Google.com Company Analysis

Running Head: Google.com: Company Analysis

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Company Summary

Classified as one of the five most popular sites in the internet, Google.com was visited by a unique user base of over 380 million visitors in May 2008. It is the world’s leading search engine and is additionally considered one of the fastest and largest growing technological companies in the world. The company was started as a research project by two Stanford graduate students Sergey Brin and Lawrence Page in 1996. The two sought to develop a search engine that produced better display for search results. The domain name, Google.com, was registered in 1997 and Google Inc. incorporated on September, 1998, (Bifet, Castillo, Chirita, & Weber, 2005).

As a result of better display in search results, and the simple approach that was incorporated in the searching process, Google has grown in popularity and acceptance the world over. Presently, the company employees are in excess of 10,000 people from all the continents of the world. It is the largest company offering Search related advertising yet Search Related advertisement are the fastest growing of all the online ad businesses with an estimated annual growth rate at 41%, (Pringle, Allison & Dowe, 1998).

Google displays almost twice as many search ads in comparison to its major competitor, Yahoo. It is estimated that, in December 2007, Google had a total of 16.5 trillion ad clickthroughs compared to Yahoo’s 9 trillion. Google earned an estimated $3.64 billion from the United States online ad revenue, an estimated 69% of all paid search related advertising. Its market cap has overtaken that of IBM and even Chevron with an estimated value of $132 billion. It has a surplus of over $7.6 billion all of which are lacking any defined usage, has its stock being predicted to reach $600 billion by the end of this year (2008) and is one of the top 10 web brands in the United States. The above summary is an indication of a model company, its success of which is attributed to its management, wide line of product, market domination, favorable financial position, favorable business strategy, strong competitive advantage, excellent organizational control and innovative research and development strategies.

Google Product Summary

Google offers a wide range of products a reflection of its technologically sound and alert team of innovators. Continuous intensive research is undertaken in the Google laboratories, online text locations or in the Google.com website itself. Products are generally of high quality and utility. The extensive list of Google’s products can be categorized into five major classes which include; Google Search, Ads, Application, Enterprise, and Google Mobile. Most of its products are free with a large proportion of its revenue (99%) accruing from advertisement, (Google, 2008).

Google Search, the best known of its products offer extensive range of products. The long list of its products covers over twenty products with product range including; Alerts, Gears, Web Search, Images, Blog search, Book search, Catalogs, language tools, Finance, Earth, Web Accelerator, Toolbar, Custom Search Engines, Product Search, Personalized Search, Google Maps, Desktop, Directory, Scholar, SketchUp and Google Toolbar, (Google, 2008).

Google Alerts is a Google product that automatically emails individuals in cases of new information on either the web or the globe. Classified into 3 types; News Alert which automatically notifies a subscriber on any news articles that appear in its top ten list, Web; an automatic notification for all the new web pages that appear on its 20 paged list and News and Web which offer an automatic notification on the basis of the above two presented products; news alert and web alert. Alerts have been most important in monitoring the development of a news story, staying alert on current events such as a major sporting event, enabling individuals to keep current on matters of industry and competition, and even tracking medical advances. The choice of the number of times one wishes to receive the alert together with the category of the alert, are matters of individual decision’ (Google, 2008).

Book search, a product under the search category enables individuals to search for book indices and contest hence persons can be able to trace books of interest. Book search is tailor-made in collaboration with the authors, publishers to avail millions of books instantly for the benefit of its potential audience. Blog Search enables individuals to find blog websites on the web. Owing to the relatively important position that bogging is progressively adopting in the global scene, Google Blog Search enables the display of millions of blog search and other feed enabled blogs including; blog names, blog posts, authors, date and other related products. Similarly, catalogs, classified under its search products enables access to full content of hundreds of mail order catalogues’ (Google, 2008).

The Custom Engine search is a specialized product built on the basis of Google ordinary search engine. It however offers a restriction on the search results of web pages displayed consequent to a given search. Desktop as a search product enables individuals to search texts over previously viewed files, music, web pages, chats and photos within the individual’s personal Computer. It generally enables an individual’s computer to be searchable therefore easening the manual organization of files. Google Directory is designed to enable people to search and browse only through the web pages that are categorized. Developed in the Open Directory Project, Google Web Directory is available in over 75 languages.

