What is your Google+ strategy

5 The phenomenon of the Google empire

Google has become synonymous with Internet searches in Germany and around the world. Other search engines also provide excellent search results, but the Google brand has become deeply ingrained in the minds of users. So strong that the word "googlen" has found its way into the general vocabulary both in Germany and in other countries and has become a recognized verb. [57] This fact suggests the influence of this company on global culture. [58] For many millions of people, Google has become an integral part of their everyday lives. According to the global ranking of the most popular websites published by the market research company Comscore, Google's pages ranked first with 583 million unique visitors in October 2007. Every day, Google processes around 1.2 billion search queries, which corresponds to a global search service market share of 58.5%. corresponds to. In Germany, the company - also the most popular website - served 23 million visitors in October 2007. [59] According to brandchannel.com, Interbrand's Internet agency, Google was voted the world's most influential brand by respondents for the fourth time in a row in 2006. [60] Second place went to Apple. The video portal YouTube, which was bought by Google, landed in third place.

Figure 10: Google the world's most influential brand [61]

If the financial brand value is taken as a basis, Google ranks 20th in the 2007 ranking of the world's most valuable brands according to the brand valuation method developed by the renowned US consultancy Interbrand. [62] The value of the company is not only determined from sales, company real estate, patents and employee potential, but also takes into account the intangible value of the brand. According to Google Finance [63], on January 3rd, 2008, Google had a market cap of 214.4 billion, making it one of the “most valuable” companies in the world. The stock was quoted at $ 686. At the stock market launch in 2004, a share cost just $ 86. The price has increased eightfold since then. Despite the high valuation, the share continues to trend clearly upwards.

Figure 11: Development of the Google share since August 27, 2004 [64]

The high market capitalization enables Google to buy up smaller, innovative companies or potential competitors in order to consolidate its technological and thus economic market leadership.

5.1 Business model and business figures

Google's original business idea was to sell licenses for its search engine technology to other companies. [65] Although the new Google technology was by far the leader thanks to the pagerank method [66] developed by the company founders Page and Brin, it did not succeed in attracting adequate customers and thus making a profit. This changed when Google displayed context-relevant text ads along with the search results displayed free of charge. So far, Google has generated its sales almost exclusively through advertising (2007: 98.9 percent, 65 percent come from AdWords and 34 percent from AdSense partner websites). [67] With the Pay-for-Placement offer AdWords and the AdSense program, the company has developed two innovative approaches with the help of which advertising can be placed particularly effectively. The most important components of the business model (to date) will now be explained below:

AdWords: The business idea of ​​Google's most important source of financial income was originally taken up by Overture [68] (now Yahoo! Search Marketing) and adapted according to Google's needs. [69] With this offer, advertisers can place text ads with hyperlinks to their websites for a fee next to or above the natural search results pages. When searching for previously defined keywords, these advertisements are then marked as advertisements next to or above the actual search results. For every advertisement clicked by the user, the advertiser is then charged a certain amount (cost-per-click). The success of this type of online advertising can be attributed to several aspects. On the one hand, the clear presentation of the uniformly formatted text ads instead of the banners and popups that are unloved by users. On the other hand, because the ads are sorted by relevance. This is achieved by taking into account not only the price offered, but also the click rate (and other factors) when ranking. This takes into account the basic assumption that the advertisements that are clicked most often are also the most relevant. [70]

AdSense: With the affiliate program AdSense, Google generates additional income by extending text and image ads to websites of all sizes as part of an affiliate program (affiliate program). In doing so, Google supplies the affiliate with context-related advertisements (i.e. with advertisements tailored to the content of the website), which the affiliate integrates on its pages to promote the websites of Google's advertising partners. These ads are paid either on a price-per-click (cost-per-click) basis or on a cost-per-1000-impressions basis. At the same time, the affiliate can offer Google web search and an internal site search. If the user searches the web from the affiliate's website by entering search terms in the search field, context-specific ads appear in addition to the search results, as is the case with normal web searches using Google. If the ads are clicked by the user, the affiliate receives a commission. [71] Thanks to the huge advertising network of Google, the AdSense ads have an enormous reach.

