Google’s mission is to organize the world’s information and make it universally accessible and useful.

- Google’s mission statement

GOOGLE INC.’

INTRODUCE TEAM MEMBER

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KSIM

Kim Min Woo.

GOOGLE INC.The recent take-over of Motorola and fee-charging of the Google Map reflects some of the changes in Google’s strategic approach. Henceforth, as a result of some situational changes for Google, it is an appropriate time to observe if Google is yet to experience relevant strategic changes as well. The following report regards Google’s current and future strategies based on the analysis of changes and conditions surrounding Google Inc.

WHAT’S GOOGLE’S CORE BUSINESS?

2010 2009 2008 2007

Google Web Sites

194(24%) 157(9%) 144(36%) 106(68%)

Google Network Web Sites

87(23%) 72(7%) 67(16%) 58(39%)

Licensing & Other Revenues

11(42%) 7.6(14%) 6.7(268%) 1.8(61%)

Total Revenue 293(24%) 236(9%) 218(31%) 166(56%)

GOOGLE CORE COMPETENCE

Business Structure

According to annual reports, Google’s business is largely categorized into 3 types. First is the Google website which refers to the site operated by Google itself. Google mainly makes profits off ’ AdWords’ sales aimed to show searching results. In late 2011, Google website sales recorded $194 billion, which counts for 60% of total sales. Google is competing against MS and Yahoo in the searching advertising market. As it is shown in the figures above, Google has maintained and sustained its overwhelming

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[Source: Google 2010 Annual Report] [Source; Net Market Share (2011. 10)]

* Note: % within brackets is the growth rate over the previous year , Google Annual Report 2010

competitiveness for a long time. Second is the Google Network Web Sites. Web site owners and Blogger operators produce profits using advertising solution called ‘AdSense’. Google also shares Ad revenue with its site operators. Revenue earnings from Google website have reached $ 88 billion. This amount accounts for 30% of total Google sales. Licensing & Other Revenue accounts for 4% of total Google sales.

Business Features

First, dependency on the Google website which is mainly known for its search engine is considerably high (66% of total sales). On-line advertising revenues with Network Web Sites ad sales added captures 96% of total sales. But Google faces a problem due to its poor portfolio. High reliance on on-line advertising business led to the result of Google’s revenue growth being vulnerable to economy fluctuations.

Second, online advertising revenues which account for 96% of total sales are dependent on existing PCs. The table above suggests that advertising revenues in 2007, 2008, and 2009 are almost zero. The current Android device may have spread across the world, but its advertising revenues seem quite insignificant. Data traffic flow from desktop to mobile may distort the current business structure and, inevitably, impacts desktop-based advertising revenues negatively

Better Portfolio

In terms of Google’s business structure, challenges faced by Google is in need of effective responses from SNS, such as Facebook, and also must consider new revenue models, according to various portfolios focused on a new business model.

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CORE CAPABILITY

Ability to provide

products/service

for customers

WHAT IS GOOGLE’S CORE CAPABILITY?

Google Search. The goal of AdWords, our primary auction-based advertising program, is to deliver ads that are quite useful and relevant to search queries or web contents are a form of information in their own rights. With AdWords, advertisers create simple text-based ads that then appear beside related search results or web contents on its websites and thousands of partner websites on Google Network, which is the network of third parties that use Google’s advertising programs to deliver relevant ads with their search results and contents. Most of our ‘AdWords’ customers pay Google on a cost-per-click basis, which means that an advertiser pays only when a user clicks on one of its ads. We also offer AdWords on a cost-per-impression basis that enables advertisers to pay us based on the number of times their ads appear on our websites and our Google Network Members’ websites as specified by the advertiser.

Our AdSense program enables websites that are part of the Google Network to deliver ads from our AdWords advertisers that are relevant to the search results or contents on their websites. We share the majority of the revenues generated from these ads with the Google Network Members that display the ads. The

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AdSense for content

AdSense

AdSense for mobile content

AdMob for mobile applications

CORE CAPABILITY

Ability to provide

products/service

for customers

CORE CAPABILITY

Ability to provide

products/service

for customers

AdSense program enables advertisers to extend the reach of their ad campaigns, improve our partners’ abilities to generate revenue from their contents, and deliver relevant ads for their users.

