Google Business Model
Since its inception, in 1998, and in the following
years, Google Inc., has developed a highly innovative,
unconventional and very risky business model.
The key point, here, is that it is a unique
unprecedent in the business world.
In this essay, we analyze it in detail.
As we write in Google
Marketing Strategy, until Google arrived
on the market, the search engine business was
not lucrative, and did not generate profits,
and neither significant revenues.
All search engine companies were running in
loss, with the expectation to become profitable
in the future.
Mostly, the expectation was based purely on
Google did different.
Google did not rely on annoying banner and advertising
on the home page. Google introduced a smart,
innovative and risky system - Adwords - and
the pay per click concept.
The risky choice, however, proved to be a winner,
and the innovative business model worked. Still
today Adwords is the main source of revenues
of Google Inc.
In the following years from 2001 to 2013, Google
became a powerhouse with an impressive pipeline
of new great products - Google Maps, Google
Earth, Google Video, Gmail, Google Finance,
and many more. And they were - and are - all
free for the user.
Google even developed its own web browser -
Google Chrome - which gained a respectable portion
of the marketshare,
In 2006 Google acquired YouTube, the most prominent
online video hub of the web at that time - and
In the years, Google brought great improvements
to YouTube, especially focused on video resolution,
which was very scarce and limited before the
acquisition, and which was prompting complaints
Google also significantly improved YouTube bandwidth,
and video maximum length (before the acquisition,
maximum length was limited at 10 minutes).
Today Google powered YouTube resolution is up
to 720p and 1080p,
and the user can upload files even 2 hours or
5 hours long.
In 2013 YouTube broadcast live - and for free
- the major sailing events in the world: the
Louis Vuitton Cup.and the America's Cup, from
In 2008 Google developed and launched the Android
operative system for smartphones.
Which are the secrets of
Google overwhelming success?
- Great products
- Relentless Brand building
- Unconventional business model
First, it has to be remarked that Google Inc.
started with a search engine which featured
strong pluses with respect to all its competitors,
as we have expounded in detail in our essay
It was faster, and giving more reliable and
This was key to everything that followed.
Second, the impressive pipeline of great and
useful products which followed, as we mentioned:
Google Maps, Google Earth, Google Video, Gmail,
Google Finance, and many more.
And, especially, that Google delivered all these
products and applications basically for free,
enticing and luring million of users worldwide,
with the result of building the brand in an
outstanding way - and so fast.
This was key for Google, to quickly build the
brand and enhance its value. Infact, a third
key secret to Google success is that Google
worked hard and relentlessly on brand building.
Often, sacrifying profits and/or revenues.
The strategy was risky, but it worked.
And it was a key asset in the IPO at the Nasdaq
in 2004, and in the spectacular increase of
its stock market capitalization. As we mentioned
Inc. Stock Value.
Wilson Sonsini Goodrich & Rosati had the
oversight on Google Inc. IPO at NASDAQ, in August
At the IPO Google stock price was set at $85.
Most financial analysts criticized the choice,
as they judged the stock price eccessive and
unreasonable. As the markets opened, the Google
Inc. stock immediately jumped to $120.
In 2005 the Google Inc. stock was above the
In 2013 Google Inc. topped $1000.
A tenfold increase in less than 10 years.
More information on Google financial results
Google Search Engine
The last data available [in 2013] give the
Bing (Microsoft search engine) 18%
In the last 8 years, Google marketshare has
always been within the 60% - 80% range.
Not a leadership. A domination.
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