Google Business Model - Case Study Example

Google Business Model Background Google was founded in 1998 by Stanford PhD Larry Page andSergey Brin to cater to the need of web searching. Initially started as a web search engine, Google now offers a wide range of products and services including web and advertising apps (Reck, 1). Google has become a successful information technology company topping all major global markets (Google Inc., n.pag.). Google’s popularity can also be judged from the fact that several dictionaries have incorporated the word Google as a verb that is synonymous with searching on the web, namely on Google. The company has expanded to over 43 countries, employing more than 21,000 employees. The company is also known for providing the best benefits to its employees who enjoy a rigorous yet unique working environment. Google regards its employees – also known as Googlers – as a central human capital for driving success and innovation. It has created a strong organizational structure that encourages performance by engaging its employees in a high-energy environment that provides value not only for the employees but also for the company and its end customers (Reck, 2; Kuntze and Matulich, 2). Although the workplace environment incorporates a fast-paced approach, it fosters individuality and team work to yield greater creativity and innovation, which is essential for the company in the wider competitive environment. Since the company derives innovation from its employees, the company also seeks to provide the best benefits to its employees to keep them satisfied with their jobs and motivated to drive further excellence. Business Model Canvas Key Partners Google relies heavily on its distribution partners to provide its customers with timely service. In recent years, Google has developed the Android mobile operating system (OS) for handheld devices. This open source mobile software is used by mobile manufacturers, such as HTC, Samsung, and so on, to install on their mobiles. Additionally, Android developers also use the software platform in order to develop Android apps such as games and other utility applications. The development of the web browser, Chrome has also led Google to partner with several OEMs (Original Equipment Manufacturers) to enable computers to run the Chrome web browser (BMI Matters, n.pag.). Various OS such as Mac and Windows have their own default web browsers. Thus, the installation and operability of Chrome on such operating systems is made functional by partnering with OEMs. Among its key internal partners, its employees provide the best opportunity for growth of the company. The strong culture within Google is to harbor creativity among its employees which is a central driver of Google’s success in an increasingly competitive environment. And since most of its services are free to the internet users, Google derives most of its revenues from advertisers who pay to display ads on various applications provided by Google. Key Activities Google is constantly faced with competition in the uncertain eternal environment. The company is synonymous with innovation as its employees develop the most creative products and solutions for its users. Indeed, research and development (R&D) is a key activity at Google which provides the company with relevant insights that can be utilized effectively to make better products and provide better services. Google also relies on feedback and other data so as to improve its existing products. Its most common apps including Gmail, Google Docs, YouTube, and Chrome have seen marked changes since their creation adding more user-friendly features for greater convenience. In order to keep its systems running smoothly and without any glitches, errors or bugs, Google also invests a great amount of effort in its information technology (IT) infrastructure (BMI Matters, n.pag.). Having a wide range of applications, Google has to manage its IT infrastructure to provide seamless services to its users online, as well as to prevent downtimes which may hurt their revenues from advertising. Key Resources Its data center operations provide the company with a significant resource that enables Google to run its services smoothly and seamlessly (BMI Matters, n.pag.). Google has millions of users who use numerous Google applications thereby accumulating large amounts of data. Such terabytes of information need storage space as well as powerful servers to be able to process large amounts of data in a matter of microseconds. For this purpose, Google employs millions of servers in its data centers to process large amounts of search requests and other application requests. This allows its users to use its services in real time without any latency or delay. Having millions of users, Google has to process large number of online requests that its data centers receive from various IP addresses. In order to return a more localized search result, Google has to resolve IPs by giving a preference to local server IPs. Google’s ranking criteria also regards IP as a key metric which is important in ranking search results that are returned. Value Proposition Value proposition for any company is an important differentiating factor for companies and their products. Perhaps its web search service is the most unrivalled services offered by Google. Then its email service, Gmail and its recently launched social network website, Google+ are also a few applications that provide value to Google’s users, that too with only one Google account. Google Adwords provide its users with targeted advertising solutions by using search engine optimized (SEO) keywords that yield greater visibility thereby displaying more effective advertisements. The Google Adsense program also allows bloggers and other website owners to display ads on their websites and pays a small fraction of the advertisement revenue to the blog or website owners. A number of Google’s web hosted applications also count