Search Appliance: Google sells its search technology to companies that use the search methodology on the intranet or for their websites. This service includes hardware, software and customer service for a fixed annual fee. Exemplary customers are Boing, Cisco Systems, Volkswagen USA, Hitachi Data Systems or the U.S. Army.

In 2007, hardly a week went by, hardly a day, on which Google did not become active in the media in some way to announce a new application or software feature and thus expand its field of business. This strategy also worked in the fourth quarter, as can be seen from the company's balance sheet. The core business - web search - is being used more and more worldwide, advertising marketing activities have been expanded, and additional services and products are successful. [72] The sales and profit development curve is thus still on the rise, which can be seen in the following table 1:

Table 1: Sales and profit development of Google 1999-2007 [73]

 

1999

2000

2001

2002

2003

2004

2005

2006

2007

sales

220 thousand

19.1 million

86.4 million

439.5 million

1.4 billion

3.2 billion

6.1 billion

10.6 billion

16.6 billion

Profit

-6.1 million

-14.7 million

7 million

99.7 million

105 million

399 million

1.4 billion

3.0 billion

4.2 billion

 

5.2 Corporate culture and reasons for corporate success

“Don't be evil” is Google's motto. Ethically correct action should be the top priority in all business areas. In the “Code of Conduct”, the company presents its intended direction and corporate goal. It emphasizes the strict customer orientation and the goal of organizing global information and making it generally accessible to users. Google requires its employees "The highest possible standard of ethical business conduct" and does not consider itself a "traditional company". [74]

In everyday work, the majority of people work in small teams of three people. Employees are expected to spend twenty percent of their time researching personal business ideas. This should give them the creative freedom to pursue their own, future-oriented ideas and projects and possibly make them usable for Google. At labs.google.de, these prototypes are presented to Google users who are keen to experiment with the request for feedback on possible uses or improvements of the technology.

There is an open, family atmosphere in the company branches. The Google employees (called "Googlers") are provided with free food of the best quality, medical care, sports offers on well-kept facilities, technical toys, their own childcare and other daily needs. The aim is to encourage highly qualified employees to enjoy their work and to achieve a productive atmosphere similar to that on a university campus. [75] It is therefore not surprising that the American Forbes magazine has named Google the world's best employer several times. [76] In January 2008, Google reported the number of its employees with a total of 16,800 full-time employees. [77]

Google's tremendous success story is largely based on word of mouth. So-called summation or potentiation effects arise at the moment when a person thinks a product is so interesting or good that he tells his environment about it (or sets a reference link on the Internet). If the product is interesting not just for one but for a sufficient number of people, the snowball principle works by itself. When trying to influence or push such effects, advertising experts speak of "viral marketing" in this context. Metaphorically, the process is compared here with a nuclear reaction or with a virus attack. [78] At the beginning of its history, Google spent comparatively little on its own advertising (2002: US $ 48,000, 2007: US $ 1.4 billion). [79]

Further reasons for the unprecedented success of Google are to be seen in the constantly improving quality of the web search [80], the outstanding usability (user friendliness) and the simple design of the start page. The waiver of unnecessary animations, advertisements and pop-ups ensures pleasantly short loading times, increases clarity and helps to avoid possible display problems in browsers. [81] Google calls this design "nonsense-free". The "less-is-more method" is a declared corporate policy for website design. [82] In addition, there is the strict separation between “sponsored links” and natural search results as well as Google's reserved right to sort the order of AdWords advertisements not only according to bid but also according to relevance. As a result, advertising on Google only bothered users comparatively little (see Section 8.4.3). The results of the Bertelsmann study confirm this: “One of the main arguments for the success of Google is therefore the extensive renunciation of advertising and sponsor references and the associated clarity of the search and hit pages; with both annoyances, Google scores far better than other search engines. "[83]

Overall, Google has a positive and, paradoxically, a little commercial image among users, even though advertising is Google's main source of income. The majority of users do not notice the enormous commercial success. Because of the likeable image, the massive expansion of offers and market dominance have not made users suspicious, as is the case with Microsoft, for example.

