GOOGLE BUSINESS MODEL | HOW DOES GOOGLE MAKE MONEY |STRATEGY AND INSIGHTS
There are different popular search engines in the world like Yahoo, Google, Bing, Ask.com, Chacha.com etc. Out of these, the most loved search engine is Google, if you ask anyone. This is evident from the 89.5 billion US Dollars generated as revenue in 2016. Google, started as a research project, was founded by Larry Page and Sergey Brin in 1998 while they were PhD students at Stanford University, in California. Just like any major famous start-up, Google was founded in the garage of Susan Wojcicki, a mutual friend of both.
The founders first named the search engine “BackRub”, because it was used to check backlinks to estimate the importance of a site. The name was then changed to Google, which actually came due to misspelling the word, googol which is the number 1 followed by 100 zeros. Googol was decided because the search engine was meant to offer large quantities of information. August 2015 saw a major decision by Google. It was decided that all the interests of the company would be reorganized as a conglomerate called Alphabet Inc. with Google continuing to be the umbrella company for its Internet interests. Once this happened, Larry Page, who became CEO of Alphabet was replaced by Sundar Pichai as the CEO of Google.
A subsidiary of Amazon, Alexa Internet, Inc. listed Google.com as the most visited website in the world. This was not the only feather in the cap. Youtube and Blogger along with other Google services were also listed in the top 100 most visited websites.
Products and Services launched by Google
While it is difficult to list down every product and services launched by Google, it is possible to list down the major products and services launched by Google other than the Google.com search engine.
Previously known as Google Print and Google Book Search and also by its codename Project Ocean, Google Books store books and magazines scanned and converted to text using optical character recognition (OCR). Every book and magazine is procured directly from publishers and authors and also through the Google Books Partner Program or from Google’s library partners. By October 2015, over 25 million books were scanned by Google Books.
Google Groups, operational since February 2001, offers discussion groups for people having common interests. It also provides a gateway to Usenet newsgroups via a shared user interface. It allows users to start or access any threaded discussions via email or web interface. Other than accessing Google and Usenet groups, users can also set up mailing list archives for e-mail lists that are hosted elsewhere.
This program allows publishers in the Google Network of content sites to publish automatic image, text, interactive media or video advertisements. These are audience-oriented advertisements. The overall authority over the ads is Google itself. Revenue is generated depending on if the ad is a per-click or per-impression basis. Operating on HTTP cookies, over 14.3 million websites use AdSense.
Google’s favourite online advertising service is AdWords. Here advertisers pay to display product listings, brief advertising copy, and video content within the Google ad network to web users. It works partially based on cookies and partially on keywords determined by advertisers. Based on the search history, Google decides which ad to put for whom. When the ads are clicked, the relevant partner websites receive a portion of the generated income.
The file storage and synchronization service developed by Google and launched on April 24, 2012, is Google Drive. It lets users store files in the cloud, synchronize and share files across devices. It offers online as well as offline capabilities. It offers 15GB worth free storage space while other higher sizes are offered through special paid plans. The privacy can be changed from private to public to restricted viewing.
The email service launched by Google is Gmail. Beginning with just 1GB storage space (which itself was higher at that time when compared to other services like Yahoo.com and Hotmail.com), it rose to 15 GB storage space now. Files up to 25Mb in size can be attached to the email while higher sizes are attached using Google Drive. Gmail is available on the web as well as on Android, iOS and Windows devices.
Google Play Music
One of the most popular music and podcast streaming service and online music locker, publicly launched on November 16, is Google Play Music. The free service is limited to up to 50000 songs after which it is paid. Users can also buy music with this service. It also offers offline services. It’s available in Android, iOS and Windows devices.
Major money-making acquisitions by Google
Other than the products and services launched by Google, it has also been acquiring numerous companies from all around the world. Here are some of the few major revenue generating acquisitions.
