While Google (now Alphabet) has been born as a search engine, Google’s business model is now diversified, even though its core business remains search, as most of its revenues still come from Google, the search engine, and YouTube, the “video engine.” However, as a tech giant, Google makes money primarily through advertising, the company does compete with Facebook, Twitter, Microsoft (with Bing), and Amazon (with e-commerce search and its advertising machine).
Origin story
When Page and Brin managed to create a search engine that was 10x better than competing engines, it made clear that search was all but a solved issue. At the end of the 1990s, Page came out with its algorithm, PageRank, which managed to rank the entire web-based on relevance and authoritativeness of the web pages it indexed.
It took off right away! It was at that point that many of Google’s competitors understood that search was just at the embryonic stage. It was by then that Google had already taken over the search market, yet revenue was still far away.
Bach in the days, Brin and Page didn’t hide their resentment toward the advertising businessmodel, which was the prevalent model for search. Indeed, in the paper “The Anatomy of a Large-Scale Hypertextual Web Search Engine” where Page and Brin presented their first prototype of Google.
With full text and hyperlink database of at least 24 million pages, in a paragraph dedicated to advertising, they explained: “We expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.“
The main issue they had toward advertising was the fact that it was biased, and it caused a lot of spam in search results. Indeed, when they met Bill Gross, founder of GoTo, which would later become Overture, the encounter might not have been among the most cordial. That’s because Bill Gross had figured the advertising market had massive potential, as he introduced an auction-based system for bidding businesses based on performance and clicks.
However, this was still back when Page and Brin were two academics completing their Ph.D. at Stanford University. The transition to becoming businessmen would take soon to arrive. Indeed, as venture money was soon to be over a plan B was needed.
In addition, as Google managed to rank advertising based on relevance (for instance, by ranking higher those ads that got more clicks) advertising became a possible option. As Larry Page pointed out in the first Google letter to shareholders:
Advertising is our principal source of revenue, and the ads we provide are relevant and useful rather than intrusive and annoying.
Advertising
Google generated over $116 billion from advertising revenues in 2018, which represented 85% of its total revenues. Of those revenues over 70% came from traffic via Google main properties (Google search engine, YouTube, Gmail, and others). Google’s main properties are monetized primary via a cost-per-click mechanism. Network members sites are primarily monetized on a cost-per-impression basis. Google also spent over $26 billion in 2018 to sustain its traffic on both its properties and as a revenue-share mechanism with its network members (AdSense and AdMob).
As large and multi-dimensional as the company may be, Google is fundamentally an advertising business. The vast majority of income is earned through generating, capturing, and channeling leads who have intent to make a purchase.
Some argue this makes Facebook the main competitor of Google because users are spending more time on social media and less time using search engines. With Facebook offering an ad platform of comparable reach and functionality, advertisers will be forced to follow the money and migrate away from search engines.
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, this comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).Facebook, the main product of Meta is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm).
Search
As already noted, Google’s supremacy in search is unlikely to be challenged in the medium to long term. In fact, the company controls over 92% of the search market since introducing Google Search in 1997.
Competitors in the North American market such as Yahoo and Bing are thus hardly worth mentioning. But in the Chinese market, Baidu enjoys similar dominance because Google is banned from operating there.
A potential emerging competitor to Google search is Amazon. Though not a search engine in the traditional sense, many consumers now bypass Google and search for products on the Amazon website directly.
Entertainment
Google’s acquisition of YouTube in 2006 is a classic example of the company using its power to establish a presence in an industry.
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, and it generated more than $15B in revenues in 2019. YouTube also makes money with its paid memberships and premium content.
Here, the competition is much more intense. Video platforms such as Snapchat, TikTok, Instagram, and Facebook all compete for video viewers.
YouTube is the most popular online video platform, a hybrid between a video search engine and a social media platform with a continuous feed prompted by social interactions and engagement. In fact, the platform is so popular that YouTube.com is the second most visited website on the internet. After being acquired by Google in 2006 for $1.65 billion, the platform now boasts over 2 billion registered users. Collectively, these users upload 500 hours of video every minute. The platform competes with other video engines like Vimeo, Dailymotion, and social platforms like IGTV, TikTok, and Twitch.
Google also faces strong competition for viewers from streaming services offered by Disney, Netflix, Amazon, and Hulu. The company does not operate its own streaming platform, instead offering the somewhat underdeveloped video aggregation service Google TV.
However, it should be noted that Google TV serves ads to consumers based on their viewing history. The presence of this feature could be construed as an attempt to compensate for the revenue lost to social media platforms mentioned earlier.
Technology
In cloud computing, Google’s main competitors are Microsoft and Amazon who both have greater market share in the industry.
Google must also compete with smaller but no less significant companies in technology and database services, semiconductor manufacturing, consumer electronics, and customer relationship management (CRM). These include IBM, SAP, Cisco, Oracle, Samsung, and Salesforce.
Google’s Pixel smartphone is also up against similar offerings from Sony, Apple, Samsung, LG, Oppo, and lesser-known Chinese brands Huawei and Xiaomi.
