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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 business model,
unprecedent in the business world.

In this essay, we analyze it in detail.

Analysis

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 wishful thinking.

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 still today.
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 by users.
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 San Francisco.

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 Google Marketing Strategy.
It was faster, and giving more reliable and relevant results.
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 in Google Marketing Strategy:

Google Inc. Stock Value.

Wilson Sonsini Goodrich & Rosati had the oversight on Google Inc. IPO at NASDAQ, in August 2004.
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 $400 mark.
In 2013 Google Inc. topped $1000.

A tenfold increase in less than 10 years.

More information on Google financial results
in Google Marketing Strategy:


Google Search Engine Marketshare.

The last data available [in 2013] give the following numbers:

Google 67%
Bing (Microsoft search engine) 18%
Yahoo 11%.

In the last 8 years, Google marketshare has always been within the 60% - 80% range.
Not a leadership. A domination.


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