Created by three former PayPal employees Steve Chen, Chad Hurley, and Jawed Karim in February 2005, Youtube is a video-sharing website acquired by Google in November 2006 for US$1.65 billion. It allows the user to view, upload, like, comment, rate and also subscribe to channels. Individuals, as well as corporations like VEVO and BBC, also upload content through their partnership program. Other than free content, there is also Youtube Red, a subscription service providing ad-free access to the website and to exclusive content made in partnership with existing users. Youtube is ranked second on the list of most popular websites by Alexa Internet.
reCAPTCHA was designed by Luis von Ahn, Manuel Blum, Colin McMillen, Ben Maurer and David Abraham at Carnegie Mellon University’s main Pittsburgh campus. Created to establish if the user is a human or not, it took the internet by storm by aiding in the digitalization of books. Google acquired reCAPTCHA in September 2009 and have been using it as an important feature of its Google Books project where rare, ancient and out-of-print books are digitalized and offered to the public. With the use of reCAPTCHA, humans have digitalized over 13 million archived articles of The New York Times from the past 20 years or so in just a few months. Through mass collaboration, books that are impossible to be scanned by computers are digitalized as well as translated into different languages. The CAPTCHA words are distorted further by reCAPTCHA in order to suppress the chances of another cyber-attack program solving the CAPTCHAs.
Google Earth, developed by Keyhole, Inc., is a computer program that provides a 3D representation of Earth based on satellite imagery. This computer program maps the Earth by superimposing images acquired from aerial photography, satellite imagery, and GIS data allowing users to see cities and landscapes from various angles. It can be accessed on the desktop as well as mobile devices.
Exploring the Business Model Canvas of Google
Before getting into the detailed structure of the business model of Google and analyzing the important segments, let us look into the main sources through which Google, Inc. earns revenue.
How does Google, Inc. earn revenue?
The majority of the revenue is generated from advertising. AdWords and AdSense are two sources of advertising revenue. AdWords are audience specific and generate 70% of the company revenue while AdSense allows advertisers to join its network and display ads on its website.
Google Play Store for mobile devices and Web store for the desktop are ways of generating revenue from apps. Out of more than 2 million apps, there are paid ones as well as free ones with in-app purchasing. Depending on the OS of the mobile, Google receives revenue in the form of commissions. Other than that app developer has to pay for their apps to be displayed in the store. Books, Music, Movies etc are also sold from Google Play Store.
Google also gains revenue from selling smartphones and other pieces of hardware tech like the Chromebook, Google driverless car, Nexus phones etc. The revenue gained is less when compared to the above two.
Business Model Canvas of Google
The business model canvas of Google explains the different aspects of a business model like customer segments, value propositions, channels, customer relations, revenue stream, key activities, key resources, key partners and cost structure.
Click the image to enlarge.
Customer Segments: This denotes the people for whom Google is useful.
- Advertisers who advertise in the Google search engine and other products.
- Ad agencies which create ads to put up in the Google search engine and other products.
- Web publishers
- Google Network Members
- Small businesses
- Content producers
- Original Equipment Manufacturers (OEMs)
Value Propositions: What all problems can Google solve and what all do they have to offer.
- Google’s mission is to organize the world’s information and make it universally accessible and useful.
- Google simply makes our life easier in innumerable ways.
- Targeted Ads using Adwords
- Extend Ad Campaigns using Adsense
- OS and Platforms (Chrome OS, Android)
- Marketplace (Google Play)
- Hosted web-based Google Apps
- Services designed for work and productivity
- Scheduling and time management
- Free email
- Instant messaging and video chat
- Language translation
- Mapping and turn-by-turn navigation
- Cloud computing services
- Content platforms (Music and Video)
- Google Shopping allows users to search for products on online shopping websites and compare prices between different vendors.
- Google Wallet allows people to send and receive money from a mobile device or desktop computer at no cost to either the sender or the receiver.
- Video sharing
- Photo organizing and editing
- Multiple hardware products (including the Google Pixel smartphone, Home smart speaker, Wifi mesh wireless router, Daydream View virtual reality headset)
- Cloud services
- Virtual Reality
- Artificial Intelligence with Google Assistant
- Internet carrier (Google Fiber, Project Fi and Google Station)
- Driverless car technology-Waymo aims to offer fully autonomous driving by 2020
Channels: What all are the platforms used by Google to reach the customers/users.
