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Google's Problem

Google is facing a myriad of problems in the future. First, Google’s stock is dropping; in November 2007 the stock was valued at $747.24, as of March 28, 2008 the stock closed at 438.08. This is more than a 40% drop in roughly 5 months time. Google needs to show that their stock is worth the asking price, and in order to do this they must be able to expand the business outside of its core search business model.

Google needs to expand now or forecasters and analysts will start to beat the company’s stock price down even more. Google also faces many other problems. For instance, Google is far more exposed to downside risk from the slumping U.S. economy than it lets on. Blodgett estimates that 50% of Google's AdWords customers could see severe drops in spending over the next couple of quarters, resulting in a marked slowdown in Google's overall revenue growth.

Furthermore, Google needs to continue to diversify its product offering so that it can take maximum advantage of different markets, and in turn this will protect the company against industry downturns in the technology sector. Diversifying their product offerings gives Google a good product mix. This reduces volatility and it also allows the company to spread its risk. So when a situation arises, the company does not have all their eggs in 1 basket, and won’t get hit as hard.

Finally, Google’s direct competitors are YAHOO, MSN Search, Amazon’s A9, eBay, and Ask Jeeves. Google needs to understand that they can not become complacent, even though they are currently on top and virtually invincible. If Google does not continue to expand and roll out innovative technologies they will quickly fall off their pedestal, and become susceptible to their competitors.

CORPORATE OVERVIEW

Google Inc. maintains an index of Websites and other online content, and makes this information freely available to anyone with an Internet connection. They operate in an online advertising market which is estimated to be worth $25.5 Billion dollars. Google uses their automated search technology helps people get hold of instant access to appropriate information from its online index. Google gets its revenue primarily by delivering online advertising. Many businesses use Google’s AdWords program to promote their products and services through targeted advertising. Also, thousands of third-party Websites that are apart of the Google Network use their AdSense program to deliver relevant ads that generate revenue and enhance the user’s experience.

Google also began acquiring related businesses, and completed the acquisition of Postini, Inc. in September 2007. They were a provider of information security and compliance solutions. Furthermore, in March of 2008, they completed the acquisition of DoubleClick. This was a company which offered online advertisement, as well as serving and management technology to advertisers, web publishers and advertisement agencies.

The acquisition of DoubleClick turned Google into double the online advertising juggernaut that it previously was. They currently have a total advertising market share of 69% according to a study by Attributor. The addition of DoubleClick allowed Google to serve advertising to roughly 2.2 billion people worldwide.

GOOGLE’S PRODUCTS & SERVICES

GOOGLE’S SWOT

Strengths:

• Corporate Culture
• Top Ranked Search Engine
• Reputation and Familiarity
• Speed and User Friendliness
• Multi-disciplinarily
• Provides Interface to 88 languages
• Wide Range of Innovative
• Extreme Profits

Weaknesses:

• Heterogeneousness of the material
• Content is arbitrary
• Risk of dead-ends (users find the citation, but can't access the full text)
• No expert search
• Anglo-Saxon (English language) focus
• Link based ranking did not employ actual traffic analysis.
• Cost Per Click advertising charging and ranking policy is confusing
• Google’s contextual advertising was perceived by marketers to be less effective in generating sales because visitors to web pages showing editorial content were less likely than searchers to be ready to buy.
• Only 50% to 65% of web search queries are answered accurately by it.
• Doesn’t have “sticky” like Yahoo! And MSN have which can attract users.

Opportunities:

• Reach new user groups
• Reach new content
• Easy and expert search fully integrated using OpenURL
• Higher usage of valuable (expensive) content
• Become a mass-market portal like Yahoo and MSN
• Enhance personalized and localized searching and can also add localized paid listings of advertisers.
• Start new services in multimedia, product search, private database, print media and digital media
• Merge with an established mass-market portal to lock in large number of users and advertisers.

Threats:

• No long time barriers to entry
• Confusing Cost Per Click ranking and charging policy could disappoint its advertisers
• Portals like yahoo provide more services and solutions with conventional search than Google do
• MSN is coming up with its new operating system called “Longhorn” which would be having “implicit query” feature
• If they become portal, may lose its simplicity and comprehensiveness
• Potential to get trapped in issues regarding privacy if it decides to go for highly personalized search for which it has to capture user’s personal information
• A merge with some already established mass-market portal, it could loose culture and brand image

GOOGLE’S NEW VENTURES

The company has bright growth prospects. The company has remained active in launching new products. It recently announced the release of iGoogle Themes API, which allows Web site developers more options to personalize iGoogle pages. In addition Google recently expanded its Conversion Optimizer for Google Ad- Words. The Conversion Optimizer itself is a relatively new feature that helps advertisers meet return objectives by automatically managing their bids according to a maximum cost-per-acquisition goal. It allows advertisers to save time and achieve a greater number of conversions at lower cost. Also, Google has launched a new iPhone application that integrates its multiple services into a single interface. Much depends upon the company’s ability to continue to grow at a brisk pace and create new ventures.

GOOGLE’S CORE COMPETENCIES

Google’s core competencies are that they can obtain and create value from massively scaled, complex human activity, For example they have an index of millions of websites linking to each other and from there hundreds of thousands of advertisers bid on key words and advertise through Google. Google also has a model which is able to measure targets and metrics such as clickthrough and conversion rates. Their other important element of core competency is their natural feedback loop. For example they can show the relevancy of a search results page, or an online business’ cost of sales through paid search advertising.

GOOGLE’S COMPETITIVE MAPPING

This diagram shows Google’s position in relation to its most general competition. Google is the industry cost leader, and only Ask Jeeves offers the same type of website. Both Google and Ask Jeeves present a “no nonsense” type of website which solely focuses on the search feature. However, MSN and Yahoo! both are internet portals in that they offer a wide variety of news, weather, featured searches, etc. all categorized through a myriad of channels. A9 and eBay both focus on particular segments. A9 directs its efforts at searching the world’s lead e-commerce sites as well as excels in searching its parent company Amazon for books and products. Finally, eBay is the world’s leading auction site, and is a behemoth in its industry.

GOOGLE’S FIVE FORCES

• Industry Rivalry: We deemed the industry rivalry to be fairly high. This is due to the large existing players already established in the industry. Their competitors: YAHOO, MSN Search, Amazon’s A9, eBay, and Ask Jeeves all are large firms who can challenge many of Google’s existing products and services.
• Threat of New Entrants: We deemed the threat of new entrants to be low. Search engines mimicking Google are constantly created, however few have the financial structure and staying power to compete with Google. Oftentimes smaller companies, similar to Google, with unique ideas are acquired by Google or their competition.
• Threat of Substitute Products: We deemed the threat of substitute products to be low. This is because there really is not a substitute for what Google does. One can either search the web through a search engine or not, it’s as simple as that.
• Buying Power of Customers: We deemed the buying power of customers to be medium. Google’s customers bid for their services and can easily go elsewhere if the do not feel they are getting the best price. However, Google offers the lowest rates, and they are the industry leader. Those factors give Google a competitive advantage in the market.
• Buying Power of Suppliers: We deemed the buying power of suppliers to be low. Google really does not have any suppliers except typical items such as electricity. Thus, buying power is not applicable.

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