One of its most relevantly applicable products is Google Earth. It uses a combination of Google search with satellite imager; integrated with 3 Dimensional mapping technology thereby making geographic information accessible, interpretable further making it useful. Google Finance is another most important of Google products. It is created to enable access to business and financial information on public and private companies together with mutual funds. These are displayed through user friendly graphical interfaces such as charts, symbols and Google analylitics information. Gears as a product under the search category is a specialized browser extension. It enables individual web developers to create web application that can run offline. Images similarly offer services that are exclusively concerned with the search and display of imagers present in the web’ (Google, 2008).

Google maps, are well accepted product in the market, is primarily a mapping technology. The mapping technology has integrated satellite imagery, graphically generated maps and content with a functionality that describes geographical locations. This product has been most beneficial in providing satellite and aerial images of major cities, businesses, prime locations in addition to offering guide’s individuals. Google language tool is a search product that offer web search based on language preferences. It has the capacity of offering custom search of more than 40 languages in addition to providing Google with links to over 100 languages.

Personalized search is a search product that enables restricted display of search results that are most relevant to individual user. Product search on the other hand enables shoppers to find available product through the use of Google technology. Individuals are able to locate products from both real and virtual stores, sort products by prices or location, see products reviews and compare prices and view Google products. Google scholar is also a criticalGoogle search product that enables the search and finding of scholarly literature. Individuals are enabled to locate essays, reports, abstracts theses, dissertations from a wide range of academic and professional groups and publications.

SketchUp enables the creation and modification of 3 dimensional models through the integration of pencil sketching and digital technology. Google toolbar enables the addition of Google search box to the browser, irrespective of the browser in use. It improves the efficiency of the browser through the introduction of features such as web form filler, spell checker, word translator and by extension, pop-up blocker. Other search products such as web accelerator enables the fast loading of web pages, and ultimately, Google Web Search which is the most used of the Google products. It simply enables easy access to billions of web pages through the integrated of a wide ranging assortment of Google web search features’ (Google, 2008).

Ads, Application and Google Enterprise

Apart from the extensive list of Google search products, the Ads category of Google’s products has also been a large product of the Google Company. Since its introduction to the company, it has continued to bring untold success, with the present estimated 99% company revenue base. The various Ads programs enables the assistance of other interested companies advertise their products through the World Wide Web. Products under Google Ads include Google Ad Sense, Google AdWords and Google Analytics’ (Google, 2008).

Companies pay Google for their products to be advertised online. Through Ad Sense the display of text and graphic image advertisements are enabled on websites. The proceeds earned through the advertisements are shared between Google and website owners. Google AdWords is also an advertisement program in which the individual has absolute control over the content to display. Google analytics is a free advertisement program to advertisers, website owners and publishers that enables the identification of key words enabling the location of where individuals who access your website are located.

Under Google Applications Category there exist; Google Apps which is basically constituted of Google application programs such as Gmail services, Google calendar, Google Talk. Google blogger is under Google Apps and offers a web based free publishing tool that enables individual creation of websites. The Calendar as a product of Google Applications enables individuals to organize their schedule through addition of expected events, keeping track of ones agenda, gathering calendar information and even adding not only TV listings, but public events as well’ (Google, 2008).

Other applications include: Checkout which makes shopping faster and more secure by creating a purchases forum; Google code which enable website developers to offer news, downloads, documentations and tutorials relevant for the development, modification of existing and new products; Docs & Spreadsheets which enables access to free web based word processing and spreadsheet application programs: Gmail which is a Webmail Service Group which enable individual access to either public or private groups of interest, and Labs which enables innovative individuals to undertake online experimental testing and search. Other products offered under the application category include; News, Notebook, Orkut, Pack, Picasa, Picasa Web Albums, Reader, Talk, Translate, Video, Webmaster tools, and YouTube an online video entertainment medium, (Evans, 2007) .

Under the Enterprise category, products such as Earth for Enterprise otherwise known as Google Earth pro enables businesses and organizations to publish their organizational data make reports and decision based on location data. Maps for enterprise enable web-based mapping technology for internal websites. Google Mini is also a Google product under the Enterprise category that enables the identification of technology applicable to small and medium sized enterprises, (Evans, 2007). The search appliance is a technologically advanced system that integrates hardware and software with Google’s advanced fields to offer products. SketchUp Pro enables 3-Dimensional modeling thereby facilitating the communication of complex concepts, importation and exportation of complex files all of which enable effective sharing of information within enterprises.

