Google’s company structure
Arguments can be made for Google being a one business company or a company practicing related diversification. I will discuss the reasons that suggest Google is structured both ways and then offer my personal opinion on how I think Google is structured.
Google as a one business company
Although Google has many different services, they generate the majority of their revenue (96% in 2011) from advertising. This would suggest that they are a one business company offering ad space online to businesses and individuals looking for targeted leads.
Before generating revenue was even considered at Google, the founders made it their goal to provide the best search experience to their users online. Even while expanding into similar areas of online information services, they made it a motto to “don’t be evil” reminding themselves that before everything else, quality search experience was what drove their business. The “don’t be evil” motto stemmed from the idea that nobody should be able to manipulate their search engine just by paying more than others.
With these two facts in mind it is easy to see how Google could be classified as a one business company simply because they only offer one service overall which is access to and management of good information, and revenue from information and services coming mostly from advertising.
Google as a company practicing related diversification
Although Google makes most of their revenue from advertising and their most popular service is the Google Search Engine, there are many other services that would suggest that Google is a company practicing related diversification.
An example would be Google’s acquisition of Youtube. Some might argue that Youtube is a search engine for videos, but the experience that is being offered would most likely be classified as entertainment not information based. The service that Youtube offers is similar enough to Google Search, that it could be classified as related, but different enough that it needs its own brand.
Another example that is even more similar to Google’s main business would be their acquisition of DoubleClick. DoubleClick is a online advertising solution that mainly focuses on banner ads, which are much different than ads served up contextually for relevant search results. DoubleClick and Adwords (Google’s main ad platform) have a similar goal which is to generate ad revenue, but the process in which they do it is very different.
All of these and many more services considered would suggest that Google is a company practicing related diversification. Most of their products are very similar in nature but different enough that they can generate revenue from different markets online.
Personal opinion on Google’s company structure
From my research I have concluded that Google is a company that practices related diversification. Their revenue does mainly come from one source but their different services are related but different enough to suggest to me that this is how they do business.
Listing all of Google’s services and products would be difficult, but a few that are very different from each other include google search, youtube, the nexus tablet, google maps, google news and gmail. All of these services including their tablet focus on online services making them very similar but also target users from a wide variety of needs such as email to video storage.
Many of Google’s new services come from developers internally that are given extra time to work on projects outside of their normal job. With this in mind it makes sense that most new services developed by Google employees would be very similar to services that are already offered.
How Google competes as an online search engine and their business level strategy
Although Google was not the first search engine they are by far the largest and most popular. At the time the case note was written Google had close to 70% of the market share of searchers with Bing and Yahoo sharing the other 30%.
Google is able to compete with the other search engines by practicing differentiation or by simply doing it better. Many of the other search engines index results based on number of inbound links, outbound links, content and general page popularity. Google is able to index their results based on all of those factors plus many others such as time spent on a website, domain authority, domain age and many more. Having a more advanced algorithm for indexing websites Google is able to offer a better experience for searchers and maintain its competitive advantage.
Google’s core competency
Above all their other services Google’s search engine remains their core service with their ability to index and display the best websites being their core competency. As stated above Google has a more advanced search engine than its competitors due to its algorithm.
Beyond its initial algorithm Google also performs periodic updates which are named after animals, the latest of which being called the penguin update. These updates make it much more difficult for websites to rank well in search engines unless they actually deserve it. Having these updates ensures that only the best results will be displayed in Google unlike their competitors that often show outdated results to their users.
Google’s building block of competitive advantage
With all things considered, I think the building block that most describes Google’s competitive advantage is innovation. They have one way of making money which is advertising, but they spend more time than other innovative companies developing new products and services that will eventually bring more users to Google in one way or another.
Two Google services that use synergy to work well with each other
Google’s ad platform is called Adwords. Most of the ads created in Adwords are shown in Google search results, but others are showed on other websites through the Adsense platform owned by Google. Google reported that a significant portion of its revenue was generated from ads shown on partner websites that use Adsense.
Adwords performs well on its own showing ads in the search engines, but it performs even better when ads are shown on related websites as well. This increase in revenue when both services are active is a good example of synergy at work in Google.
Comparison of search results between Google and Bing
The first keyword I searched for in both search engines was “Las Vegas hockey tickets”. This keyword generated ads in Google that were related to what I wanted such as Wranglers hockey tickets. Bing on the other hand showed me ads for Stub hub and other websites that were related but not what I was looking for.
The second keyword I searched for in both search engines was “les miserables soundtrack”. This keyword generated almost the exact same results in both search engines with some very slight variations farther down the search results.
The last keyword I searched for in both search engines was “discounted bean bag chairs”. This keyword returned similar results in both search engines, but the ads that were displayed in Google were from larger more trusted companies than the ads that showed in Bing.
I would prefer to spend money in Google because it seems like the ads that were displayed there were much more related to what I was searching for than in Bing. I would assume that more qualified leads would come from Google because of this experience.
Google vs. Newspapers vs. Television advertising
My opinion is that Google is in the best position out of the three in its business. Google is able to show advertising only to individuals that are interested in a specific product or service they have searched for. Newspapers and television show advertising to all of their viewers or subscribers which are not very targeted.
This ability places Google in a position to send much more targeted leads to its advertisers than their competitors can. Besides quality of leads, Google is also much cheaper than some of the other advertising mediums out there.
With Google you only pay for each click which is for the most part equivalent to paying for an interested person. Newspapers and television show advertising to everyone regardless of interest or not.
With all of this data combined I believe that Google is in the best position to grow and gain more market share of advertisers in the years to come.
Headline: Google Case Note Review