The search industry is one of the largest industries in the world with Google Inc. bringing in $15.7 million in advertising revenue alone. Google was the leading Internet search firm in 2010 with over 60 percent market shares in both searches performed on computers and mobile devices. The search industry is impacted by numerous forces that have strong, moderate and weak impacts on the industry. Rival firms, new entrants, buyer power, supplier power and substitutes are the five largest forces that impact the search industry.
A rival firm is a strong force in the search industry. Google Inc, Microsoft Corporation and Yahoo! Are all competing for market share in the search industry in the United States and across the world? The fact that these three companies search engines are relatively the same to most users, it is hard to consumers to see the difference between them and it forces the companies to find various ways to distinguish themselves from each other. Microsoft’s Bing has tried to distinguish itself from Google by using an algorithm that looks at the context of the words in a search instead of just the words themselves. Microsoft Corporation has also launched a very strong advertising campaign to demonstrate the difference between Bing and Google search. Yahoo! Has recently adapted Bing as its default search engine but is competing with Microsoft’s MSN and Google for number of viewers and advertising income.
The competitive force of new entrants is moderate to weak in the search industry. Google and Bing have such a large market share that it is difficult for new entrants to gain market share and make a large dent in these companies market share. Bing was the last new entrant to affect Google’s search dominance and they entered the market in June 2009. Microsoft had previously already had a search engine under the name Live Search which was discontinued when Microsoft purchased PowerSet which was the developer of the semantic search engine that looks at the context of words rather than just words themselves. Instead of companies starting their own search engines to compete with Google and Bing, many companies just license Google’s search engine or Bing to increase traffic and gain revenue from ads.
Buyer power is a strong to moderate force in the search industry. There are relatively zero buyer costs for switching to competing sellers, as buyers don’t pay anything to search through these various search engines. The buyer’s power is mostly in the mobile search field as Google’s Android platform and Microsoft’s Windows Phone compete for mobile search results. Google wants more and more people to purchase Android mobile phones, not because they make money on the phones, but more because mobile search is one of the fastest growing segments of the search industry and Google’s search engine is the proprietary search application throughout the phone. The other buying power is companies who are looking to advertise on Google. With Google making almost all of its revenue through its search engine, the advertisers are the people Google wants to keep happy. One of the ways Google does this is by allowing users to pay a cost-per-click rate lower than their bid price if their big was considerably more than the next highest bid. This allows Google to keep its advertising partners happy by showing them that Google is also looking to decrease their costs instead of selling advertising at a price that could be a lot higher than what others bid.
Supplier bargaining power is weak in the industry. The main thing suppliers have power over is the server that powers the search industries inquiries. Many different companies manufacture servers and companies can purchase servers from a variety of companies and not all simply from one company.
Substitutes are another weak force in the industry as there aren’t many substitutes for search inquiries on the Internet. Many people heavily rely on...