Google Mobile as a product category incorporates products that are built for mobile devices. The Google mobile products enable individuals to use their mobile phones in location of virtually any piece of information worldwide. It has similar features with other Google products such as search, maps, Gmail, SMS, YouTube, Callender, News, Blogger, Picasa Web Albums, and Checkouts.

Geographical distribution of Google services

Google’s products and services are distributed globally. It is reported that its offices are strategically located with the geographical location of its major markets, Khaki-Sedigh, A., Roudaki, M. (2003). It therefore has an extensive global network of offices. This enables regional coordination thereby ensuring market domination. It has over 20 offices in the US with its head office located in Mountain View, California. Other offices across the United States are in Atlanta, Austin, Boulder, Ann Arbor, Cambridge, Chicago, Coppell, Detroit, Irvine, Pittsburgh, Reston, San Fransisco, Santa Monica, Seattle, Kirklant and Washington DC. It further has two offices in New York City. Across the Australian Continent, Google has headquarters in Melbourne and Sydney. In Mainland China it has headquarters in Beijing, Shanghai and Guangzhou. It further has headquarters in Hong Kong. In the Indian Subcontinent, Google has offices in Bangalore, Gurgaon, Hyderabad and Mumbai.

In Japan its offices are located in Osaka and Tokyo, in South Korea Seoul, in Taiwan Taipei. Across Europe Google’s offices are located in Prague Czech Republic, Aarhus and Copenhagen in Denmark, Helsinki in Finland, Paris in France, Hamburg in Germany, Budapest in Hungary, Dublin in Ireland, Milan in Italy, Amsterdam in Netherlands, Oslo and Trondheim in Norway, Kraków and Wroclaw in Poland, Moscow and St. Petersburg in the Russian Federation, Madrid in Spain, Luleå and Stockholm in Sweden, Zurich in Switzerland, London and Manchester in the UK, Toronto, Montreal and Waterloo in Canada, Buenos Aires and Sao Paulo in Brazil, Lomas de Chapultepec in Mexico. Other management offices are located in Heliopolis Cairo, Haifa and Tel Aviv Israel, Istanbul Turkey and Dubai in the United Arab Emirates’ (Google, 2008).

Google Competitor analysis

Google’s biggest competitor is Yahoo followed by Microsoft, Ask.com and American Online respectively. Based on the variety of Google’s products and services, it is difficult to exactly determine its competitors. Yahoo provides similar products such as e-mail services, maps, financial analysis, advertising, search and yahoo toolbar but still its products are not similar in many ways to those of Google.

Comparing Microsoft to Google, Microsoft offers search and other few online services similar to those offered by Google though its main line of business is the design and sale of software and operating systems. Competition comes into focus due to the recent launch of Google Docs & Spreadsheets and Google Gears, presentation software that challenges the dominance of Microsoft Windows.

In terms of Sales, Products and Geographical distribution, Google accounts for over 50% (Estimated 58.4%) to be exact of market share in nearly all its products. By market share Google beats its competitors by far. With the stated estimated market share of 50%, Yahoo, Microsoft, Ask.com and AOL each have an estimated market share of 28.5%, 10%, 5%, and 4% respectively, (Khaki-Sedigh, & Roudaki, 2003).

Financial Analysis

There has been an exponential growth in Google’s revenues within the past decade. This growth is attributed to the increase in advertising revenue that has been witnessed within the past five years and the fact that the company went public in 2004. In its Initial Public Offer, the company offered 19,605,052 shares at the price of $85 per share. Its stock has steadily been on the rise averaging $500 in the 2007. In terms of market value estimation, its value has risen from the IPO value of $1.7 billion in 2004 to over $157 billion.

Further estimates show that Google’s net income grew from $100 million in 2002 to $ 3.077 billion in 2006. Its cost of goods sold was generally constant being maintained at approximately 40% of sales. Earnings before interest and taxation have been relatively constant at an estimated 33% of total sales. On common base analysis, Google had a 2,412% increase in sales in the five year period between 2002 and 2006 with a net income increment of over 3,088% within the same period.

