Case Study - Google

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Case: Google

MBA Japan- INSY 690 (Case Analysis Assignment) Student: Lance Shields

1. What were the key factors behind Googles early success? Perfecting an innovative search engine was clearly the most important factor for Google founders early success. Turning the keyword spam problem on the web into an opportunity by solving it while grad students at Stanford led to Sergey Brins and Larry Pages now famous PageRank algorithm. Instead of counting keywords like old search engines, the founders created reliable searches through the number of websites that link to a page or votes to weight search result relevance. Google focusing on the user was another trait that attracted people initially as the nononsense simple white search page and distinctive colorful logo with no ads or editorial content on the page lead to easy and fast searches that Yahoo couldnt imitate. This is described in their first truism Focus on the user and all else will follow where they talk about simplicity of interface and speed of page loads. Google delivered search results people really wanted lead to users trusting Google as they promise to not sell placement in search results to advertisers and instead rely on the true natural search to deliver users the content they really are looking for. At the same time, their sponsored links were relevant to the searched keywords so that users generally found them useful or at least not intrusive like usual banner ads. The sponsored links being just simple text also meant that they were lightweight enough to not slow down page loads and allowed a better search experience. Effectively monetizing paid search was what made Google economically successful as a business. They did this by first adopting a cost per impression in 1999, that made money regardless of whether people clicked on a an ad. Then in 2002, they then altered

the cost per click paid listing model that was popularized by Overture by doing a ratio of actual CPC and expected CTR (click through rate) to ensure users saw ads that were closer to what they were actually searching for. By giving users what they wanted, it maximized their revenue by avoiding the problem of high CRC but low CTR.

2. Do you expect the search business to become more concentrated (i.e., dominated by fewer firms)? Is search a winner-take-all business? Why? My initial impulse is to answer yes the search business will continue to become more concentrated as Google has clearly dominated this industry and Yahoo can hope to retain market share by offering editorial content that some users may be tricked into viewing. But as modern web surfers have become more sophisticated and empowered to seek out content in less orthodox sites, Googles democratic style of search combined with its enormous scale of indexed web pages leads to results more fitting to users, especially younger ones. This very scale of indexing presents a head start for Google that makes market entry near impossible. At the same time, innovative search engines continue to come out as seen by Cuil.com1 that went live in July 2008 and claimed to have the largest index in the world at 120 billion sites. Cuils differentiation is its concept of not relying on just superficial popularity metrics but Cuil searches for and ranks pages based on their content and relevance. At the same time, they provide helpful choices and suggestions until you find the page you want by showing relatively long entries along with thumbnail pictures for many results. Cuil also claims to focus on analyzing web content rather than users to give better results based on the 1 and

coherence and quality of the content. Unfortunately for Cuil, the wide coverage of the search engine was dampened by technical issues of reports of improper results appearing. Most likely the innovative interface they invented was too unique and possibly to challenging for users who were used to the much simpler Google results pages. And then theres Bing, Microsofts recently rereleased engine that is now number three in query volume at 3.16% (Google 85%, Yahoo 6%). Whats probably most significant about Bing recently is the search deal with Yahoo in which Microsoft has taken the responsibility of powering Yahoo search with Bing search, eventually to feature Powered by Bing in the future and will be a lift for Bing and something it was missing the chance to do with Google dominating. For Yahoo this means it can focus on its strengths as a producer of Web media sites, from finance to sports, as a marketer and a leader in on-line display advertising that accompanies published Web sites.2 With Google now taking 85% market share, it certainly seems that its a winner-takeall industry. With Googles large lead and gargantuan resources to throw at any new innovation it decides to take on, it would take more than a good idea to beat this giant. What would be needed is another disruptive technology that connects future users in ways that Google hasnt addressed.

3. In addition to enhancing its core search businesses, should Google also branch out into new arenas? Which of the following would you recommend: 1) building a fullfledged portal like Yahoo!s; 2) targeting Microsofts desktop software hegemony; 3) becoming an e- commerce intermediary like eBay?


For Google, they have been experimenting with a variety of online software that drives travel to their site and provides opportunities for in contextual Sponored Links related to the content the user is engaged in creating such as in Gmail and Google Groups. By providing ad funded web services, Google could solve one of the fundamental contradictions of its business model, to generate revenue users have to click a sponsored link in a search a search result and leave Google, in other words they want people to leave as possible by dishing up the most relevant ads as possible to the users search. But what about the rest of the time people spend on their computers when theyre not searching? By moving people online to use Googles communication and productivity tools, they are creating numerous new opportunities for ad revenue opportunities. By scanning the content of the users mails, messages, documents and to-dos, Google gains insights about what sort of services or products that their advertisers offer which the user might be interested in. At the same time, this solution to increasing the scope of Googles business, opens another can of worms in that it does not appear appear to be consistent to the companys founding mission, to organize the worlds information and make it universally accessible and useful. In some ways, by channeling people into their own services rather than making other sites more visible, Google could be reducing the democratic nature of the web, something akin to what Yahoo has done by creating an editorial content destination in order to retain users rather than send them out to possibly even more relevant and useful websites or blogs. As I am an avid user of many of Google services such as Gmail, Calendar, Custom Homepage, Google Docs, Sites, Wave and Picassa, I can honestly say I have been generally pleased by these additions and the overall integration to make me more productive and bring me information wherever I am. At the same time, I pay very little attention to the Sponsored

Links in these services, which tells me that the contextual links in Google apps have a much lower CTR compared to search results. Google will have to think further about how to both maximize ad revenue and provide useful experiences that change the way people use computers and mobiles. I also think that as Google gets mature, it needs to be careful about sacrificing its unique idealism for continuing to grow by dominating the web and destroying healthy competition which leads to innovation. By replacing MS Office, an outmoded local software model, they help to usher in a new ubiquitous computing era. At the same time, they are a business and are competitive and have the potential to squash other new innovations before they ever come to light.

4. Do you view Googles distinctive governance structure, corporate culture, and organizational processes as strengths or potential limitations? Why? I would say that in general, for the kind of innovations and technology that Google produces, their governance, culture and processes are perfectly suited for generating one great idea after another. The three top executives have a keen instinct for where to take the company and I agree with them when they say hostile takeovers would only put their long-term vision in jeopardy. The media model may very well be a good one to compare them to, as they are both are reliant on creative vision and talent. The creative corporate culture is superb for attracting bright minds and Googleplex is a perfect laboratory/playground for creating the Google magic. The organizational process of allowing all employees to use 20% of the work time combined with the small team work style appears to be a good formula for generating rough and dirty prototypes that if found of value can then be developed more fully from alpha to beta. The only limitations I can see is the possibility of ego getting in the way of

doing great work and the size of the company eventually turning employees and customers off of the company. This could very well be a branding challenge for Google in the near future of how to deal with growing into a big corporation.

5. My Question: What will Google be like in the coming 5 years? What challenges will it face? The answer to the first question is that in many ways Google ca