 Assignment 1
E- MG448 Electronic Commerce, Systems, and Web Design,
Instructor: JUNG WAN LEE, Ph.D.
09/22/2015
Luis Esteban
Luis.esteban.arribas@gmail.com
Content
INTRODUCTION .....................................................................................................................................2
BACKGROUND .......................................................................................................................................2
BUSINESS MODEL..................................................................................................................................5
SWOT ....................................................................................................................................................7
Strengths...........................................................................................................................................7
Weaknesses ......................................................................................................................................8
Opportunities....................................................................................................................................8
Threats ..............................................................................................................................................9
REVENUE SREAMS.................................................................................................................................9
SUGGESTIONS .....................................................................................................................................11
Related with E-commerce ..............................................................................................................11
CONCLUSION.......................................................................................................................................12
APPENDIX ............................................................................................................................................14
Appendix 1 ......................................................................................................................................14
Appendix 2 ......................................................................................................................................14
REFERENCES ........................................................................................................................................15
1
INTRODUCTION
Google is mostly known for being the most popular search engine, it started that way, but
nowadays that is only part of the whole line of services that it offers: Mailing, news, maps,
blogs, videos…. And not only that, but also it has become the most used browser in the
world and had a long range of innovative products like the Project of the Glasses or the
automatic drive cars. Besides of having its own line of mobile phones and tablets, as well
as being the owner of Android which is the most used OS in mobile phones. Furthermore,
it has acquired YouTube, as well as other companies which give related services in the
Web and help them to analyze and get revenue from all the information they process every
day. Nowadays the company is the main subsidiary of a bigger multinational called
Alphabet.Inc.
BACKGROUND
Larry Page and Sergey Brin were students and close friends at Stanford University. Larry
Page is an American entrepreneur who now is considered one of the richest persons in
the world, and also is the CEO of a multinational called Alphabet. Sergey Brin was
originally Russian, he was graduated in Maryland University and then moved to Stanford
where he met Larry in the orientation week, and both become friends because they shared
a special interest in the World Wide Web. Google arose from their final Thesis in 1995.At
first, it was originally called “BackRub”. The Project consisted on exploring the
mathematical properties of the Internet, and understanding its structure. In 1996 the first
Web Browser was launched under the domain of Stanford as the starting point. At the
beginning the domain was (google.standford.edu). The current domain was set in
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September 15th, 1997. One year later, Google. Inc. was founded on a garage in Menlo
Park, California. Page and Brin changed the name inspired by the mathematical term
“Gogol” which refers to the number 1 followed by 100 of zeros related to their ambition
of organizing the amount of information in the Web.
In December of 1998, Google already achieved to have an index about 60 million pages,
despite the webpage was still a BETA. By that time, some companies started to say that
they were way better than its competitors by far.
The company moved to 165 University Avenue in Palo Alto in 1999 then, in 2003 after
outgrowing the place, they moved to Parkway from Silicon Graphics. Google remained
at this location ever since.
In 2000 Google presented AdWords, which was their first online publicity system and the
Google bar. Eric Smith is named President of the Directive board in 2001. The same year
Image Search is launched. In 2002 Google News is released. And on December of the
same year Google Products sees the light for the first time. In April of 2003 Google Grants
is presented, which is a publicity free service for NPO. The same year Google Print and
Google Books were both presented to the public.
In April of 2004 Gmail is presented, electronic mailing with capacity of 1 GB of storage.
On August 19th Google went Public. The company was valued on $23 Billion, it was
generating $27 billion in revenues and $286 Million in profits already. They used an
auction to sell the shares. However, before the IPO they had to back scale the value of the
shares leaving it with a price of $85 per share. The IPO finished with $22.5 million of
shares sold, and rose $1.9 billion. The stocks rose to $100.34 per share. In October of the
same year Google Academics was launched too.
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One year later, in 2005, Google launch Google Maps and Google Earth. Also bought
Android INC. In the summer Google Talk was presented, and by the end of the year
Google Analytics and Google transit are also released.