This is a remarkable growth within such small periods of times. Growth in sales over the five year was 233%, 117%, 92% and 72% in 2003, 2004, 2005 and 2006 respectively. The downward trend should not be seen as a reduction in income or negation in growth but rather as relative responses to increases in economies of scale, (Decuir, 2007). There has been a considerable cash surplus resulting from balances in short and long term investments. Google has neither short nor long term debt though the IPO offered an increase in capital surplus in 2004. With the continued rise in its share prices, Google’s capital surplus has continued to rise over the years furthermore being a service oriented company, Google has no looming inventory.

On the basis of ratio analysis, Google’s sales increased from 1.2 in 2002 to a whooping 29.05 in 2006. (Decuir, 2007) notes that, over the past five years, Google has had more money at hand than they know what to do with, an attribute that has been seen on its rather many acquisitions. Google’s profit margin fluctuated between 2002 and 2003 but increased steadily to an estimated 60.2% in 2006.

R&D Budget for Google and for its competitors

Driven by large revenues from advertisement, Google.com has invested massively in its Research and Development Budget. Varied sections of Google have had different approaches to attaining solutions to various world problems such as new technological advancement, pharmaceutical research and online advertisements, (Pringle, Allison & Dowe, 1998).

Google has invested massively in research and development though it was not classified under the top ten R&D spenders until 2007. This followed from massive increments in the company’s spending on Research and Development when spending increased by over 73% to a record breaking $2.1 billion in the year 2007 compared to the budget in 2006.

HYPERLINK “http://labs.google.com/” http://labs.google.com/Since 2007, it is estimated that Google’s R&D spending has stayed above 13% of its total revenue which is a representation of more than double the amount spent prior to the year 2002. Massive research is being undertaken on how Google can enter into other business projects such as Android, TV Ads, and other projects to further boost its growth.

Google’s business strategy

As listed on the company’s website, Google’s operations have been guided by the philosophy of not settling for the best. Google’s mission is to be a world leader in information provision. This is to make information accessible and useful. It has displayed continued innovativeness with the introduction of multiple products into the markets. Certain products, such as Google Ad Sense, were without doubt, a success for the company, advertisers and web owners in general, (Lohr, 2007) .

Google has managed to remain competitive through multiple acquisitions. To the present, the company has acquired more than 30 companies since its inceptions, a strategic step since most of the acquisitions have been advantageous to the company. Some of the acquisitions that have been instrumental to the growth of the company include the 2003 acquisition of Applied Semantics Inc. which enabled them to develop an advertising campaign that has earned them billions of dollars in advertisement revenue to the present. The 2006 acquisition of Writely, an online processing firm led to the development of Google docs which since its inception in 2006, has seen a rise in its revenue. Google further acquired YouTube, in 2006 for a record $1.6 billion which has seen it dominate the online video industry.

The Company has also made efforts to acquire competitors. An example is the 2007 acquisition of DoubleClick, an advertising competitor for a record $3.1 billion. It also acquired Tonic Systems which enabled it to acquire the capacity to convert Microsoft Power Point files into html and PDF documents. This boosted its competition with Microsoft which had gained a considerable market base based on its Microsoft Office product.

Control Strategy

Google has had a rather integrated approach in achieving organizational control, an approach applying both bureaucratic, market and clan control mechanisms. Google has a board of governors and a core management team together with specialized well documented rules and regulations implemented through a formal authority that serve to guide employee performances. This bureaucratic type of approach has been applied mildly and has served to regulate Google employee’s behavior thereby leading to better results, limited budgets, better performances as displayed in statistical reports and employee performance records.

Google was ranked as the best company to work for in the 2006 survey by the Fortune magazine in 2007, (Fortune, 2007) . It has succeed in creating a generally good working environment for all its employees though some critics see this as making them loose a considerable proportion of daily tasks. It has been characterized by offering its employees a large degree of freedom thereby tapping their creativity towards the improvement of both its products and services.

It has further served to ensure the health and safety of its workers through the implementation of a comprehensive heath protection scheme that ensures that all its employees have a comprehensive medical cover. This is based on its belief that healthy workers are more productive and can produce quality work, are regularly present to work since good health reduces the number of accidents and diseases thereby reducing duration of absence. The company has also ensured the optimization of the working environment.

