(Stanford BUS-21)Martin Westhead

Mastering Marketing

Free Case Study: Google

How to make money by giving things away

Overview

History Abundance Product Development Max Strategy Complementary Products

“Free” by Chris Anderson- Free PDF / Amazon / Free Audio Book

Timeline

1999-2001- Invent search that gets better with web scale

2001-2003- Self service ads on searches

2003-Present- Services: extend reach and customer attachment- Advertize where it it makes sense

Google Today

Last year Google - $60M revenue- $14B income- 46K employees

Feb 2014- 2nd Biggest company in the world $395.4B- Apple first at $463.6B

Abundance Product Development

“Would it be cool?” Product ideas com from engineering

- Google 20%- What can be done?- Would it be cool?- Will people like it?- NOT: Will it make money?

Sound crazy?- Maybe for GM or GE - Just way of life for Google

Monetization- Popular products are analyzed later for monetization options

Max strategy

Eric Schmidt, CEO Google- Max Strategy:

“Take whatever you are doing and do it to the max in terms of distribution. The other way of saying this is that since the marginal cost of distribution is free, you might as well put things everywhere.”

E.g. Marketing “The Sopranos” with HBO- Facebook page- Viral videos- Extra footage - Plot updates via twitter- Website where they can learn more about the characters- Unused scenes on YouTube- Competition on which scene should have been in- Etc…

“Fill every crack in every pavement”

“Max” needs an monetization engine

Sopranos -> HBO Google -> Adsense / Adwords Your business you either:

- Build your own- Leverage 3rd party

- Partner- Acquisition

Complimentary products

In economics, a complementary good is a good with a negative cross elasticity of demand. This means a good's demand is increased when the price of another good is decreased. Wikipedia

Google News

Google products are “Complementary” to its search ads

“The initial studies on Google News said that people were twice as likely to click on search ads on a subsequent search, so everyone said , ‘Great’. It a loss leader – a traffic getter. Sure it’s a service to the world and so forth, but a more sophisticated view of that is to say that the product is not Google News but Google. It’s all about engagement into Google and that if we can get you, at some point in your engagement with Google, to end up using Google for something that we can then monetize, the sums work.”

-- Schmidt

Google wants information to be free because as the cost of information falls it makes more money

- Nicholas Carr “The Big Switch”

Scale

Reduces marginal costs- CPU, storage and bandwidth low and falling- Everything Google does is cheaper

Easy to trial new products- Betas- Massive customer trials- Kill failures quickly…they are cheap

Only way to grow is to increase Web usage- Free WiFi- Free internet access- More ways to use internet for more things

Google strategy

Build cool products- Figure out quickly if people like them- Kill off failures

Grow and audience Think about monetization

- In-house economists and biz strategists Products

- Canceled due to lack of uptake- Or not cool enough- Never because they won’t make money

Overview

History Abundance Product Development Max Strategy Complementary Products

“Free” by Chris Anderson- Free PDF / Amazon / Free Audio Book