail contacts without having to copy and paste, and open the same tabs on your Android phone that you have open on your Chrome browser on your desktop (Google (b)). III. Strategy Google’s business strategy hinges on differentation and excellence in its core technology offerings, leveraging thst excellence to generate revenues from advertising, and extending the technological excellence and its advantages throughout all of its dominant and emerging platforms, including mobile. This can be gleaned, for instance, in its strategy of giving away its Android software for free, so that it can then leverage the tremendous reach that Android has achieved to make sure that Google search is dominant in mobile. This mobile dominance translates to Google being able to extend its monetization of search to mobile and emerging mobile platforms. The strategy can further be gleaned from the way the company describes what it does best, its values, and what it sees as its core offerings to consumers. For the web, for instance, its strategy is improved web experience, by looking far beyond what is merely excellent, and then innovating to make quantum jumps from that excellent starting point. There are overlaps and meeting points, for instance, between what it sees as its core benefits offerings for businesses in general, and its core offerings for the web. Both hinge on Google being able to leverage the power of the Internet by exploring new frontiers for making lives easier and more productive for its end users. The experience is better using Google, the company is implying, and that experience is at the core of what Google strives to achieve moving forward with the Internet and with its business tools offerings. This intense focus on the user experience as the pillar of strategy is also evident in its foundational values/truths (Google (b); Google (c)): We do search. With one of the world’s largest research groups focused exclusively on solving search problems, we know what we do well, and how we could do it better. Through continued iteration on difficult problems, we’ve been able to solve complex issues and provide continuous improvements to a service that already makes finding information a fast and seamless experience for millions of people. Our dedication to improving search helps us apply what we’ve learned to new products, like Gmail and Google Maps. Our hope is to bring the power of search to previously unexplored areas, and to help people access and use even more of the ever-expanding information in their lives (Google (c)). IV. Objectives The company’s objectives can be gleaned from its stated mission and vision, as well as the previous discussion on its strategies. The mission also reflects its objectives of being able to organize the information of the world, in ways that makes users connect to that information usefully, and in a universally accessible and user-friendly fashion. The end goal is to empower users to be able to excel at those things that they are good at, and to empower users to make good use of their time doing the things that are most important to them. With information access easy and convenient, as well as comprehensive, in the channels that users are familiar with, such as the web and such as in mobile, users are freed from the work that can take away from their time, and in the process allows users to be more productive. Meanwhile, while excelling in information organization and in search, Google hopes to grow its advertising businesses as the primary business objective (Google; Google (b); Google (c); Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch). V. SWOT Analysis A. Strengths The company’s core strength is in search, and its flipside ability to make money from search. The numbers are not small by any measure. It follows Microsoft in market capitalization, currently at US 220 billion. It has been able to fortify its hold of the search market in the US, as well as its overwhelming dominance of share in the global search market, and the firm has done so with amazing consistency throughout the years, even with the sustained efforts of Microsoft to catch up. Its growing dominance in mobile, through Android, has likewise resulted in the firm being able to expand its lead in search into that emerging platform. Google likewise has solid earnings and a cash pile that it can leverage to continue its dominance of search, and to expand revenues from search by expanding its presence in enterprises, and emerging platforms such as mobile (Lardinois; Ludwig). These are formidable strengths that all emanate from technological and business leadership in its avowed mission of organizing global information, and making such information available to its users in the most user-friendly and useful fashion (Google; Google (b); Google (c); Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch). B. Weaknesses