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GOOGLE Strategic Analysis

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<ul><li>The Vision </li></ul><ul><ul><li>To make search engines so powerful they would understand &quot;everything in the world&quot;. </li></ul></ul><ul><li>The Mission </li></ul><ul><ul><li>To organize the world's information and make it universally accessible and useful. </li></ul></ul><ul><li>The Focus </li></ul><ul><ul><li>Google continues to focus on innovation and on the user experience . </li></ul></ul>

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Google Strategy <ul><li>It’s the same as of Honda & Sony </li></ul><ul><li>Both these companies have major share in world manufacture share of Engines and Electronic Goods </li></ul><ul><li>Google wants world wide web’s major share. </li></ul>

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QUESTION? <ul><li>IS GOOGLE IN THE RIGHT INDUSTRY? </li></ul><ul><li>Let’s Analyze the Industry </li></ul>

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The Industry Stats

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Country Analysis Country Users (Mn) Usage Growth (2000-2007) US 210.00 120.80% China 162.00 620.00% Japan 86.30 83.30% India 42.00 740.00% Brazil 39.15 682.8% World 1173.00 225.00%

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QUESTION? <ul><li>IS GOOGLE IN THE RIGHT BUSINESS? </li></ul><ul><li>Lets Look at Products and Rev Model. </li></ul>

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Google Products (>60) Standalone Applications AdWords Editor Gmail Notifier Hello Pack Photo Screensaver Picasa Secure Access GTalk SketchUp Desktop Extension Blogger Web Comments Browser Sync Dashboard Widgets Send to Phone Toolbar Communication & publishing 3D Warehouse Blogger Calendar, Docs& Spreadsheets Dodgeball FeedBurner Gmail, Orkut YouTube Reader Mobile Products Blogger Mobile Calendar Gmail News iGoogle Reader Maps Mobile Web Search Maps Ride Finder Analytics Directory Google Mini SMS Search Mash Advertising AdSense AdWords Audio Ads Click-to-Call Grants TV Ads

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Core Products & Revenue Model <ul><li>Core Products – Search and Adwords . </li></ul><ul><li>Revenue Sources - </li></ul><ul><li>Contextual Ads - Adsense. </li></ul><ul><li>Adwords. </li></ul><ul><li>Licensing Google search. </li></ul><ul><li>Approx – 10 Billions Dollars. </li></ul>

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Internet Advertising - 2007 <ul><li>Global - By E-Marketer </li></ul><ul><li>Number 1 – Advertising Medium in terms of growth rate. </li></ul><ul><li>Ad spending on the Web should net out at $21.7 billion this year VS $20.4 billion on radio. </li></ul><ul><li>E-Marketer predicts that online advertising will reach $28.2 billion next year (an increase of 30 percent) </li></ul><ul><li>Online advertising will account for a nearly twice as many dollars - constituting a hefty $44 billion market </li></ul>

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Internet Advertising Trend and Predictions <ul><li>Global - By Zenith Optimedia </li></ul>

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Internet Advertising Trend and Predictions <ul><li>Global - By Zenith Optimedia - continued </li></ul><ul><li>The internet will grow six times faster than traditional media between 2006 and 2009 and increase its share of the ad market from 5.8% to 8.7%. </li></ul><ul><li>All of the fastest-growing ad markets are in the Middle East and Central & Eastern Europe </li></ul><ul><li>These regions are growing at double-digit rates, compensating for an under performing North America </li></ul><ul><li>World Adspend to grow 5.2% in 2007, on par with long-term trend </li></ul><ul><li>Olympics, elections and football to lift growth to 6.2% in 2008. </li></ul>

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Global Market Share in Search <ul><li>Total search in year 2006  99.57 Bn </li></ul><ul><li>Google is doing 138.1 Mn search per day </li></ul>