Other Bets
Under the hood of Google’s 161 billion in revenues (2019), it hides an accounting item called “other bets.” That accounting item might hide the next big thing in technology and business. Yet, as Alphabet shows its “other bets” on its financials, we can try to understand where Google’s hidden gem is and where the future of technology and business might be heading toward.
Key takeaways:
Google has total dominance in organic and paid search, controlling over 92% of the market. But in markets without first-mover advantage, it faces stiff competition.
As fundamentally an advertising business, Facebook is perhaps the biggest competitor of Google with Amazon a close second. Users are spending more time on social media and eCommerce sites to search for what they need. As a result, advertisers and advertising revenue must follow the crowd.
Google is a significant player in cloud services, but it sits behind Microsoft and Amazon in terms of market share. It also faces established competition in technology and database services, consumer electronics, and CRM.
Zoominfo is an American software-as-a-service (SaaS) company founded by Henry Schuck and Kirk Brown in 2007. The company sells access to the most comprehensive B2B database in the world to help sales and marketing teams better communicate with prospects. Zoominfo held an IPO in June 2020 raising $935 million. Like similar software companies that are valuable to remote teams, demand for the Zoominfo platform increased because of the coronavirus pandemic. It is now used by over 20,000 businesses, with clients including T-Mobile, Zoom, Amazon, and Google.
Spotify is the world’s largest music streaming platform with over 381 million users across 184 markets around the world. The company was founded by Martin Lorentzon and Daniel Ek in 2008 in response to the shutdown of peer-to-peer music service Napster. Spotify became a success because it was the first company to determine how to distribute music legally and compensate the music industry at the same time. The platform now offers various curated music discovery services, music stations, audio customization, and private listening. In recent times, it has also ventured into the streaming of audiobooks, podcasts, comedy, poetry, and short stories.
Poshmark is a social commerce marketplace where users can buy and sell new or used clothing. The company was founded in 2011 by Manish Chandra, Tracy Sun, Gautam Golwala, and Chetan Pungaliya. Poshmark is one of many companies looking to profit from the explosive growth in the second-hand clothing and resale industry, which is expected to be worth around $51 billion by 2023. Scores of women, in particular, are opting to sell their unwanted fashion items online instead of donating them to charity or thrift stores.
Afterpay is an Australian fintech company operating in Australia, Canada, the United Kingdom, New Zealand, and the United States. Founded in 2014 by Nick Molnar and Anthony Eisen, the company enjoyed a first-mover advantage in the buy-now-pay-later (BNPL) space. Less than seven years later, the company reached 13.1 million active customers with gross sales amounting to $10.1 billion. Despite its success, some suggest the company has lost its edge in the buy-now-pay-later space with the emergence of several high-profile competitors exerting their influence and giving merchants more choice.
Carvana is an online used car retailer with vending machines located around the United States. The company was founded in 2012 by Ryan Keeton, Ben Huston, and Ernest Garcia III. The company is the fastest growing online used car retailer in North America and was recently one of the youngest companies to be added to the Fortune 500 list. While Carvana is currently the only American company selling cars in vending machines, its growth and success have not gone unnoticed by other players. In this article, we’ll take a look at some of the company’s major competitors.
Carvana is an online used car retailer with vending machines located around the United States. The company was founded in 2012 by Ryan Keeton, Ben Huston, and Ernest Garcia III. The company is the fastest growing online used car retailer in North America and was recently one of the youngest companies to be added to the Fortune 500 list. While Carvana is currently the only American company selling cars in vending machines, its growth and success have not gone unnoticed by other players. In this article, we’ll take a look at some of the company’s major competitors.
GoodRx is an American healthcare company known for its telemedicine platform and a website and mobile app that track prescription drug prices. As part of this service, the company makes drug coupons available for free to consumers. GoodRx was created by Trevor Bezdek, Doug Hirsch, and Scott Marlette. Hirsch, an early employee at both Yahoo and Facebook, got the idea for the company after picking up a prescription with private health insurance and still having to pay $450. Given the high variability in prices between different pharmacies, Hirsh went on a mission to make prescription drug prices more transparent and affordable for ordinary Americans. Revenue in the second quarter of 2021 amounted to $177 million with over 7.5 million app customers using the GoodRx app. While the company was the first to provide a comprehensive list of pharmacy drug prices, new players have entered the market. The rest of this article will be devoted to looking at the main GoodRx competitors.
DoorDash is an online food ordering and delivery platform founded by Tony Xu, Stanley Tang, Andy Fang, and Evan Moore in 2013. Together with its subsidiaries, DoorDash has a 56% market share in food delivery and a further 60% in the convenience delivery sector.
In 1965, PepsiCo acquired Frito-Lay in what the chairmen of both companies called a “marriage made in heaven”. The resultant company transformed PepsiCo from a soft drink organization and set it on a path to becoming one of the world’s leading food and beverage companies. Today, PepsiCo claims to operate in more than 200 countries and territories around the world with seven distinct divisions and many successful brands.
