free business models case study: google
DESCRIPTION
This lecture looks at Google as a poster-child for the use of Free products as a way to build successful businesses.TRANSCRIPT
(Stanford BUS-21)Martin Westhead
Mastering Marketing
Free Case Study: Google
How to make money by giving things away
Overview
History Abundance Product Development Max Strategy Complementary Products
“Free” by Chris Anderson- Free PDF / Amazon / Free Audio Book
Timeline
1999-2001- Invent search that gets better with web scale
2001-2003- Self service ads on searches
2003-Present- Services: extend reach and customer attachment- Advertize where it it makes sense
Google Today
Last year Google - $60M revenue- $14B income- 46K employees
Feb 2014- 2nd Biggest company in the world $395.4B- Apple first at $463.6B
Abundance Product Development
“Would it be cool?” Product ideas com from engineering
- Google 20%- What can be done?- Would it be cool?- Will people like it?- NOT: Will it make money?
Sound crazy?- Maybe for GM or GE - Just way of life for Google
Monetization- Popular products are analyzed later for monetization options
Max strategy
Eric Schmidt, CEO Google- Max Strategy:
“Take whatever you are doing and do it to the max in terms of distribution. The other way of saying this is that since the marginal cost of distribution is free, you might as well put things everywhere.”
E.g. Marketing “The Sopranos” with HBO- Facebook page- Viral videos- Extra footage - Plot updates via twitter- Website where they can learn more about the characters- Unused scenes on YouTube- Competition on which scene should have been in- Etc…
“Fill every crack in every pavement”
“Max” needs an monetization engine
Sopranos -> HBO Google -> Adsense / Adwords Your business you either:
- Build your own- Leverage 3rd party
- Partner- Acquisition
Complimentary products
In economics, a complementary good is a good with a negative cross elasticity of demand. This means a good's demand is increased when the price of another good is decreased. Wikipedia
Google News
Google products are “Complementary” to its search ads
“The initial studies on Google News said that people were twice as likely to click on search ads on a subsequent search, so everyone said , ‘Great’. It a loss leader – a traffic getter. Sure it’s a service to the world and so forth, but a more sophisticated view of that is to say that the product is not Google News but Google. It’s all about engagement into Google and that if we can get you, at some point in your engagement with Google, to end up using Google for something that we can then monetize, the sums work.”
-- Schmidt
Google wants information to be free because as the cost of information falls it makes more money
- Nicholas Carr “The Big Switch”
Scale
Reduces marginal costs- CPU, storage and bandwidth low and falling- Everything Google does is cheaper
Easy to trial new products- Betas- Massive customer trials- Kill failures quickly…they are cheap
Only way to grow is to increase Web usage- Free WiFi- Free internet access- More ways to use internet for more things
Google strategy
Build cool products- Figure out quickly if people like them- Kill off failures
Grow and audience Think about monetization
- In-house economists and biz strategists Products
- Canceled due to lack of uptake- Or not cool enough- Never because they won’t make money
Overview
History Abundance Product Development Max Strategy Complementary Products
“Free” by Chris Anderson- Free PDF / Amazon / Free Audio Book