Google's Internet Business Model - Term Paper Example

Google's Internet Business Model The fundamental principle of business models is to provide a sustainable means of generating revenue for a company. Google's business model depends mainly on search services and "highly targeted advertising" ("Company Profile"). They profit from relevant sponsored links based on a user's keyword search through their search engine. They were also the first to introduce "content-targeted advertising" (Rappa) to online advertisers through the Premium Sponsorship program and AdWords, which places relevant ads based on a web site's context ("Company Overview"). The Adwords program, which drives traffic to advertiser sites, is their main revenue-generator. Google is presently touted as the "world's best search engine" ("Company Profile"). They pioneered the use of text-based ads with a search engine that has a clean, spartan lay-out. The creators also devised a system of page ranking that assesses a site's value on the premise that the number of sites pointing to a particular page is an indicator of it's importance. This system, coupled with a match to a searcher's text query can give out the most relevant and accurate results. Their innovative take on the search engine is the foundation of their success, and they have branched out to offer a wide array of services. Google's content-based advertising scheme results in a service that accurately zeroes in the appropriate market. This produces a " higher than the industry average " ("Company Overview") click-through rate for their text ads compared to traditional forms of Internet advertising (banners, animation, e-mail, etc.). Their philosophy regarding advertising include the precept that one "can make money without doing evil" ("Corporate Information"). They maintain that the ads on their results pages can actually "provide useful information" ("Corporate Information") and are only shown on the basis of relevancy to the person's query. The company also adopts an unconventional approach to their business model. Instead of promoting their company as a brand, like what their competitors do, their focus is in enhancing the technology of their primary service-that is, a faster, easy to use, and effective search engine. Their initial popularity is owed more to word-of-mouth, rather than to marketing and brand promotion. This has enabled them to tap into greater revenue-generating services such as AdWords and AdSense ("Corporate Information"). Google proclaims that its company's mission is provide a superior search engine "organizing the world's information and making it universally accessible and useful" ("Company Profile"). It also projects a relaxed corporate atmosphere which is elucidated by their philosophies such as "work should be challenging and the challenge should be fun" or "you can be serious without a suit" ("Corporate Information"). Their principle when it comes to the search engine is "never settle for the best" ("Corporate Information"). Even though their search services are already touted, both in performance and popularity, as the most outstanding in the industry, they espouse an open attitude to change and innovation. The company also espouses a dynamic perspective in running and developing their services. With that in mind, they have constantly innovated and expanded their domain to include a myriad of other services that does not necessarily lie within the search engine arena. Its Google Labs, dubbed as it's "technology playground", is a testament to this philosophy as it constantly launches new and experimental ideas that challenge the status quo and redefine how we use the Internet. They are trying to develop and discover new technologies that will enhance the current state of things. According to their company overview, they are working to "expand search capabilities, encompass more information and present information in fresh ways across multiple plat forms". Advertising on the Internet is an offshoot of the traditional broadcast model. This model is most effective for sites that can generate a high user traffic rate and when the services or information provided is "highly specialized" (Rappa). Companies such as Google attract ads from a broad business source, catering to an equally wide market-base. The draw of this kind of advertising is that it costs a fraction of what is paid through traditional marketing channels, and virtually anything can be sold. In terms of profits in the web