In 2006 Google Docs, Google Finance and in April and August Google Calendar and
Google Apps are presented, respectively. In October of the same year Google bought
YouTube for $1650 Million.
In 2007 Google bought DoubleClick an online advertising Company for $3,100 million,
becoming the most valuable Company of the world. In the same year it also presented the
OS Android.
In 2008 Google sites ins launched, the same year Google browser also known as Google
Chrome is released Two years later in 2010 Google presents his first mobile phone Nexus
One which is compatible with Android.
On January of 2011 Larry Page became CEO of the company and in June Google+ is
presented. Motorola Mobility is acquired by Google for 8800 million. In 2012 Google
presents the Project Glass, in order to create virtual reality.
In August 2015 Google became the main subsidiary of Alphabet Inc. which would work
for the R&D of Google products and services.
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BUSINESS MODEL
In order to analyze the Google Business model, we have used the Model Canvas (see
exhibit 1). Which reflects the main ideas of a business model in a very analytical way.
The business model of Google is based on the value proposition that it offers, it is an
online search engine, that allow user to find everything they are looking for in the internet,
not only that but allow companies to become the first result in the search, as well as using
advertising campaigns, it has the revolutionary concept called AdWords which is a
publicity program of Google which allows the user to create simple and efficient
advertisements to show the users that look for information related with its company.
Besides with the OS and platforms that they are improving and creating everytime their
main goal is to make the user experience easier and to facilitate the operations.
The Key activities of the company are basically 3 that makes them create revenue and
increase the value which is offered to its clients. 1) To keep improving and maintain the
infrastructure that the company has.2) Being able to control and supervise the three main
services (AdSense, AdWords and Google.com) 3) Research & Development with projects
like the Google Glass, or the automatic drive cars, also, they are always trying to improve
the services and products that the company already has in the market. Google, besides,
control a large amount of traffic information from the internet, most of the search requests
done in the Web go through Google. Therefore they need to have a huge IT capacity to
control and be able to storage all the information in order to improve. Another key activity
is the Problem solving, when any customer needs a problem to be solved, they used
internet and google to solve it. Each of them has a specific request then some problems
of different origins may arise. Google needs to have anticipated this kind of problems
before they get out of control.
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Customers are mainly can be classified in to many groups, however, the most important
ones can be: internet users, as general division, mobile users, enterprises, advertisement
agencies and developers. Google is estimated to have nearly 1 billion searches every day.
Users like enterprises are mostly looking for making business with Google in order to be
advertise by them.
Internet is the main channel from which you can use Google, and all of Google devices,
but also the mobile phones like the Nexus, or android users.
Google business is composed by four key cost elements; Data center operations,
Research & Development, Sales and Marketing and Traffic Acquisitions. Google has
invested a large amount of money on data centers in order to be able to manage the huge
number of search request that are done a day. Also it does invest a lot in R&D as we can
see for the number of new products that has launched in their history, both as software
and as hardware, the investment on projects like Google Maps, on Satellites for Google
Earth, Gmail, Nexus, Tablets… etc. Traffic acquisition costs include the money paid to
the network that contain AdSense program and the distribution programs that drive traffic
to Google sites. And finally, Sales & Marketing costs include the cost of the advertising
made by Google, the promotional events, global sales and the teams that make it possible.
Databases are the hardware part of the key resources that Google uses in their activity.
They play an important role in the development of the main activity because are used to
help storage all the information created by the search requests. Also the IPs are registered,
whereas the company is able to track the search request and make more automatized the
kind of searches that are repeated.
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SWOT
STRENGTHS
WEAKNESSES
 Strong Market Position
 Advertising dependent income
 Success of Android OS
 Weak strategy in Social media
 Diversity of Products and Services
Advertising
 Brand Image
 Lack of product integration compared
 Strong Infrastructure
to its competitors
 Great Finances
OPPORTUNITIES
THREATS
 Increase in Internet Users
 Lawsuits expenses
 Mobile Advertising
 Strong Competition
 New Products
 Exchange rate fluctuations
 Expansion to China
 Security Issues
Strengths
 Strong Market Position: Google has around the 88% of the Market Share in
Search Requests inside the Web. Almost all traffic in the internet goes through
Google.