A considerable proportion of the company’s control has also been governed by the aspect of market control mechanism. There has been the rewarding of well performing management team since 2002 with the managers who are underperforming being demoted or reshuffled. The organization has also adopted the clan control mechanism. Google’s employees have many things in common. They share many values, expectations and goals hence tend to work in harmony with one another. This has been displayed in the less formal approach in which the Google team approaches issues. The intergraded approach used by Google has ensured greater cost savings, increased efficiency, better product quality, enhanced customer service and a happier cohesive workforce who work in harmony to produce positive results.

Google: A continuously evolving corporation

Google is continuously evolving from a predominantly search engine to a media corporation. It formerly concentrated on being a search engine. Its evolution has been a long one. Its breakthrough came when it was contracted by Yahoo to offer its distribution services. Presently, Google has advantageously taken the lead both as a search engine and in advertisement’ (Wall, 2008). To maintain the lead, constant innovative change in its product through invariable introduction of new technology, strategy, structure and culture is required otherwise, the lead will slip.

Historically, Google became popular through the organization of web based on links via empirical analysis were performed by PageRank, (Brin, S. & Page, 1996). Google has introduced relatively stringent rules in order to protect some of its products and services. More recently, it introduced a trend that required all Ad Sense members to sign a gagging clause. The clause has restricted web owners from unfairly benefiting from the proceeds gained from advertising. Google has been continuously innovative, being innovative and the first to implement its strategies. For example it was the first company to implement the Ad Relevancy strategy, a strategy that ensured it provided broad matching on all search terms. It further went ahead to set a system in which a single price was set on all ads, (Moran, & Hunt, 2006).

A company set towards meeting its objectives

Will the organization manage to meet its growth objectives in the coming years while displaying sustained innovativeness in further differentiation of its products? So far Google has displayed significant growth rates since the onset of the 21st century. Its stock prices are currently above the $500 dollar mark, with predictions of better performance in future. Based on free cash flow estimates, its shares were estimated at $503.32 as at June 2007 though scholars estimate that conservative estimates could range anywhere between $100 and $30,000 per share’ (Decuir, 2007).

Through internal development and acquisition, Google has managed and will continue to expand its products and services so as to increase its competitiveness in different markets other than software and other web based services. Since web based advertising is the fastest growing advertisement portion, Google’s sales will certainly increase in the coming years. In fact on the basis of a logistic growth function presented by (Decuir, 2007), sales figures will reach $155.3886 billion by the year 2016. Based on its current largely favorable management team,

The Way Foreword

Since the future is uncertain, through based on the current results, it looks like it holds probable success prospects for Google, Google should innovatively continue sticking to its current products and services of largely providing free web-based services to users while at the same time diversifying into new markets. It should however, seek to keep other technology firms from overtaking its already established market base.

Google should not continue being too dependent on advertising. Presently, 99% of Google’s revenue comes from search related advertising. It is only the remaining 1% that comes from the sale of its many web based tools, (Wall, 2008). With it massive financial resources, Google should be able to diversify into other investments so as to not only increase its revenues, but to remain stable in the turbulent waters of the global business domain. The company management should be focused and rather than have massive financial resources lacking in usage, make wise investment decisions to use the resources to enter new markets such as the media industry.

Conclusion

As defined by Google’s philosophy, “Never Settle for the Best”, Google is surely one of the success stories of the 20th and 21st centuries in terms of technological investments. It has succeeded in providing relevant search results, offering advertisement on specific web pages, together with a variety of products and services. From the analytical presentation above, in overall, Google as a company has displayed strong financial growth, better management principles, better company philosophy, and decision making process displayed in its continued innovation and strategic acquisitions.

With a strong reputation and familiarity, good speed in its search procedures, user friendliness in its product output, relevance in ranking of its search results together with technologically advanced additional services which are multidisciplinary in nature, available multiple opportunities seen in the ever increasing online advertisement, higher usage volubility as it gains more customer base across the global domain, and the introduction of new products, Google will surely continue to dominate the market for certain undefined periods of time. Definitely, Google Inc. has been a role model to technological businesses and still has great potential as a company.

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