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Porter’s Five Forces Model for Google Search <ul><li>Rivalry factors: </li></ul><ul><li>Few players of relatively smaller size industry is growing at rapid pace </li></ul><ul><li>Product differentiation is low </li></ul><ul><li>Switching cost is low </li></ul><ul><li>Exit barrier is low </li></ul><ul><li>Switching cost zero </li></ul><ul><li>Informational Complexity due to secrecy of internal algorithms </li></ul><ul><li>Entry barrier: </li></ul><ul><li>Entry barriers due to brand identity and scales is high </li></ul><ul><li>Buyers bargaining power: </li></ul><ul><ul><li>Buyer size/volume is very small </li></ul></ul><ul><ul><li>Change cost/frequency is very low. </li></ul></ul><ul><ul><li>product/service importance is high. </li></ul></ul><ul><ul><li>Ability to backward integrate is very less. </li></ul></ul><ul><ul><li>Price sensitivity is high </li></ul></ul><ul><ul><li>Product differentiation is low </li></ul></ul><ul><li>Substitution threat: </li></ul><ul><li>Mobile search. But due to less sophisticated technology threat is far away few years </li></ul><ul><li>Switching cost is LOW </li></ul><ul><li>Supplier bargaining power : </li></ul><ul><ul><li>Supplier concentration is low </li></ul></ul><ul><ul><li>Switching costs is low </li></ul></ul><ul><ul><li>Threat of forward integration is low </li></ul></ul><ul><ul><li>Importance of volume to suppliers is high </li></ul></ul>

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QUESTION? <ul><li>WHAT MAKES GOOGLE? </li></ul><ul><li>ANDAR KI BAAT </li></ul>

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Leadership <ul><li>Dr. Eric Schmidt , </li></ul><ul><li>Chairman of the Board and Chief Executive Officer </li></ul><ul><li>Larry Page , Co-Founder & President, Products </li></ul><ul><li>Sergey Brin , Co-Founder & President, Technology </li></ul>

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Philosophy of Google <ul><li>Focus on the user and all else will follow. </li></ul><ul><li>It's best to do one thing, and do it well. </li></ul><ul><li>Fast is better than slow. </li></ul><ul><li>Democracy on the web works . </li></ul><ul><li>You don't need to be at your desk to need an answer. </li></ul><ul><li>You can make money without doing evil. </li></ul><ul><li>There's always more information out there. </li></ul><ul><li>The need for information crosses all borders . </li></ul><ul><li>You can be serious without a suit. </li></ul><ul><li>Great just isn't good enough. </li></ul>

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Google’s Culture <ul><li>Heart of Small Company </li></ul><ul><li>Hand’s on contribution to the Products by each employee </li></ul><ul><li>Flat Hierarchy </li></ul><ul><li>Each employee having several responsibilities in different departments </li></ul><ul><li>Hiring Policy </li></ul><ul><ul><li>Non Discriminatory </li></ul></ul><ul><ul><li>Preference of ability over experience </li></ul></ul><ul><li>Multilingual company environment </li></ul><ul><li>Multidomestic culture </li></ul><ul><li>Recreation along with work </li></ul><ul><li>Common café for all employees </li></ul>

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Google’s Global Presence <ul><li>21 countries at present </li></ul>

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Uniqueness about Google <ul><li>SEARCH </li></ul><ul><li>Speed, Accuracy, Objectivity and Ease of use of. </li></ul><ul><li>Fit between their technology and the consumer behavior. </li></ul><ul><li>Page Rank technology – Orkut merged </li></ul><ul><li>Solved the scale up problem </li></ul><ul><li>Positioned as “Fastest Crawling Technique” </li></ul><ul><li>Keeps the search “Up to date” </li></ul>

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Uniqueness about Google <ul><li>1 st to get it right advantage </li></ul><ul><li>Advertisers tie up as “CPC” </li></ul><ul><li>Trade off between “Speed” & “Compression” </li></ul><ul><li>Best asset utilization (Efficient storage space) </li></ul><ul><li>R&D expenditure = 50% Net Income(10% of Revenue) </li></ul>

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Continuous Innovation

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Biz Model <ul><li>User Info </li></ul><ul><li>Social Networking </li></ul><ul><li>Page Rank </li></ul><ul><li>Relative Importance </li></ul><ul><li>Customization </li></ul><ul><li>Contextual Advertising </li></ul>

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<ul><li>competitive advantage comes from its core competencies in computer hardware and software engineering </li></ul>

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Value Chain

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Dynamic View Resource Endowments Resource Commitment Activities Buying many sites, Opening offices in many Countries, Huge investment in R&D, Continuous investment in increasing Database Searching for various avenues, Continuous innovation, Developing people, learning new technologies

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QUESTION? <ul><li>WHAT IS GOOGLE PITTED AGAINST? </li></ul><ul><li>THE BATTLE ZONE </li></ul>

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Competitive Landscape <ul><li>Search </li></ul>

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Competitive Landscape <ul><li>Advertising </li></ul>

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Competitive Landscape <ul><li>Video Blogging </li></ul>