 Success of Android OS: Android has become one of the main OS in mobile
devices, for Samsung, Nexus, but IPhone and Windows OS.
 Diversity of Products and Services: Google has a large range of products like
the phones and tablets, and offer a lot of services like Gmail, Maps, News, and
Google+.
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 Brand Image: Due to the quality of their products Google has achieved a strong
Brand Image, and created brand awareness.
 Strong Infrastructure: has a strong Infrastructure in order to be able to process
all the information that they receive a day, and to the R&D and the maintenance
of it.
 Great Finances: It has a great flow and huge revenues, and profits, being able to
have a great liquidity that allows the company to perform purchases of millions
of dollars.
Weaknesses
 Advertising dependent income : Even though Google has a great diversity of
products, their main income comes from the advertising of the publicity
 Weak strategy in Social media advertising: they are not very strong in terms of
media control.
 Lack of product integration compared to its competitors.
Opportunities
 Increase in Internet Users: The number of internet users are increasing day by
day, which benefits the company by increasing the users that will use its services.
 Mobile Advertising: There is not too much advertising in phones yet, but it will
change eventually. The only service that has publicity is YouTube, which is a part
of Google.
 New Products: The continue creation of new and innovative products is one of
the strongest points of Google.
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 Expansion to China: They have not yet expanded to China because in the
negotiations there were no agreement, because Google did not want to limit the
search options because of Government rules.
Threats
 Lawsuits expenses: Google has a bunch of law demand because of going against
the privacy of many users.
 Strong Competition: Competitors are arising, like Yahoo, or the new Microsoft
explorer
 Exchange rate fluctuations: The fluctuation of the markets are variable and
affects all companies included Google, and their value in the Stock Market
 Security Issues: Due to the fact of being an online company is always under the
threat of having a black hat hack that could get all the information
REVENUE SREAMS
Google is a free service that can be used by users, however, it makes revenue from
advertisements of companies who are interested on be the first when some terms are
related. Google assist them to create text-based Ads through Google AdWords (an
Advertising Program that helps companies to appear nest to the search results, like
publicity. The companies pay Google with the method of Cost per Click(CPC) which
means that companies pay when their ads are clicked and by the number of times it have
been clicked.
Its main revenue processes can be summarized in (see exhibit 2):
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Google PC Search Revenue which we explained before, through the ad and the number
of searches per day. Which gives a revenue of $27.5 Billion, having the 66.4% of market
share we can confirm that is the largest part of Googles revenue.
Google Mobile Search Revenue which gives back the amount of $15, 8 Billion. It has
around the 89% of Market Share of Mobile searches
Google Phone Revenue, which comes from the sales of their own phone brand, also
known as Nexus being the mobile.
YouTube Revenue, from the advertisements put before the video starts and the
promotional videos that appear in channel when you are registered.
Interest Income which comes from the shares, and the increase in the value of them in the
stock market which varies continuously, however, Google shares had been regular since
they went public.
Other Revenues that come from Network Partnerships, Search appliance, Google Apps.
The revenue that Google got in 2015 without costs arose to the total amount of $57.2
Billion, and after total expenses, it had profit valued on $19.7 Billion.
.
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SUGGESTIONS
Google is a great example of what ecommerce is able to do, because it bases most of its
profit on advertisement online, besides the diversification of services and products that
the company also offers.
First proposal, suggest to try to decentralize the revenues, even though that advertising is
their main activity, it is also the one the one that they depend on, and with all the resources
that Google has is for sure a fact, that they will try to equalize the amount of revenue per
sector. We can appreciate that with the projects like the Google Glass or the Automatic
driven cars, we propose as the challenge to keep investing on those products and become
able to get revenues from more than one activity.