Google Display. Display advertising is comprised of videos, text, images, and other interactive ads that run across the web on computers and mobile devices, including smart phones and handheld computers such as netbooks and tablets. The Google Display Network provides advertisers services related to the delivery of display advertising across publishers participating in our AdSense program, publishers participating in the DoubleClick Ad Exchange, and Google-owned sites such as YouTube and Google Finance.

Through our DoubleClick advertising technology, we provide to publishers, agencies, and advertisers the ad serving technology, which is the infrastructure that enables billions of ads to be served each day across the web. Our DoubleClick Ad Exchange creates a real-time auction marketplace for the trading of display ad space. We aim to simplify display advertising so it is easier for advertisers[source: google annual report 2012]

HOW DOES GOOGLE’S BUSINESS MODEL CANVAS LOOK LIKE?

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CORE CAPABILITY

Ability to provide

products/service

for customers

HOW GOOGLE GENERATE CORE REVENUE?

• USERS: the best and widest range of searches for free6

• ADVERTISERS : a more measurable advertising model ‘ AdWords’, linking directly to search phrases and triggering payments contingent on user actions (clicks)

• WEB CONTENT OWNERS : opportunities to monetize from traffic routed by Google, through AdSense revenue sharing model

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<REFERENCE: ANNUAL REPORT 2011>

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SOURCE 1 GOOGLE 2011 ANNUAL REPORT

IN PARTICULAR, WHAT IS GOOGLE’S REVENUE MODEL?

Now let us have a look at Google’s revenue model regarding its broker business. Usually, there are compensations for every products and services, but it may not necessarily be in payment form.

In Google’s case, the non-monetary compensation for their search offering is the key to Google’s fortune.

In Fig. you can see that Google’s search business basically provides a search service to search customers and a PPC (Pay per click) advertising service to its advertising customers.

The compensation for the PPC advertising service is payment per click on an advertisement. The non-monetary compensation for the search service is the data about the user who is searching.

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Synergy from Google´s R evenue M odel

This business model has two striking advantages:

The information about the search customers is provided to Google for free and Google sells advertising space, perfectly matched with the customer information, to advertisers via an automatic online auction.

So Google leverages a revenue synergy between the search and advertising business.

The revenue model allows the revenue generated in the broker business to be used to carry the sunk cost and operations cost of offerings like Gmail and others.

GOOGLE

MAIN BUSINESS MODELBROKER

(HYBRID)

MAIN SOURCE OF REVENUE

ADVERTISING

NON-MONETARY

REVENUE STREAM

YES

(BROKER)

REVENUE SYNERGIES

BETWEEN E.G..

ADVERTISING AND ALL OTHER BUSINESS

IMPACT OF EXISTING

ECOSYSTEM

CUSTOMER AND

PARTNER ECOSYSTEM

WHAT DOES GOOGLE HAVE TO DO SUSTAIN?

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GOOGLE, HISTORICALLY AHEAD IN MANY DIGITAL SERVICES, IS BEHIND IN SOCIAL TECHNOLOGY

While they have tried in the past with services like Wave and Buzz,they have failed to capture mass attention and usage.

ACROSS THE GLOBE, USERS CHOOSE TO SPENDTHEIR DIGITAL TIME IN SOCIAL

In December 2010, Europeans spent more time on Facebook.comthan on Google sites– comScore , dec. 2010

GOOGLE+ WILL BECOME THE CORE OF GOOGLE’S SERVICES

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“The assumption is that everything will move over to usingthe Plus infrastructure over time” – Eric Schmidt, Google’s chairman

IT’S TIME TO SHIFT PARADIGMS. PROVIDE BETTER ADS. BETTER ADS MEANS MORE REVENUE.

FIGURE 1. CURRENT PORTFOLIO

Google+ brings more social factors into other services, such as YouTube and Chrome, and will activate social data across other Google products that millions are already using.

FIGURE 2. FUTURE PORTFOLIO

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GOOGLE SHOULD ALSO BE FOCUSING ON ADS MORE THAN MOBILE PAYMENT BUSINESSES BASED ON PAYMENT FEE.

Google has the opportunity to spread the NFC that occurs in off-line payment transactions and personal information has accumulated based on the BM-based advertising business. Its value base must be expanded into the real economy.

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