advertising model, Google is the industry champion with a revenue of 6.14 billion dollars so far this year, followed by Yahoo (5.26 billion), MSN (2.27 billion), and finally with Ask Jeeves with 350 million ("Google, Inc."). While all the aforementioned companies use advertising as their primary source of revenue, there are significant differences to their business models. Google is unique in that it primarily uses text-based ads (although they have recently expanded their repertoire to image ads in off-site advertisements) and pioneered the concept of search-relevant advertising. This advertising strategy, coupled with an innovative search engine propelled Google's sales up to 468% (Gillmor) over the past years. All sites are regarded as "portals" which usually provide search functions along with other services (Rappa). Sites such as Yahoo and Ask Jeeves followed Google's example, using a clean search lay-out and text ads. But while Google gets 98% of its revenues from text ads (Crawford), Yahoo taps into other revenue streams. Though profit Yahoo gets from search channels is only 45%, a third of which is generated by ads containing graphics and multimedia, they acquire significant proceeds from subscription services (Gillmor). According to the Microsoft website, their goal is to "simplify and enhance these technologies for users at affordable prices" ("Microsoft Keeps"). Microsoft's MSN business model is similar to the other companies, but they focus more on getting a market-base by offering free services and on promoting their existing brands and online applications. Paul Whiteway, Microsoft executive furthers that they "focus on customer acquisition, then try to migrate them to paying services. It's like digital TV, where you offer a base subscription and then upsell" ("Microsoft Keeps"). Finally, Ask Jeeves differs from the others by being an engine that caters to natural language queries, and though much smaller than the other companies, it is unique with regards to this niche. They boost their company revenue by also displaying sponsor links, and engaging in lucrative business partnerships ("Business Development"). Works Cited "Business Development." Ask. 2006. IAC Search & Media. Accessed 25 February 2006 "Company Overview." Google. 2006. Google, Inc. Accessed 25 February 2006 "Company Profile." Google. 2005. Google, Inc. Accessed 25 February 2006 "Corporate Information." Google. 2005. Google, Inc. Accessed 25 February 2006 Crawford, Krysten. "Google CFO: Fraud a big threat." CNNMoney. 2 December 2004. Central News Network. Accessed 25 February 2006 Gillmor, Dan. "Google's Business Model." Emergic.org. 6 November 2004. Rajesh Jain. Accessed 25 February 2006 "Google, Inc." Yahoo! Finance. 25 February 2006. Yahoo! Inc. Accessed 25 February 2006 "Microsoft Keeps On Innovating with Windows Messenger, Office XP." Microsoft. 5 June 2001. Microsoft Corporation. Accessed 25 February 2006 Rappa, Michael. "Business Models on the Web." Managing the Digital Enterprise. 13 February 2006. Digital Enterprise.org. Accessed 25 February 2006 Bibliography Beal, Andy. "Yahoo And Google In Same Space, Different Business Models." WebProNews. 21 December 2004. IEntry, Inc. Accessed 25 February 2006 "Business Development." Ask. 2006. IAC Search & Media. Accessed 25 February 2006 "Company Overview." Google. 2006. Google, Inc. Accessed 25 February 2006 "Company Profile." Google. 2005. Google, Inc. Accessed 25 February 2006 "Corporate Information." Google. 2005. Google, Inc. Accessed 25 February 2006 Crawford, Krysten. "Google CFO: Fraud a big threat." CNNMoney. 2 December 2004. Central News Network. Accessed 25 February 2006 Elgin, Ben. "Google: A $50 Billion "One-Trick Pony"" BusinessWeek. 3 March 2005. Accessed 25 February 2006 Gillmor, Dan. "Google's Business Model." Emergic.org. 6 November 2004. Rajesh Jain. Accessed 25 February 2006 "Google, Inc." Yahoo! Finance. 25 February 2006. Yahoo! Inc. Accessed 25 February 2006 Hedger, Jim. "Google Losing IT's Cool." Internet News. 27 May 2004. Websearchguide.ca. Accessed 25 February 2006 Lee, Charlene. "Yahoo! versus Google revenue streams." Forrester. 19 April 2005. Forrester Research, Inc. Accessed 25 February 2006 "Microsoft Keeps On Innovating with Windows Messenger, Office XP." Microsoft. 5 June 2001. Microsoft Corporation. Accessed 25 February 2006 Rappa, Michael. "Business Models on the Web." Managing the Digital Enterprise. 13 February 2006. Digital Enterprise.org. Accessed 25 February 2006 Read More