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Competitive Landscape <ul><li>Social Networking </li></ul>

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QUESTION? <ul><li>HOW WOULD GOOGLE CLASSIFY THESE PLAYERS AND WHO ARE THE TOP COMPETITORS? </li></ul><ul><li>THE BATTLE ZONE – Part Deux </li></ul>

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Direct Competitors OR Complementors? <ul><li>Internet companies, </li></ul><ul><li>web search providers, </li></ul><ul><li>Internet access providers, </li></ul><ul><li>Internet advertising companies </li></ul>

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Indirect Competition Or Complementors? <ul><li>Competition from traditional media companies. </li></ul><ul><li>Most large advertisers have set advertising budgets, a very small portion of which is allocated to Internet advertising. </li></ul>

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Top Competitors

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Google Identifies Top 2 <ul><li>Primary competitors - Microsoft and Yahoo! Inc. </li></ul><ul><li>Both Microsoft and Yahoo have more employees than Google. – Microsoft 6 times . </li></ul><ul><li>Microsoft also has significantly more cash resources . </li></ul><ul><li>Longer operating histories and more established relationships with customers and end users. </li></ul><ul><li>Microsoft and Yahoo also may have a greater ability to attract and retain users - because they operate Internet portals with a broad range of content products and services. </li></ul>

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Strengths Analysis Weaknesses Analysis

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Threats Analysis Common Opportunities <ul><li>BRIC Countries </li></ul><ul><li>Computer literacy is on the rise </li></ul><ul><li>Telecommuting and at-home-businesses growth </li></ul><ul><li>Mobile technologies offer another opportunity. </li></ul><ul><li>Cheaper global telecommunication costs open new markets </li></ul>Pay Per Use office Internet Ads Other Software Apps. Traditional ad domain Office Suites Microsoft Yahoo Google

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Competitor Analysis <ul><li>Google – Aim – To make everything free for the Virtual User. </li></ul>

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QUESTION? <ul><li>SO WHAT IS GOOGLE DOING AND WHAT SHOULD IT DO? </li></ul><ul><li>ACTION ITEMS </li></ul>

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Inorganic Growth - List of Google acquisitions 2004 2005 2006 2007 2008 Xunlei Adscape – Video Game advertising Trendalyzer Tonic Systems Marratech GreenBorder Panoramio FeedBurner PeakStream Zenter Grand Central – VOIP dMarc Broadcasting – Radio Advertising Measure Map Upstartle @Last Software Orion Neven Vision JotSpot YouTube- Video Sharing Endoxon 2Web Technologies Phatbits Urchin S/W Inc. Dodgeball Reqwireless Current Comm. Group Android Skia Akwan InfoTech AOL (5% stake) -Internet

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5 year Performance

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5 year Performance <ul><li>R&D -> More than 10% increase Y/Y since 2002 </li></ul><ul><ul><li>Continuous Innovation, creating new products. </li></ul></ul><ul><ul><li>New products every year, Need Based Positioning, Depth rather than Breadth. </li></ul></ul><ul><ul><li>Ready to deal with dramatic change. </li></ul></ul><ul><li>Cost of Revenue – around 40% increase Y/Y since 2003 </li></ul><ul><ul><li>Find new sources of Revenue, margins reducing. </li></ul></ul>

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Recommendations <ul><li>Diversify earnings not products </li></ul>Country Revenue % US 61% UK 14% Rest Of World 25%

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The Growth Share Matrix

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Recommendation <ul><li>Search : Competition from both big web companies and well-funded startups will force Google to remain focused on continuing to innovate in search. </li></ul><ul><li>Contextual Ads – Continue good work </li></ul><ul><li>Other Ad formats - With Google clearly intent on spreading its advertising platform to the offline world, go for more acquisitions. </li></ul><ul><li>Video – Continue Good work. Consolidate position. </li></ul><ul><li>Social Networking – Acquire other players. </li></ul><ul><li>Office Suite – Continuous R&D </li></ul>

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Recommendations <ul><li>Be Multi-domestic company </li></ul><ul><li>Find new sources of revenue. </li></ul><ul><li>Continuous Innovation is the key to maintain dominance in such an aggressive environment. </li></ul><ul><li>Concentrate on BRIC nations. </li></ul>

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Recommendations <ul><li>Balance Scorecard </li></ul>

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Have we left any QUESTIONS unanswered? <ul><li>“ THE POWER OF GOOGLE IS ENPOWERMENT.” </li></ul>