Thus, the pieces of the puzzle that will give rise to a uniquetoday might be completely different in the future. This is even more evident for tech giants, like , which disrupted the marketplace with innovative .
At the same time, ifitself doesn’t want to be disrupted, it will need to evolve its . This might imply a complete change in a few years on things like key partners, distribution channels, customer relationships and the critical resources required to succeed; while the might stay the same all the rest might change.
For instance, take the case of Goolge able to automate most of the organic content offered to users. Would still need publishers as key partner? If not, its value proposition will slightly change.
Google key partners
Traffic is the main ingredient for ’s success. Each day over three billion and a half queries go through because is one of the best search engines out there.
At the same time, one of the critical ingredients of success was its ability since the beginning to structure a distribution strategy able to bring traffic which got monetized on search pages.
In this respect I believe, that at the time of this writing three key elements and partnerships allowedto reach its scale:
- Partnership agreements (like the multi-billion dollar deal with Apple to have featured as a default search engine on Safari). This is a critical piece of the pie in terms of critical partnerships as it allows to have a continuous and massive stream of qualified traffic across several devices
- Mobile users have grown massively in the last decade. This implies that whoever takes hold of the mobile content consumption can build a sustainable business model for years to come. With other 84 technology and mobile companies, . In fact, in 2005, forged the Open Handset Alliance acquired Android (what would become the prevailing operating system for mobile). Just after a few months from the launch of the iPhone by Steve Jobs, announced its Open Handset Alliance. The aim was to build “the first truly open and comprehensive platform for mobile devices.” The behind the Open Handset Alliance is a simple one. provides its free of charge, the operating system for mobile devices, Android, and in exchange for many apps, like Play and Chrome come pre-installed.
- One key ingredient for success was its ability to offer relevant and high-quality content compared to any other portal, or search engine existing back in the late 90s. One of the key ingredients of that success was the AdSense network. Comprising millions of websites around the world; those websites allow to tap into their sites to place banners from businesses that want to advertise their services. shares the advertising revenues produced on those websites with those partners.
- Another primary ingredient for success was its ability to attract organic content. In short, beyond the paid text-based advertising places as first results on , the search engine also offered search results pages of content which weren’t sponsored, neither necessarily monetized by via AdSense. Those publishers fetched their content for free within in exchange for qualified traffic.
Google key activities
Google mission is to “organize the world’s information and make it universally accessible and useful.”
This bold vision requires thatkeeps innovating in the search industry, while it also looks forward to new ways the web is developing. This implies a few key activities:
- At a basic level, has to keep innovating its search algorithms
- As voice search is growing it is critical that keeps innovating by also offering new products. For instance, launched its new voice devices, such as Home, which compete against other tech giants, like Amazon’s Alexa and Cortana.
- Google still generated most of its revenues from advertising. A business model based on a single source of revenue might not be sustainable in the long run. That is also why is investing resources in betting in other areas that might lead to the next innovation.
Google value proposition
Instead, severalwill serve the purpose of keeping key partnerships that allowed to scale up and let it today to maintain its market dominance. Thus, if I had to summarize the fundamental those would be:
- Free search engine for billions of users around the world. This is how managed to grow quickly. A great, reliable and free service that allowed users anywhere in the world to find the information they needed, fast.
- Besides its free search engine, also offers a set of free tools and apps (just to mention a few: Gmail, Google Analytics, Blogger, Books, Chrome and many others). Those free tools are among the most used in the business world.
- The core of the Google business model is advertising, focused on targeted text-based ads for businesses offered via the AdSense network. Before existed,d there was no way for marketers to know in details all the conversion metrics of their ads. While Overture was the first in offering CPC advertising, managed to scale it up at massive levels.
- Before disrupted the advertising world and took over the digital advertising market, a few established publishers could make money via advertising. With its AdSense network, also allowed small publishers to monetize their content. In a way, it was a democratization of the digital advertising market, where anyone with the content that got the most eyeballs and attention could monetize on it, independently from its brand. AdSense is still an important element of Google .
