Google: Strategic Analysis

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The web search industry is characterized primarily by an oligopolistic competition within Google, Yahoo, Microsoft, and AOL. The Big 4 serve the entire market and share similar basic infrastructures and activities. So they compete in such segments as market share, technology and methods used, revenue, and share price.

High barriers to entry. Consolidated market with the high amount of R&D required.

Competition mainly on market share (differentiated product)

Google's website, had a 37% share of all U.S. searches in Q3 2005,, its closest rival, had a 30% share.

Leveraging its own traffic and that of AOL,, and other affiliates, Google garnered about 60% of U.S. search-related advertising revenue in 2005.

Outside the United States, held a commanding 68% share of all search traffic in Q3 2005.

In June 2000, one year after it was founded, Google's index of 1 billion web pages surpassed those of its rivals.

In 2000, Google replaced Inktomi as Yahoo's search engine.

Microsoft was threatened by Google's ad-supported software.

In 2005, Microsoft responded to Google's ad-supported software threat by proposing a joint venture with AOL to develop search related advertising.

High customer loyalty

See Exhibit x for detailed competition profile among the big players


Google's range of products fueled speculation about Google's strategic objectives.

Google had launched a flurry of products that had expanded its domain beyond web search including Gmail, Google Desktop, Google Maps, Google Book Search, and Google Talk.

Products like Talk and Gmail, along with personalization features offered on Google's home page, moved the company further into the domain of portals like Yahoo! And Microsoft's MSN.

Base, Book Search, and Maps along with a payment service acknowledged to be under development, suggested that Google could be targeting e-commerce giants like eBay and Amazon.

Google's ad-supported software and rumored web-based products such as calander program and an "open office" suite threatened Microsoft.

See exhibit 3 for a list of Google services and products.


The PageRank search algorithm used by Google is the most advantageous and of the highest quality search method ever used for web search.

Before 198, web site developers exploited search algorithms by repeating keywords on their pages, as a result searches increasingly returned irrelevant listings called "spam".

Google ignored the two dominant web search technologies of the time: AltaVista and Inktomi

In 1998, Google cofounders, Sergey Brin and Larry Page, came up with PageRank algorithm, which delivered more relevant searches.

The PageRank algorithm was required to solve an equation with 500 million variables and 3 billion terms.


Google has the highest U.S. and International search query share.

A survey on search engine attributes valued by users, over 50% of respondents chose Google as their preferred search engine (see exhibit 8).

In 2005 Google garnered about 60% of U.S. search-related advertising revenue.

In 2005, outside the United States, held a commanding 68% share of all search traffic in Q3 2005.

Yahoo held the second highest U.S. and international market share (see Exhibit 2)


Thanks to "click-through" method and paid listing, Google's revenue became maximized.

Until December 1999, Google earned revenue strictly by licensing its search technology to Yahoo and other sites and its website carried no advertising.

In December 1999, Google's paid listings were priced on a cost-per-impression basis, which charged marketers a fixed price each time their ad was viewed.

Ordering paid listing to "cost-per-impression" auctions yielded results that met users' needs.

In 2003, Google earned gross revenues-derived almost entirely from paid listing-...
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