The Coca-Cola Company has 21 different billion-dollar brands or brands that generate more than $1 billion or more in revenue each year. The company also sells its products in nearly every country in the world, with Cuba and North Korea the only two countries where it is not sold officially. What’s more, the Coca-Cola brand is worth $87.6 billion, making it one of the most valuable among all companies. Though these figures allow Coca-Cola to enjoy market dominance in many countries, the company is nevertheless subject to intense competition.
Headquartered in Burbank, California, Disney has global reach and influence with its universally popular resorts, movies, streaming services, video games, and merchandise. But as one of the largest media conglomerates in the world with a diverse range of products in multiple marketplaces, Disney is no stranger to competition.
International Business Machines Corporation (IBM) is an American multinational technology company. It was founded in New York as the Computing-Tabulating-Recording Company in 1911 by Charles Ranlett Flint. IBM is a diverse company with a similarly diverse portfolio of products and services. It produces and sells hardware, middleware, and software. It also offers hosting and consultancy services in nanotechnology and mainframe computers. What’s more, IBM has a strong culture in research and development, filing the most U.S. patents of any business for the past 28 years.
Starbucks is a multinational coffee chain headquartered in Seattle, Washington. It was founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker in 1971. From a single and very humble bean roasting store in Pike Place Market, the company is now a global giant operating almost 33,000 stores around the world. This large global footprint obviously increases the competition for Starbucks in many different markets. The coffee industry itself is also highly competitive, with established players including McDonald’s and Dunkin’ Donuts.
Boeing is best known for designing and manufacturing commercial aircraft, but the company also produces helicopters, rockets, satellites, spacecraft, missiles, and telecommunications infrastructure. Founded in 1916 by William Boeing in Seattle, Washington, the company is one of the largest aerospace manufacturers and defense contractors in the world.
While Google (now Alphabet) has been born as a search engine, it is now a diversified company, even though its core business remains search, as most of its revenues still come from Google, the search engine, and YouTube, the “video engine.” However, as a tech giant, which business is primarily based on advertising, the company does compete with Facebook, Twitter, Microsoft (with Bing), and Amazon (with e-commerce search and its advertising machine).
Peloton is a media and exercise equipment company primarily making money making money via its fitness products. The idea for the company came from John Foley, who argued that technology could help time-poor individuals get a full workout at home. The company competes with other players like Bowflex, NordicTrack, Life Fitness, MYX Fitness.
IKEA was founded in 1943 by Swedish businessman Ingvar Kamprad as a mail-order catalog business. The company is best known for selling affordable flat-pack furniture, but it also sells home accessories and kitchen appliances. Today, IKEA offers approximately 9,500 products across 445 stores in 52 countries. With such broad reach, IKEA is not immune to competition.
The Airbnb story began in 2008 when two friends shared their accommodation with three travelers looking for a place to stay. Just over a decade later, it is estimated that the company now accounts for over 20% of the vacation rental industry. As a travel platform, Airbnb competes with other brands like Booking.com, VRBO, FlipKey, and given its massive amount of traffic from Google. Also, platforms like Google Travel can be considered potential competitors able to cannibalize part of Airbnb’s market.
Salesforce is a cloud-based customer relationship management (CRM) provider, allowing businesses to build meaningful and sustained relationships with their customers. With robust, customizable software that integrates with social media, Gmail, and Microsoft Outlook, the Salesforce CRM platform is rated highly among businesses of all shapes and sizes. Recent data has shown that the company has captured 19.5% of the global CRM market.
In just fifteen short years, Shopify has grown from humble beginnings to become one of the fastest-growing eCommerce platforms online. The Shopify eCommerce solution is perhaps best suited to users who desire an easy, flexible and affordable starter solution for their online store. The provider now has upwards of 820,000 stores accounting for 20% of the total market share. However, the continued success of any company in the dynamic digital market is never guaranteed.
Netflix is the largest streaming video subscription service in the world. Created by Reed Hastings and Marc Randolph in 1997, the company has revolutionized the video content subscriptionmodel with over 139 million subscribers in 190 countries. The success of Netflix is due to two factors. The first is a recommendation system that gives suggestions on what customers should watch based on their viewing history. The second is the vast catalog of content on offer – produced by third parties and by Netflix itself. These factors have resulted in Netflix competing against influential TV networks and film producers for viewership.
YouTube is the most popular online video platform, a hybrid between a video search engine and a social media platform with a continuous feed prompted by social interactions and engagement. In fact, the platform is so popular that YouTube.com is the second most visited website on the internet. After being acquired by Google in 2006 for $1.65 billion, the platform now boasts over 2 billion registered users. Collectively, these users upload 500 hours of video every minute. The platform competes with other video engines like Vimeo, Dailymotion, and social platforms like IGTV, TikTok, and Twitch.
Zoom is a video platform, which enabled remote working. As such it competes with other large tech players like Google and Microsoft for the productivity space, and other startups like Slack and Go-To-Meetings.
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with the self-driving software.
Amazon is a consumer e-commerce platform with a diversified business model spanning across e-commerce, cloud, advertising, streaming, and more. Over the years, Amazon acquired several companies. As it operates across several industries, Amazon has a wide range of competitors across each of those industries. For instance, Amazon E-commerce competes with Shopify, Wix, Google, Etsy, eBay, BigCommerce.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
