In recent days, much has been made of the launch of a search engine by MSN and the fact that Apple took the #1 spot among brands replacing Google. And not too long ago, there was another report that showed how Yahoo and MSN have increased their market share in the search space. Of course, all of these are developments are important to assess Google's worth as a company and to analyze its future prospect, but a close look at the financials presented by Google today tells us at iProceed that Google is a very solid company, principally because of a great business model and a robust strategy.
Google's business model transformation
Google is no longer a search engine company. That is evident from its expansion into many additional offerings for both consumers (Picasa, Blogger, Keyhole, Gmail, and other small features, along with rumors of a browser) and enterprise (primarily search).
While Google has not announced that it is restructuring its business model, as a management consultant, I can see all the signs of a business model transformation (Elements of business model according to iProceed are market/value chain positioning, target customer, offering bundle, principles of operation, basis of competition, profit mechanism, and value proposition)
Market/Value chain positioning: Google is expanding its area of participation in the value chain. In other words, its search technology and infrastructure is merely a utility that allows it to do what really bring over 90% revenue and income - advertising. I personally like to call Google an advertising company, simply because it is the only company that allows any business to start advertising online without any need for professional copy writers or graphic designers or help from any advertising salesperson.
Target customer: It's the small guy. Indeed, Google has almost all large companies as advertisers, publishers, and partners, but take a look at the sales from its AdSense programs, which includes largely small publishers. Revenues grew 147% in 2004 to $1.6 billion in 2004. This growth reflects growth in the number of partners (Google is still recruiting) as well as improved monetization of those programs. I clearly see that Google, eBay, and Amazon as the best companies that exploit "the power of many".
Offering bundle: While Google has not figured out ways to monetize everything (e.g. Google news), its bundle keeps growing and I would not be surprised if it did come up with a very innovative approach to monetizing some of its offerings (Gmail has a very powerful model). In other words, its pipeline is full.
Principles of operation: Hire the best and the brightest, give them freedom to their best, and keep it all simple. If only rest of the world could do this! (Related article: How to attract and retain great employees?)
Basis of competition: Simple and powerful. What allows both these attributes to work is technology, business ethics, and transparency. (Related article: How to develop competitive strategy?)
Profit mechanism: Drive ebusiness. These are the folks that are willing to spend money on advertising.
Value proposition: Enhance e-commerce. Google's customers report exponential growth in their sales after they started advertising with Google.
What does it mean for you?
- Keep it simple. I mean it.
- Think creatively and find out how you can exploit "the power of many".
- If you are not helping your customers win, you won't win either. So ask your customers what can you do to make them win rather than just selling them your widgets.
Recommended article: How to grow high value companies?