5.3 Current strategic development trends

According to GLÖGGLER [84], the most important goals for a successful business development of a search engine include the expansion of the range and the improvement of the precision of search results. Both goals are pursued in Google's business strategy. While the search algorithms (must) be constantly improved through new programming, the expansion of the range is ensured primarily through new additional services. The countless press releases for new product launches in recent years can be used as evidence of the diversification and differentiation of the company. In keeping with the tradition of the free culture on the web, almost all Google offers are free and some of them are extremely popular. If a suitable company is found that fits into Google's strategic orientation (such as Blogger.com from PyraLabs), it is bought up and quickly integrated into its own offer. In this respect, Google's expansion strategy is similar to that of Microsoft: finding and assimilating interesting business areas. However, Google is setting a much faster pace. While Microsoft usually waits until a market has developed and then rolls it up from behind, Google's strategy seems to be to conquer all promising business areas as quickly as possible without paying attention to short-term profitability. [85]

In the following, some of Google's business areas that are important for the future will be presented as examples, which are fundamentally moving away from the original core competence of search engine technology and thus opening up completely new markets. According to KAUFMANN and SIEGENHEIM, Google works according to a 70-20-10 rule: around 70 percent of the resources flow into the expansion and further development of the core areas of search engine technology and advertising, around 20 percent are used to expand newly introduced products and services around 10 percent went into researching and developing new ideas and concepts. [86] Expenditures for product development (research & development) increased significantly from US $ 600 million in 2005 to US $ 2.1 billion in 2007 (with a net income of: 2005: 1.4 billion and 2007 : US $ 4.2 billion). [87]

Telecommunications market: Operating system for smartphones, Android:

Android is an open source platform for smartphones that is being developed by the Open Handset Alliance [88]. It is based on the Linux operating system and uses the Java programming language. With this, Google (together with its partners) will publish a mobile phone operating system in 2008 that will run on devices from all possible manufacturers. With Android, Google attacks Microsoft's competing product Windows Mobile directly. Since the software is open-source, companies and programmers can add additional functions to the Android platform without having to reveal their source code to the community. In order to encourage the developer community to participate, Google is organizing the “Android Developer Challenge”, in which prizes worth a total of US $ 10 million are advertised.

Telecommunications market: Free information, 1-800-Demokratie-411:

Since the fall of 2007, Google has been operating its free directory assistance service Zigarren-411 in the United States under the telephone number 1-800-Demokratie-411. [89] What is automated information for users is a gigantic public beta test for Google and a training program for the speech recognition software it has developed itself. “Due to the almost endless training, the system continues to improve by itself and will one day be able to offer 99.9% reliability - probably also with dialects. With this practice, Google continues to pursue the strategy of letting users work for them for free. Once the speech recognition has built up a sufficient vocabulary with a very high level of reliability, Google will and will probably hunt this software completely over YouTubeFor the first time, the ability to analyze videos not only based on the description but also based on the audio content.[90] Googles-411 was first developed further through Google Labs before it was finally launched on the market in September 2007. [91]

Classic advertising market: Expansion of the Google AdWords system:

In the USA, Google expanded its AdWords system to include newspapers (print ads), radio (audio ads) and television (TV Ads beta) in 2007. [92] The advertisement can be placed with the previous AdWords login - without any prior knowledge. If these products are "ready for series production" in the USA, transfer to other countries is quite conceivable.

