Google Inc.

Case Solution

The business model and strategic choices which made Google a success in the early years

As the need for the search services grew with the expansion of the World Wide Web, it opened new options and dimensions to explore. Yahoo! being the earliest service was not able to manage the load. Therefore, it created a vacuum. In 1998, Larry Page and Sergey Brin found a solution to that problem which was Google.

Google is based in Mountain View, California with revenues grossing about $21.2 billion and an operating income of $5.5 billion in 2008. Till the same year the company had employed about 20164 employees. Founded in 1999 the company’s IPO was completed in August 2004 at $85 per share which was to increase at a tremendous speed later.

The business model that Google followed had a simple idea of giving free information to the user in the most sophisticated and innovative manner, and constant efforts on the part of advertisers to attract and contain them.

Their first strategic step was to go forward with the elite venture capital firms Sequoia and Kleiner Perkins. The mission of the company was to organize world’s information and make it universally accessible and useful.

All objectives were aligned with this idea. The main mode of revenue was advertising, where Google made many innovations for the advertisers and as a result capturing more market than advertisers and gaining more revenue.

For an internet based company like Google, innovation determines how long you would stay in the business. The same was a winning factor for Google. It brought forward many new products and services which expanded the company’s domain beyond a traditionally wed search.

In the early days, Google licensed its technology to various sites. Later when opportunities called Google capitalized on them as paid listings by Overture was gaining much attention. In late 1999, the company introduced its own paid listings which were sold on a cost per impressions basis and was much different model than what Overture had applied. Google’s idea was: weighted CPC bids by the ratio of an ad’s actual CTR to its expected CTR. This methodology increased Google’s revenue as they could easily evaluate ads now.

In the span of just two years, Google became the ninth largest US website and that also without taking any marketing costs. The invention of Froogle and Google Maps which was much faster than any competitors gave the company an advantageous position. Maps became another source of revenue as paid listings were later added to it.  For ease of the advertisers, it launched AdSense which improved the company’s customers to a great extent.

After bringing a huge array of products like Gmail, Google Maps, Books, Finance, Docs, Calendar, Checkout and much more to offer. It greatly threatened the giant Microsoft’s Office and Windows offerings by bringing in ad supportive software including e-mail and document management systems.

Products bearing personalization features that are offered on Google’s homepage moved the company more towards portal like Yahoo! and Microsoft’s MSN. On the other hand, Books Search, Maps and Checkout proposed that Google was entering the traditional domains and strongholds of e-commerce giants like EBay and Amazon.

Google’s expansion leads the company into various fields such as hosting video and books. This was done mainly after the success of YouTube and Amazon. It went on to providing communication applications and productivity applications.

The cloud based productivity applications proved to be a big asset for the company. Later, Google also created first beta of its Chrome web browser which attracted a great number of users. The intelligent system of the browser was the key as the user did not need to add the full URL but instead options near to the words the user was typing were given thus saving time. This intelligence was highly appreciated by the users.

Google’s constant improvement in the search engine and massive efforts to attract advertisers, especially local gave them an upper hand on the competitors. It also offered the advertisers free software Google Analytics with which they could track which words could lead more sales and then spend accordingly, this way both parties benefited…………………..

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