Google, The Web's Most Influential Player?

Article  by  Laetitia MAILHES  •  Published 11.01.2011  •  Updated 10.03.2011
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Google needs no introduction. Known to all, the market's most competitive name still has a ways to go in the realm of the Social Web.


The Global Web Leader

Google is the world leader of both Internet search and the advertising model of sponsored links related to the search terms. The company was founded in California in 1998 by Sergey Brin and Larry Page, two students at Stanford University who developed the search engine’s famous algorithm. Their mission was to “organize information on a global scale with the goal of making it accessible and useful for everyone.” This raison d’etre is still used today.

Google occupies such a significant position in the era of new information technology that its name has become a verb in several languages, including English and German, meaning to “do an Internet search by terms.”

Google has earned its reputation not only from the quality of the products and services it provides (search engine, advertising agency for advertisers and content publishers via its programs AdWords and AdSense, 3D interactive electronic mapping Google Earth; the Gmail email system, the virtual library of Google Books, etc.) but also the manner with which these projects have been created and developed. The enterprise culture, intended to nourish creativity, productivity and loyalty of employees thanks to a fun and ecologically responsible environment is a model for Silicon Valley and elsewhere. Equipped with a solar energy capacity of 1.6 megawatts and a fleet of bikes and electric scooters, the California campus, called The Googleplex, provides its employees recreational facilities including four fitness clubs and several free restaurants that promote organic and local products. Above all, the Googlians, as they are known, have the freedom to devote 20% of their time to projects that they choose on their own. Google’s bet is to cultivate its pool of ideas to maintain its dynamic of innovation. Since 2007, Google is consistently among the top four American companies.
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A Makeover for the Competitive Company?

With more than 20,000 employees in the world, Google has been a publicly-traded company since 2004. Due to the convergence of technologies and web-based practices, it has emerged these last few years as the main competition of Microsoft (global software-making giant also a pretender to web domination) and Yahoo! (Internet pioneer suffering from the rapid and constant evolution of web users’ expectations and practices.) In 2009, Microsoft and Yahoo! concluded a partnership designed to unite their forces against Google in the online advertising market.

In this competitive context, Google is today at a turning point. For the second trimester 2010, the beloved child of Silicon Valley recorded a drop in profits compared to the previous trimester.

More than 90% of its sales figures are generated by its advertising platform, which allows advertisers to buy links associated with certain search terms or with the content of partner sites. And yet, at the end of a period marked by annual growth rates between 30% and 40%, Google finds itself today at the top of the pyramid with 85% of the global market and 66% of the American search market. Analysts’ long-term projections now evaluate the growth of the market between 15% and 17%. In other words, investors are looking with growing anxiety for strategic developments that will allow Google to rebound and maintain the kind of growth rate it has become accustomed to.

Google is constantly exploring new growth opportunities such as web-based applications for individuals and businesses, advertising banners (with the purchase of the advertising services system DoubleClick for 3.1 billion in 2007), the mobile platforms (the first mobile phone system running on the Android operating system appeared on the market in 2008), online video (buying YouTube for 1.65 billion dollars in 2006) as well as VOIP (voice over Internet protocol, Google Talk and Google Voice). Some initiatives, headed, for example, by the foundation and its venture capital arm Google Ventures, have led to unexpected and misunderstood (at least by analysts) directions, such as renewable energy, green vehicles and biotechnology.

Google has bought more than 75 companies. Their technologies have been integrated into Google’s services. The most strategic among them have kept their brand name:

At present, results are still awaited. The banner advertising market is at a decisive moment and extremely competitive since Google is facing off against Yahoo!, the historical leader. Google Apps is today still a source of negligible revenue. YouTube, the most visited video site in the world, still hasn’t converted its two billion videos watched per day into cold, hard cash. This despite targeted advertising on the videos and the ad revenue-sharing agreements between Universal Music Group, Sony Entertainment and Abu Dhabi Media company as part of the new music video website Vevo.

Furthermore, even if Android phones have already overtaken Apple’s iPhone in the global mobile phone market, according to the respected research firm Gartner, revenue has yet to come. Developed as open-source and given for free to mobile application developers, Android is the Trojan Horse planted by Google in the mobile phone market to gain leverage in the expected growth in the mobile phone advertising market (the purchase of the technological platform and advertising system AdMob for $750 million, a deal made in May 2010, is a masterful additional move in the pursuit of this strategy.) It should reach 43.2% per year by 2012, according to the well-known interactive marketing agency ZenithOptimedia.

Another detail worth mentioning: ZO’s predictions concerning the annual ad revenue growth from social networks are 30.2%, compared to an average of 15.6% for the entire online advertising market.
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A Lacking Social Dimension

In fact, the analysts emphasize that the main challenge confronting Google going forward is the evolution of the Internet toward a social web. In other words, the core of Internet user activity is in the process of moving from search, which traditionally was the guide for the user in all his or her movements online, to social networks. Indeed, more and more users are seeking and finding from their friends the answers to the questions that they had traditionally put to Google’s algorithm.  Of course where ever users go, advertisers follow them. In this way, the true threat for Google doesn’t come from Microsoft or Yahoo!, whose business models are centered on search engines that imitate Google, but rather the young guns like Facebook and Twitter. Facebook made $800 million in sales in 2009, double the amount of the previous year. The rumors circulating as of September 2010 predicted that Facebook would pass the $2 billion threshold, meaning a rise of more than 100% in one year. In contrast, Google last year reported 8.5% growth in sales.

No matter how extraordinarily influential a player Google has been on the Internet, it doesn’t really have in its arsenal a relevant asset with a social dimension except for YouTube, a relatively uni-dimensional network, since it’s strictly centered on the choice of videos and the commentaries about them. The products and services of Google are certainly useful, but they aren’t truly social. Even e-mail and VOIP are tools, not ways to build a network.

Dealing with these questions, Google has implied that its response is to develop an increasingly intuitive search engine, which will not only scour the web but also the e-mail accounts of users and the gray matter of their networks (targeted based on the question asked). Since the beginning of summer 2010, rumors abound as well of a project designed to compete with Facebook -- Google Me is reportedly its codename.

Furthermore, we could suppose -- without taking a risk -- that Google, behind the scenes, is also wielding its proven strategy of strategic acquisitions (see table) in order to acquire the assets it is missing. In 2009, the web was rocked for a time by rumors of advanced negotiations between Google and Twitter (the two companies have connections since the co-founder and former CEO of Twitter, Evan Williams, is none other than the creator of Blogger, a service bought by Google in 2003. To be continued...
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Key Data

  • Company founded in September 1998 in California by Sergey Brin and Larry Page.
  • Annual sales: $23 billion
  • 2009 before-taxes annual earnings: $8.38 billion
  • Liquidity: $30.1 billion as of June 30, 2010
  • Number of employees: 21,805 worldwide as of July 15, 2010.
  • Headquarters: Mountain View, California
  • American marketshare of internet search: 65.8% in July (66.2% in June. Source: ComScore)
  • Global marketshare of Internet search: 84.97% in July :
  • Global marketshare of sponsored links: 82% - Source: Covario Interactive marketing analysis agency.
  • Global marketshare of mobile phones running Android (Google’s mobile phone operating system developed by Google): 17.2% in the second trimester 2010 - ahead of the iPhone (14%) and behind Research in Motion’s Blackberry (18%) and the Symbian platform by Nokia.

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