Management 693
Prof. Daniel Degravel
Presented by:
Team Chopin
Spring 2008
Agenda
-
History and Background
Key Success Factors
The Future of the Search Business
Competitors
Google’s Next Move
SWOT Analysis
Board of Directors
Corporate Governance, Culture & Processes
Current Situation
Major Competitive Moves
Current Financial Ratios
Q&A
Background
- March 1995 Meeting of Sergey Brin & Larry Page
- BackRub 1996-1997
- PageRank algorithm 1998
- 1998 – 10,000 queries a day
- 2000 – 60,000,000 queries a day
Background (cont.)
- 37% of all U.S. searches in Q3 2005
- 68% of all search traffic outside U.S. as of Q3 2005
- Google's mission is to organize the world's information
and make it universally accessible and useful.
Key Success Factors
- PageRank-the better algorithm vs. directory based
searches
- Reliable delivery of more relevant searches
- Google adopts Overture’s cost-per-click
- 55% of Internet search volume for Google’s paidlisting advertisers
- Constant innovation – Google launches contextual
paid-listing
The Search Business
- Google
 Most relevant searches
 67% market share
- Yahoo!
 Acquired Inktomi & Overture in 2003
 20% market share
- Microsoft
 Replaced Inktomi in 2005 with in-house search engine
 7% market share
Competitors
Google’s
competitors
- Yahoo
- MSN
- Others
Yahoo!
- Yahoo is the leading internet portal with revenue of
5.3billion & 345 million monthly visitors.
- Yahoo’s competitive advantage over Google is being a
full-fledged portal which has the third party content and
related transactional services and the channel to different
sections such as:
- Autos - Finance
- Kids
- Movies
- Game
- Hot Jobs
- Health
- Personals
Microsoft’s MSN
- Microsoft is the dominant player in OS
- They are trying to compete with Google in the
Search Business
- Google is trying to compete with MS through
open office
eBay
- eBay has 15 million current U.S. listing as of 2005
-The number of listing fell because:
• Google offered Base which got 10 million listing in just 6
month
• Through Base, customers who used to go to eBay to find a
qualified seller, could find the vendor through Google
• Previous full-frontal assaults on eBay was expensive
failures and negative experience for the users
• Higher transaction costs on eBay compared to Google paid
listings for small businesses
- eBay could keep its market share because of the online payment
service (Pay Pal)
- Google tried to come up with Google’s Electronic Wallet
Next Move?
- Building a full-fledged portal like Yahoo!’s
- Targeting Microsoft’s desktop software
hegemony
- Becoming an e-commerce intermediary like
eBay
SWOT
STRENGHTS
Experience in Developing &
Improving the Best Search Engine
 High Quality Services & Products
 Knowledgeable and Motivated
Workforce
 Creativity & Innovation
 Rapid Product Delivery to the
Market

WEAKNESSES
Decision Making Concentrated in
Management Trio


Narrow Spectrum of Products
OPPORTUNITIES
THREATS

Diversify Products & Services

New Entrants

Expand into New Search Areas
New

Internet Portal

Financial Intermediary

Software development
Technology & Algorithms
AOL: Google or MS
In renewing its deal with AOL, could Google afford to pay
more than 100% of the revenue generated from AOL
searches? How did Microsoft maximum affordable bid for
AOL’s search traffic compared to Google’s?
- Google: 5% stake in AOL, 85-90% Revenue split, 300m
ad Credit




Google blocks the move by Microsoft (Strategic move)
AOL provides communications channel to Google
AOL had 17.7 million subscribers nationwide in 2005.
MS lower search volume than Google, cannot necessarily pay
the same share of ad revenue
Board of Directors
Dr. Eric Schmidt
Chairman of the Board and CEO
(10% voting control )
Larry Page
Co-Founder & President, Products
(30% voting control )
Sergey Brin
Co-Founder & President, Technology
(30% voting control )
Corporate Governance,
Culture & Processes
- Anything but shareholder friendly
- Two-tiered stock system
- Shares held by insiders are 83 percent of the voting power &
Board of directors largely packed with insiders
- Viewed by Wall Street as risky corporate governance in long run
- Groupthink
- Compressed business lifecycle vs. “innovative” managers
Corporate Governance,
Culture & Processes
- Technology and strategy at Google are inseparable
- Google is in a fast changing & unpredictable environment; must
limit its strategic planning to a few principles & guidelines; the rest
must emerge as circumstances unfold
- Innovation as a source of competitive advantage
- Organizational climate encouraging innovation
- Clear sense of direction (Vision and Mission)
Current situation
- Google's core business:
- Engine services and advertising
- Web portal services
 Webmail (Gmail)
 Blogging (Blogger)
 Photo sharing (Picasa)
- Image library (Google Images)
- General news stories (Google News)
- Financial news (Google Finance)
- Interactive maps (Google Maps)
- Comparison shopping services (Google Product Search)
Google interface is available in some 115 languages
Major Competitive
Moves
- Purchase of YouTube for more than $1.6 billion (Google Video) (2006)
-
Purchase of dMarc Broadcasting (audio ads) (2006)
Acquired email security company Postini for $625 million (2007)
Bought mobile social network firm Zingku (2007)
Bought Adscape Media (placing advertising within videogames) (2007)
Bought Jaiku (mobile and Web-based instant messaging) (2007)
Acquired digital ad firm Doubleclick for $3.2 billion (2008)
Current Financials & Ratios
Dec 07
Revenue
Dec 06
16,594.0 m 10,604.9 m
Dec 05
6,138.6 m
Gross Profit Margin
59.9%
60.2%
58.0%
Net Profit Margin
25.3%
29.0%
23.9%
Return on Investment
22.41
20.83
21.42
2007 Sales
2007
US
52 %
Advertising 2007
$ mil.
% of total
Google sites
10,625
64
UK
15 %
Google networks
5,788
35
Other
33 %
Licensing & other
181
1
16,594
100
Total
Any Questions??