Google customer relationship
The cash cow foris its AdWords network, made of a growing number of businesses looking to sponsor their products and services. That implies two things.
First,needs to keep offering targeted ads that allow those businesses to generate leads. Second, is as worth as much as the qualified traffic it can generate.
This implies that attention merchant, is selling back their attention. That means will need:needs to keep focusing on making sure that users go back to its search results pages. Indeed, even if users do not pay for search results, they are the products. As any
- Offer the proper support to businesses part of the AdWords network
- Keep expanding the network of businesses joining AdWords address
- The privacy concerns of users. As I pointed out, companies like DuckDuckGo have built their business on Google weakness in terms of privacy. If those concerns are not addressed might be losing an increasing chunk of users, willing to switch because of privacy concerns
Google customer segment
In terms of value creation, with its massive business model, has several “customers” not intended only to businesses paying for service but also those people or organization that contribute to Google financial success. In that respect we have:
- Internet users around the globe. To keep growing its users base, might also be going back to China
- Those who are bringing big bucks to are agencies, marketers and businesses part of its Ad Network
- AdSense Network Members that allow to offer targeted ads on their web properties
Google key resource
Google is very capital intensive; this implies a couple of key resources to keep running its infrastructures at best:
- The most basic thing any sites with a large number of traffic needs is a massive server infrastructure. Back in the late 1990s when data centers around the world. was still in the very initial stage at Stanford, it brought down its internet connection several times, by causing several outages. That allowed its founders to understand they needed to build up a solid infrastructure on top of their search tool. Today has a massive IT infrastructure made of various
- Another element to allow to stay on top of his game is to keep innovating in the search industry. Maintaining, updating and innovating ‘s algorithms isn’t inexpensive. Indeed, in 2017 spent over $16.6 billion in R&D, which represented 15% of its total revenues.
Google distribution channel
My belief is that one of the vital ingredients tosuccess was its distribution strategy, since its first few years of operations. That is also why relies on:
- global sales team which uses business development to keep growing operations
- deals and partnerships that bring it on billions of devices in the world
I’ve extensively covereddistribution strategy below:
- The Deal That Made Google The Tech Giant We Know Today
- Why Google Success Was The Fruit Of Its Business Distribution Strategy
Google cost structure
With its over $110 billion in revenues in 2017,reported a $12.6 billion in net profits. This implies a few critical items in its income statements:
- traffic acquisition costs is a crucial metric to assess ability to generate value over the years:
- As we’ve seen R&D costs represented 15% of its total revenues, or $16.6 billion
- Sales and marketing represented 11.6% of its revenues or almost $13 billion
- Datacenters costs also represent another good chunk of cost of revenues
Google revenue stream
Google business model can be broken down into three main lines:
- Google advertising network
- other revenues (consisting of Apps, in-app purchases, and digital content in the Play store; Cloud offerings and Hardware)
- Google other bets
Google business model canvas (video case study)
Other resources for your business:
- What Is a Business Model? 30 Successful Types of Business Models You Need to Know
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- How to Write a One-Page Business Plan
- The Rise of the Subscription Economy
- How to Build a Great Business Plan According to Peter Thiel
- What Is The Most Profitable Business Model?
- The Era Of Paywalls: How To Build A Subscription Business For Your Media Outlet
- How To Create A Business Model
- What Is Business Model Innovation And Why It Matters
- What Is Blitzscaling And Why It Matters
- Business Model Vs Business Plan: When And How To Use Them
- The Five Key Factors That Lead To Successful Tech Startups
- Top 12 Business Ideas with Low Investment and High Profit
- Business Model Tools for Small Businesses and Startups
- The Power of Google Business Model in a Nutshell
- How Does Google Make Money? It’s Not Just Advertising!
- How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
- How Amazon Makes Money: Amazon Business Model in a Nutshell
- How Does Netflix Make Money? Netflix Business Model Explained
- How Does Spotify Make Money? Spotify Business Model In A Nutshell
- DuckDuckGo: The [Former] Solopreneur That Is Beating Google at Its Game
- How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained