Google: A money-making machine and business model

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Google, according to the London Times, is the “fastest growing company in the history of the world” (Jarvis, 2009). This is remarkable when one considers the success of other tech companies such as Microsoft, Facebook and Apple. According to Levy (2009), Google brought in $21 billion in ads over the prior year. But how does Google make so much money? For one, it holds auctions for its web searches that allow prices to be bid up in an increasingly competitive market for companies’ search results orders. Once an ad is sold, data is generated about users’ tastes and habits, which Google then uses to eventually sell more ad space. It is a never-ending cycle of perpetual ad space sales that helps to ensure profitability for the company for the foreseeable future. I found it particularly interesting about how selective Google is with the companies that it partners with. Google turns away customers whose ads don’t measure up to its complex formulas. Since Google is a titan of its industry, it can afford to be selective when choosing customers to work with. However, if Google’s market share magically dwindles in the future, it may have to be less stringent on its qualifications.

Another key reason behind Google’s success has been its algorithms. In only one year, the tech company introduced 550 improvements to its fabled algorithms, demonstrating the will to always do whatever it can to increase its 65% market share (Levy, 2010). Search engines such as Bing attempt to gain market share, but to customers its like driving a BMW compared to a Ford Focus. Tests revealed that Google searches are far more accurate than Bing’s when typing in identical words or phrases. As long as Google keeps producing accurate searches, other search engines will have a difficult time keeping up with the monolith. Watch this video to find out more about how Google’s algorithm works!

An issue that Yahoo ran into years ago when ex-CEO Terry Semel headed the company was that he focused more on branding and marketability than on the actual software capabilities. His formula did not work, and consequently Yahoo fell further behind Google in revenue and market share. As the Wired column stated (2007), at Yahoo, marketers rule, while at Google, engineers rule. Google’s winning formula of perfecting its algorithm and other software intricacies have led to its dominance in the search engine marketplace.

Google’s innovation continued through 2008, when it introduced its Chrome browser. Four years later, Chrome’s sleek web browser has surpassed nearly every other browser on the planet, except for Microsoft’s Internet Explorer. Even still, Chrome briefly overtook IE as the world’s most popular browser, and isn’t showing any signs of slowing down anytime soon (Shah, 2012). Mangalindan reports that IE’s market share has fallen 11% since May 2011, giving Google even more motivation to continue to optimize its browser which, ultimately, will lead to more advertising revenue.

One of the biggest hurdles that Google faces in the future relative to its Chrome browser is the same customer stubbornness that many old-timers have in regards to keeping print newspapers. Many customers like myself have used Firefox (or IE) for several years, and don’t plan on downloading Chrome anytime soon because we fail to see the value in switching from a known and proven commodity to something with less of a track record. Because I’m generally the antithesis of a hipster, if Chrome does continue to grow its market share, I still probably won’t jump on the bandwagon until years after its become popular.

Other companies can learn from Google’s successful model. For example, Google believes that it’s better to do one thing really, really well as opposed to taking on too many projects and doing them halfheartedly (Jarvis, 2009). Yahoo CEO Marissa Mayer, while very ambitious, may want to take Google’s stance into consideration, as opposed to continually pumping out one or two new things on a weekly basis (Levy, 2013). Yahoo appears to be mirroring Google’s work culture by keeping things at its corporate headquarters as geeky, fun and hip.

2010 Browser Market Share

2010 Browser Market Share

Also, if companies like Yahoo want to find financial success in the same realm as Google, it probably shouldn’t hire a CEO (Semel) who has minimal technological experience. It was surprising to read that Semel actually had an extensive Hollywood film background, helping to make Warner Bros. highly profitable. The moral of this story may be to hire people within the tech sector instead of dipping into other sectors.

Another way that companies can find Google-like success is to quickly find its own identity. Google knows its strengths and continually works to keep a stranglehold on its search engine while showing tremendous growth and increased market share with its Chrome browser. Yahoo, on the other hand, still hasn’t figured out if its a media company or tech company, according to the New York Times (2011).

Other companies should emulate Google’s business model by hiring highly qualified, long-term executives to provide leadership. It was interesting reading the amount of CEO turnover that Yahoo has encountered since its heyday of the 1990s. Google, on the other hand, has been able to keep its executive turnover low in comparison, with Page taking on non-consecutive terms. Even former CEO Eric Schmidt was relocated to work as Google’s Executive C

Microsoft's mentality since the 1990s.

Microsoft’s mentality since the 1990s.

hairman, demonstrating that his original hire was not a mistake.

As for Microsoft, it appears that it still has a similar mentality as it once possessed in the 1990s in regards to preventing competition. However, this model is no longer working, as the European Commission regulated its browser via an anti-trust settlement (Baker, 2010). I think Microsoft may want to follow Google’s lead of focusing more on what it needs to do to improve its technology, and less on trying to reduce the competition at all costs.

I do think that the social media standard will continue to be Facebook and Twitter, so therefore other tech companies shouldn’t look to Google + as an example until it reaches more users and is able to more substantially monetize its social media platform.

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