In-Game Advertising Market:

It can be assumed that sales from advertising in computer games will increase enormously in the next few years. According to estimates, the total turnover in this sector to date is expected to increase five to seven times from the current level of around US $ 100 million by 2010. [93] In order to participate in this trend, Google has acquired the software company AdScape, which has the necessary know-how in the in-game advertising industry, for US $ 23 million. It is considered likely that Google will integrate the planned in-game advertising into its AdWords system.

Publishing market: competition with Wikipedia and trade journals, Google knol:[94] Google claims to be able to give binding and conclusive answers to all possible questions. A first attempt to answer search queries with definitive information was made by Google between 2002 and 2006 with Google Answers [95]. “Unlike Wikipedia, where the individual author is nothing, but the jointly developed content is the measure of all things, knol articles should be author's works. Google would obviously prefer to be writing experts who report highly competently from their specialist areas [...].This also means that at knol, the duplication of topics has been created from the start: While at Wikipedia everyone writes one piece of content - namely an article on the topic - at knol the authors compete.In addition, Google knol offers the authors the opportunity to participate in the turnover generated with their know-how: Proceeds from advertisements are to be shared with the authors. […] What Google is getting up and running seems more like competition for today's trade magazines […]. On the other hand, the concept weakens when it comes to assessing relevance and correctness. Here, specialist journals rely on the so-called peer review by other experts. At knol, the peers will be normal web surfers.In the best case, Google […] manages to achieve a reasonable ranking through [the] planned rating function [by] users […] […]. Wherever the much-touted swarm of users votes, the popular is [but] only too happy to sit down against the factual. The areas in which the company has so far mainly picked up blue eyes are, of all things, community and knowledge. knol lies exactly on the interface. "[96]

Internet auction market, job placement market, among others: Google Base (beta):

Since autumn 2005, Google has been offering its users a free web database that can be filled with any content. Depending on the content, the set information is assigned to one of several categories. These categories determine on which Google website (Google Base, Google Product Search or Google Maps) the information is displayed. [97] The web database can be used, for example, as a classifieds market or job exchange, which means that Google Base also competes for similar offers on the Internet, which are usually chargeable (e.g. Ebay). In a broader sense, Google Base also competes with Wikipedia. Both projects are about creating databases for all conceivable topics, collecting as much information as possible and offering it in a structured manner. [98]

Financial services market: online payment system, Google Checkout: Owners of a Google login can pay in participating online shops after registering by entering their credit card number via Google Checkout. During the shopping process, the credit card number and, if desired, even the e-mail address are kept secret from the retailer. In addition, the delivery status can be tracked regardless of the seller. The advantage of this payment system is that buyers do not have to constantly get involved with different checkout systems, but rather find a recurring structure. Google particularly emphasizes that you no longer have to remember dozens of passwords for individual shops. The payment system introduced in the USA in June 2006 has been available in Great Britain since April 2007. It can be assumed that Google will expand this service to all of Europe in the next few months. [99]

Navigation System Market: Google Maps for Cell Phones:

With the provision of Google Maps for GPS-enabled mobile devices, navigation systems for cars are already becoming redundant. It can be assumed that due to the constant further development of mobile devices, the integration of the GPS function will become increasingly widespread in the next few years. With Google Maps for cell phones you can determine your location and then plan a route. [100]

Software / hardware market: Operating system for PC, gOS:

The free gOS operating system [101] developed by gOS LLC, which is based on the Linux operating system and "haunted" the press as the "unofficial Google OS", also caused a stir. It was released in November 2007 with the sale of a personal computer at Wal-Mart in the US for $ 199. In this system, Google's web applications are clearly in the foreground. The application bar almost exclusively contains icons for Google services such as Gmail, Google Docs, Calendar, Blogger, Maps, Youtube and Product Search. [102] Although the manufacturer of gOS is not Google, rumors have been circulating in recent years that Google is working on its own operating system for PCs.