- Internet – google.x
- Corporative websites
- Global sales and Support teams
- Multi-product sales force
- Google News
- Google Apps
- Google Play
- Google Now
- Google AdWords/AdSense
- Google Maps
- Google Books
- Google Chrome web browser
- Chrome OS
- Nexus devices
- Android devices
- Google Wallet
- Google Pay
- Google Analytics
- Google News Service
- Google APIs
- Google Developers
- Google Labs
- Google Open Source projects
- Public Relations
Customer Relationships: Features offered by Google to connect with the customers and how they connect back.
- With the popularity and ubiquity of Google, it has become a verb to describe ‘searching for something online’ and it appears in conversations.
- It keeps things simple.
- Problem-solving approach
- It’s fast
- It’s flexible
- It’s search results are of a higher standard.
- Pay per click advertising platform
- Automated online tools to create text-based descriptions.
- Online marketplace
- Account management (large enterprises)
- Learning resources
- Speeding-up-Society (24/7 access)
- Same-side and cross-side network effects
- Benefits to each group exhibit demand economies of scale
Revenue Stream: What are the main income sources? Where do all the users have to pay?
- Google business model is polyhedral
- Users (see free searches, Free email, free maps, free browser etc and pay for some Premium services like advanced email and Google earth features, Cloud services, Payment services)
- Companies (see website space where to put their ads taking advantage of geolocation, Segmentation, Ad revenues, Keywords auction, Enterprise product sales, Licensing, Subscriptions, Enterprise services etc)
- Developers (see a way to monetize their knowledge by means of Android apps in a kind of 2.0 of coding)
- OEMs (Google get IP agreements with mobile OEMs, get paid to check and use their servers as repository for downloading their apps, etc)
- E-commerce transactions (Google Shopping)
- Google Shopping Express
- Offline (It is trying to move outside the web with autonomous cars, Working humanoid robots, smartglasses etc offered to the general public)
Key Activities: What are the activities undertaken by Google.
- Online advertising technologies
- Data Indexation
- Cloud Computing
- Software development
- IT infrastructure
- Marketing and Sales
- New products and Services
Key Resources: What all resources do Google need to be successful?
- Google’s secret algorithm (PageRank algorithm)
- Googlebot – web crawler
- Internet user’s queries
- The homepage was reductive it focused HUGELY on simplicity
- “Keep it simple and clean” Strategy
- Google.com as the most visited website in the world
- Google has been the second most valuable brand in the world for 4 consecutive years.
- Google’s corporate philosophy (“you can make money without doing evil”, “you can be serious without a suit”, “work should be challenging and the challenges should be fun”)
- 70/20/10 innovation model
- Staff talent
- Company culture
- Initial search deals (Yahoo, AOL and Netscape)
- Crawlers and infrastructure
- Big data
- Android mobile operating system
- Google has been enormously successful because of its ability to monetize search through AdWords
- Google X (Secret projects)
Key Partners: Who all help Google? What all do they do?
- Internet users as a content generator
- Early stage(Yahoo, AOL and Netscape)
- Content creators
- Alphabet (owner)
- Distribution Partners
- Open Handset Alliance
- OEMs (for Chrome OS devices)
- Developers Community
- Partnership with funding organization (Summer of code)
- Hardware manufacturers
- Major Electronics manufacturers
- Companies from Google Ventures
- Acquisitions and partnerships (Deja News, Applied Semantics, Keyhole, Urchin Software, YouTube, DoubleClick, Waze, DeepMind Technologies, Mobvoi etc)
- Google developed a partnership with GeoEye to launch a satellite providing Google with high-resolution
- NASA Ames Research Center
Cost Structures: What are the types and relative proportions of fixed and variable costs that Google incurs?
- Google is making hundreds of millions of dollars of investment in technology and R&D projects each year
- Traffic acquisition costs
- R&D costs
- General and administrative
- Data centres (100% renewable energy)
- Software development
- Googleplex and facilities
The future growth of Google
It is predicted that Google will always remain as the most popular website in the world, right now it defines itself aa a AI as a Servcice, the future of Google goes to be a complete Artificial Intelligence assistant. The revenue generation is always on the rise and will continue like that. Google CEO Sundar Pichai has proclaimed that Artificial Intelligence is the future of Google. Virtual Reality is another project by Google. Another major gold mine of Google is Google Fiber or Waymo, its autonomous vehicle technology division. This self-driving car is estimated to have a market worth of $42 billion by 2025.
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