under value proposition. Among the most notable is Google Drive which offers a suite of office applications including presentations, word processing, spreadsheet, and drawing. The office suite is almost a complete alternative to offline office suites such as Microsoft Office but with a few added utilities like cloud based storage, large storage space, and so on. The recent Android software platform is a popular mobile OS which comes pre-installed into mobile devices. The Android provides millions of apps to mobile phone with virtually unlimited utilities. The Chrome web browser by Google is also popular among its users providing them with speedy web browsing capabilities along with support for in-browser applets. Customer Relationships Google’s investment on its IT infrastructure has allowed the development of its sales and support teams that work across different industries to make user experiences better. Although Google has its own sales force which helps it in campaigning, Google is automating its services allowing customers to serve themselves. The global support teams help Google users to share experiences and tips so as to obtain the most out of their Google accounts. As such, this provides a great way for Google users to build relationships and to the company to manage its relationship with advertisers, who are the main source of revenue for the company. Google also has a dedicated staff for accounts having large sales so as to provide them with better services for growth. Channels Google has set up global sales and support system which is handled by teams that operate across different industries. Its sales force is involved in campaigning for its premium products for business, such as search, display, mobile advertising, etc. Google’s market offerings come with support networks that help its advertisers to obtain the most out of its products. Since Google’s clientele includes large internet companies and advertisers, having a support force has helped it gain a competitive advantage over its rivals by providing unique services to its customers. Customer Segments Google’s customer segments include internet users, advertisers, ad agencies, Google Network members, mobile device owners, developers and enterprises. Its primary customers are its advertisers, although its customer segment of internet users is very large. Most of its internet users use the services for free whereas its advertisers contribute to the bulk of revenue Google receives. Google Network members are important resources for the company as they provide sales and support service to its advertisers. After the development of Android system, mobile users have also been added to the customer segment of Google as the mobile OS caters to a large segment of handheld device users. As more and more manufacturer’s are incorporating the Android OS, its market share is expanding and developers are finding a thriving industry by creating apps that meet the needs of billions of Android users. Google’s premium and paid services find their customers in educational institutions and other business enterprises. Cost Structure Since advertising is so central to Google, this requires a large amount of productive traffic that is channeled into its web pages that are displaying ads. Traffic acquisitions costs are huge and contribute towards its advertising as the traffic is channeled to search results. Google as well as its advertisers measure the traffic acquisition costs so as to assess the profitability of its ad campaigns that may reach its target audiences. As Google partners with other Google services such as Adwords and Adsense, it also pays a small fraction of the advertising revenue to its registered users (Charles, n.pag.). The R&D also constitutes a major cost to Google as it invests heavily on research so as to improve the quality of its products. Then the servers at its datacenters also cost the company huge sums as servers are maintained in order to provide fast and speedy service to its users. Revenue Streams The major source of revenue for Google is advertising. Advertising constitutes about 97% of Google’s revenue generation (Charles, n.pag.). All Google websites display ads by advertisers that generate revenues for the company. Through programs like Google Adsense, bloggers and other website owners can also earn a share of the advertising revenue. Traffic determines the rate of revenue for Google although a share of the traffic acquisition cost has to be paid to the website which directed the traffic to the advertisements. Most of Google’s services like Gmail, Google Drive and YouTube are free. Thus, free services like the regular Google accounts by users do not pay Google at all although the same users do provide revenue by means of advertisements. Other than that Google also has a few paid services for companies, businesses, and other educational institutions that offer such enterprises with additional Google applications along with custom email addresses with the business domain name, and so on. Conclusion Google’s business model shows that advertising is a key generator of revenues and Google continues to offer support for its advertisers so as to monetize its search and to compete with other search engines in the market. Works Cited BMI Matters: Understanding Business Models,. Understanding Google Business Model. N. p., 2012. Web. 1 May. 2014. < http://bmimatters.com/2012/03/29/understanding-google-business-model/>. Charles, Aaron. What Is Google TAC?. Chron.com. N. p., 2014. Web. 1 May. 2014. . Google Inc.,. Company: Google. N. p., 2014. Web. 1 May. 2014. . Kuntze, Ronald, and Erika Matulich. Google: Searching For Value.. Journal of Case Research in Business & Economics 2 (2009): n. pag. Print. Osterwalder, Alex. ‘Business Model Canvas.’ Business Model Generation, 2014. Web. 1 May. 2014. . Reck, Ross. ‘Case Study: Google.’ Ross Reck and Associates. Web. 1 May. 2014.< http://rossreck.com/media/i/Google_CaseStudy.pdf>. Read More