Conclusion

In summary, it can be said that Google has long since abandoned the role of the classic search engine and is planning to build up additional pillars of the main source of income AdWords / AdSense by building up new business areas. On the one hand, this is intended to counteract one of the greatest criticisms of Google's business model: the one-sided focus on advertising. [103] On the other hand, it should be ensured that reduced advertising income can be absorbed by income from other applications in the event of possible future share losses in the web search. Google is also trying to compensate for the declining growth figures in the original search markets with international and localized variants. However, the question arises: What is Google's long-term strategic objective? One answer to this question can be seen in the statements made by Eric Schmidt, the CEO of Google. For example, at the Search Engine Strategies Conferences in August 2006, he spoke of an “emergent new model”. The idea behind this is to break away from the traditional client / server model and obtain software functionalities directly from the network. [104] Schmidt called this user system "cloud computing" (roughly to be translated as "source cloud IT services"). The idea of ​​this approach is not new. However, Google does not want to charge for the financing of these online software solutions after use, but to provide them free of charge and finance them through advertising. SCHMIDT announced the new strategy as follows: "There is a new business model that’s funding all of the software innovation to allow people to have platform choice, client choice, data architectures that are interesting, solutions that are new and that’s being driven by advertising. “Google took the first steps towards building“ cloud computing technology ”in March 2006 with the acquisition of the free, web-based word processing program Writely from Upstartle. Writely was the basis for the further development of the web-based application Google Docs, which enables users to create and edit text documents, tables and presentations online with other users in real time.

SCHMIDT made another strategically elementary objective clear with this sentence: "But ultimately our goal at Google is to have the strongest advertising network and all the world's information, that's part of our mission". [105] This statement reflects a significant change. Up until now, Google was a search engine that was financed through contextual advertising. In the future it can be assumed that the importance of the advertising business will be placed on an equal footing with search and will be defined as an independent strategy. The first step in this direction was the establishment of the affiliate network AdSense. Further measures in the direction of classic media are now following. Here, Google is making considerable efforts to expand its online ordering system (AdWords) into offline advertising. The AdSense program is to be expanded in this way to include the classic advertising media of television, radio, newspapers and magazines as well as outdoor advertising. Google is pursuing the goal of transferring the advantages of AdSense such as price setting via auctions, contextual reference and the automation of the ordering process to these advertising media. [106] If the simple operation of AdWords and AdSense were to be transferred to the other advertising media, Google could fundamentally change the structures of the advertising industry, because advertisers would then no longer need large media agencies in the future. A relatively small number of highly specialized service providers could then implement targeted advertising measures in the interests of the client. [107]

At the moment, however, the majority of the additional services offered contribute at best to the overall income of Google and cause gigantic investment costs. One problem with this is that many of the new services are not noticed by many potential users due to their hidden position within the Google websites. "Some [...] are so hidden that you have to use the Google search to find them".[108] Most of the products presented, however, are assessed by experts as having enormous sales potential. The focus of the possible sources of revenue is likely to be the integration of AdSense into these products. [109]

Table 2: Evaluation of the sales potential of selected Google products [110]

product

Monetization

today

potential

You Tube / Google Video

low

very high

Google Maps

low

very high

Google Mobile

low

very high

Google Audio / dMarc

low

very high

Google Base

low

high

Google checkout

low

high

Google News

low

high

Products Mobile

low

high

Blogger

moderate

high

Google Finance

low

moderate

Gmail

low

low

Google talk

low

low

Picasa

low

low

Google Docs & Spreadsheets

low

low

Table 3: US ranking of the top 10 Google products, June 2007 [111]

rank

product

Share of Google site visits

1

Google web search

69,06%

2

YouTube

11,53%

3

Google Image Search

7,58%

4

Gmail

5,27%

5

Google video

1,44%

6

Google Maps

1,42%

7

Google News

0,94%

8

Blogger

0,49%

9

Google Book Search

0,29%

10

Orkut

0,28%