Related with E-commerce
Digital trends are changing, due to this, companies which based their activity in the Web
has to be able to react to this trends. Google needs to become able to shift their way of
doing e commerce with the new trends that are arising. Since 2013 there has been a growth
of Mobile search rather than PCs. This means that apps are breaking through the most
common used tools for mobile devices. Within this line of thought there has been a new
trend that Google need to be careful about, which is the in app-search, which will affect
the way that Google has been doing E-Commerce the last few years. By in-app search we
mean that inside mobile applications has specific ways to search for products or services.
For example Yelp´s app is used commonly to look for services, like Restaurants. Within
this way Google is completely pass over. For this reason Google should start to make
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arrangements with different app developers in order to maintain its market share inside
researches.
Another trend that is arising is the video advertising. Nowadays, the commercial videos
look more natural and commercial than other kinds of e-commerce like the bannering’s
for example. They are displayed in order to distract the users when they are using other
services inside the Web, like in Social networking pages. Google has also adapted to that
trend in its filial YouTube. It also has to be aware that this kind of publicity can affect in
a negative way to the user, making his/her experience unpleasant, like in the TV. For that
reason a balance should be found in order to get into the user, but not to kick him out of
the other activity that is performing.
CONCLUSION
Google is the most valued Company in 2014, it has Billions in Revenues, and it is
dedicated to one of the most popular sectors, which is the technology, not only that but it
also controls two of the most used domains in the Web, which are Google.com and
YouTube.com. The company has real data of what people look for, what they like, and
what they search for. This is a unique advantage that could make them able to adapt to
shifts in the markets even before they actually happen.
It also is a legal problem because we cannot define where is the boundary about privacy
within this company and the analysis of this huge amount of information. However, in
terms of e-commerce there is no other company that cannot compare with Google,
because is the most visited webpage in the world. And where most costumers can be
reached.
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Google is a multinational and even though the perfect performance it had been doing in
the last few years, it have had to face law suits from apple and other companies that
creates threats the company needs to be aware of. Besides, one of the strongest point of
this company is also the R&D which will help the company to diversify its activity and
keep being in the top.
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APPENDIX
Appendix 1
Appendix 2
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REFERENCES
The Birth of Google (Wired 13.08: The Birth of Google)
http://archive.wired.com/wired/archive/13.08/battelle.html?pg=2&topic=battelle&topic_set=
Let’s Get This Straight: Yes, there is a better search engine (Saloncom RSS)
http://www.salon.com/1998/12/21/straight_44/
(Forbes)
http://www.forbes.com/sites/jayritter/2014/08/07/googles-ipo-10-years-later/
2015 Annual Meeting of Stockholders – Investor Relations – Google (2015 Annual Meeting
of Stockholders – Investor Relations – Google)
http://investor.google.com/proxy.html
Create and develop Business model (Create and develop Business model)
http://www.slideshare.net/doczenith1/create-and-develop-business-model
Understanding Google Business Model (Understanding Business Models)
http://bmimatters.com/2012/03/29/understanding-google-business-model/
SWOT analysis of Google (Google SWOT analysis 2013)
http://www.strategicmanagementinsight.com/swot-analyses/google-swot-analysis.html
Net Market Share (2013). Market Share Trend Highlights. Available at:
http://www.netmarketshare.com/
Google (2013). Investor Relations. Available at: http://investor.google.com/
Google SWOT analysis 2015 (Google SWOT analysis 2015)
http://www.strategicmanagementinsight.com/products/swot-analyses/google-swot-analysis.html
Google Nexus 7 Tablet Case - An E-Marketing Perspective (Google Nexus 7 Tablet Case An E-Marketing Perspective)
http://www.slideshare.net/awang12/google-final-36802910
(Forbes)
http://www.forbes.com/sites/greatspeculations/2015/07/20/google-earnings-profits-soar-as-thecompany-reins-in-cost/
Google -- Trefis (Trefis)
https://www.trefis.com/stock/GOOG/model/trefis?easyAccessToken=PROVIDER_a339366c4c
65a7bc19c5040d9b25109aac708d92
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