There are weaknesses associated with the growing importance of mobile ad revenues to the total revenue pie at Google. This is because mobile ad revenues are smaller per click, in comparison to traditional ad placements in non-mobile PC platforms. Historically, over the past several quarters, the observation has been of declining revenues on a per click basis, and this is a cause of concern in the short term, even as total revenues from mobile ads has been growing by leaps and bounds over the past few quarters at well, now estimated at US 8 billion dollars on an annualized computational basis. The recent drop in the market capitalization at Google underscores the risks that the company faces in the midst of this transition, and these risks reveal some fundamental weaknesses. Among these are the potential of Motorola Mobility to be a drag on future profitability, given that revenues in Motorola have been going down, and given that such down trend is expected to persist moving forward (Foreign Writer; Fletcher). C. Opportunities There are opportunities to continuing to leverage dominance of mobile to extend global dominance of Google search market shares. This is evident from the way Google’s mobile ad revenues have been growing thanks to the continuing surge in market share of search in mobile platforms, correlating with the global surge in market share of the Android platform. The short term downward movement of the revenues and profits may be correctional in nature, meaning that once mobile revenues hit a certain inflection point, then the natural scale of the massive uptake of mobile search will mean that Google’s revenues and profits will go back into hyperdrive as far as upward movement is concerned (Fletcher; Foreign Writer; Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch). D. Threats There are various threats to Google’s core search business. One of the dominant threats are the direct competitors to Google’s search and advertising offerings, headed by the Bing and Microsoft juggernaut, as well as Yahoo! (Paul). The other set of threats come from indirect competitors to Google’s search offerings, by way of social media platforms such as Facebook, which has come to compete with Google in terms of advertising share of revenues and mind share, even as Google continues to hold its own against Facebook in these areas (Kelleher). VI. Porter’s Five Forces A. Competitor Rivalry Competition is fierce and growing, and the list of competitors is growing as well, with Google in the search business having direct and indirect competitors in Microsoft and Facebook among others. In mobile it is also battling Microsoft, as well as Apple. Though its share of search and search ad revenues seems unassailable, competition and innovation in the space is non-stop. Competition is fierce and will continue to be so moving forward. The stakes are high for those who miss strategically in terms of technology and appropriate business models, especially in the areas that are being contested at present, including the all-important mobile arena. Even in the emerging tablet platform, the battle is fierce, and where Google’s platform dominance is in doubt, then it follows that where Google yields platform edge, its share of search and search revenues is also vulnerable to attacks by Microsoft, Apple, and Facebook (Kelleher; Paul; Enderle; Coldewey; Porter). B. Buyer Bargaining Leverage/Power Buyer bargaining power is low to medium in search, given that while Bing and Yahoo! offer alternatives to Google search and to Google advertising, the combined shares of the two are small in comparison to Google’s. The buyer leverage is especially weak in terms of placing advertising, because of Google’s wider reach (Kelleher; Paul; Enderle; Coldewey; Fletcher; Foreign Writer; Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch; Porter). C. Supplier Bargaining Power Supplier bargaining power is especially weak too, relative to the search offerings of Google, owing to the fact that Google owns the platforms where it places its search properties. In the concrete, it owns Chrome as the browser in which it offers its search. In mobile, it dominates with Android. One can argue that Microsoft’s dominant share in PCs translate to poorer power for Google and a stronger bargaining power for Microsoft. On the other hand, Google has been able to delink its search engine from Microsoft’s platform, so that in general it continues to enjoy use even by those who are in the Microsoft Windows platforms (Kelleher; Paul; Enderle; Coldewey; Fletcher; Porter). D. Threat of New Entrants Given that the search business requires massive scale, and given that even the platform wars on mobile and the Internet in general is fierce and requires massive resources, it can be said that the threat of new entrants is low (Kelleher; Paul; Enderle; Coldewey; Fletcher; Porter). E. Threat of Substitutes There is talk about Facebook being able to act as a substitute to Google as a platform for search and for placing advertisements. Much of this talk has some substance, given the rise of Facebook as a platform of choice for many Internet users. Given the strong position of Google, however, the threat of substitutes overall is low to medium in the short term. This may change in the long-term though, as Facebook’s business model matures (Kelleher; Paul; Enderle; Coldewey; Fletcher; Porter). VII. Competitor Profile Matrix The preceding analysis allows us to construct our own competitor profile matrix for Google, using Microsoft and Facebook as the key competitors to which Google is to be compared to. The key success factors that can be derived from the preceding discussion are search share, search revenue share, share of mobile platform, differentiation ability, and end-user experience (Kelleher; Paul; Enderle; Coldewey; Fletcher; Foreign Writer; Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch; Porter): Critical Factors for Success (Weight) Google Microsoft Facebook Rating Score Rating Score Rating Score Search share (0.4) 4 1.6 2 0.8 2 0.8 Share of revenues (0.2) 4 0.8 1 0.2 2 0.4 Share of mobile (0.2) 4 0.8 1 0.2 3 0.6 Differentiation ability (0.1) 4 0.4 2 0.2 4 0.4 End user experience (0.1) 4 0.4 2 0.2 4 0.4 Total 4 1.6 2.6 This ad-hoc competitor profile matrix shows Google dominant in the near to medium term, from what we know so far about how competition stacks up relative to the identified key success factors (Kelleher; Paul; Enderle; Coldewey; Fletcher; Foreign Writer; Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch; Porter). VIII. EFE External factors that are relevant, as can be gleaned from the preceding discussion, are the long-term evolution of mobile, as well as the long-term threats posed by Facebook and Microsoft as indirect and direct competition. We assign these with equal weights, at a third each, and determine that among the three, it is the long-term evolution of mobile that impacts Google most (Kelleher; Paul; Enderle; Coldewey; Fletcher; Foreign Writer; Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch; Porter). IX. IFE There is one pronounced weakness in Google’s internal makeup, and that is the continued drain on finances by Motorola Mobility. This is the dominant concern, and is given the whole weight for practical purposes, dwarfing all others (Kelleher; Paul; Enderle; Coldewey; Fletcher; Foreign Writer; Google Finance; Reuters; CrunchBase; Yahoo!; MarketWatch; Porter). X. Brief Financial Analysis Google financial fundamentals are solid and sound, judging from key financial metrics (MarketWatch): Graphic Source: MarketWatch Profitability and liquidity ratios are solid, reflecting low debt and high monopoly-level margins. Share prices, meanwhile, are near historical highs, and given its bright prospects, the P/E valuation is reasonable (MarketWatch; Google Finance): Image Source: Google Finance Works Cited Coldewey, Devin. “Battle Plan: Apple vs. Microsoft vs. Google”. NBC News. 2012. Web. 27 October 2012. . CrunchBase. “Google.” CrunchBase. 2012. Web. 27 October 2012. . Enderle, Rob. “Opinion: Google, Microsoft, Apple suit up for tablet World War III”. Digital Trends. 30 June 2012. Web. 27 October 2012. . Fletcher, Nick. “Google shares continue to slide as poor US corporate news hits markets”. The Guardian. 19 October 2012. Web. 27 October 2012. . Foreign Writer. “Analysts cut Google share price targets”. Business Day Live. 21 October 2012. Web. 27 October 2012. Google. “Company”. Google.com. 2012. Web. 27 October 2012. Google (b). “Our products and services”. Google.com. 2012. Web. 27 October 2012. . Google (c). “Ten things we know to be true”. Google.com. 2012. Web. 27 October 2012. . Google Finance. “Google Inc.” Google. 2012. Web. 27 October 2012. . Kelleher, Kevin. “Facebook vs. Google: It’s on! (again)”. CNN Money. 24 September 2012. Web. 27 October 2012. . Lardinois, Frederic. “ComScore: Google’s Search Engine Market Share Increased in September, Yahoo Down Another 0.6 Percentage Points”. TechCrunch. 11 October 2012. Web. 27 October 2012. . Ludwig, Sean. “Study: Paid search ads increased 33% in Q3, Google controls 87% of search ads”. Venture Beat. 11 October 2012. Web. 27 October 2012. MarketWatch. “Google Inc.”. The Wall Street Journal. 2012. Web. 27 October 2012. . Paul, Ian. “Microsoft Bing Social vs. Google Search Plus Your World: Showdown”. PCWorld. 11 May 2012. Web. 27 October 2012. . Porter, Michael. “The Five Competitive Forces That Shape Strategy”. Harvard Business Review. January 2008. Web. 27 October 2012. . Reuters. “Google Inc.”. Reuters US Edition. 2012. Web. 27 October 2012. . Yahoo! “Google Inc. Profile”. Yahoo! Finance. 2012. Web. 27 October 2012. . Read More