Google is one of the most influential companies in the world. Undeniably, this American multinational technology company has also been one of the prime shapers of the digital information age. It has introduced several innovations through its varied Internet-related and technology-related services and products that changed the way people use the web by promoting the easy dissemination of information and creation of content.
The Internet giant is an American business success story. Furthermore, it is considered one of the Big Five technology companies in the United States IT industry, alongside Amazon, Facebook, Apple, and Microsoft. Understanding how Google has become one of the biggest companies in the world requires an appreciation of its overall business strategy.
Understanding the Elements of the Business Strategy of Google: From Product Strategy to Vertical Strategy
Product Strategy Through Product and Service Diversification
Online search has always been the main service and product of Google. The company initially capitalized on its search technology that it began developing since 1996. However, as part of its product strategy, it later diversified to different Internet-related products and services.
These include productivity tools such as Gmail and Google Drive, enterprise products such as Google Search Appliance, online advertising and publishing services such as AdWords and AdSense, and other online services such as Google News, Google Translate, and Google Maps, among others.
The varied Internet-related products and services have enabled Google to corner diverse Internet users and make them dependent to a certain extent. Take note that these products and services are complementary. They benefit users through familiarity and hassle-free transition using a single all-access account.
Diversification is a core business strategy of Google because it allows the company to create new markets and retain existing customers, thereby creating a pool of Google-dependent Internet users. Furthermore, diversification has enabled the Internet giant to position itself as a one-stop venue for all Internet-related needs.
Expansion Strategy Through Company and Product Acquisitions
The Internet giant did not only diversify by developing original Internet-related products and services. Like any other companies with deep pockets and established industry influence, acquisition has always been a notable business strategy of Google because it has enabled the company to expand to different technology-related ventures.
Acquisition is a notable market entry strategy. Google has successfully expanded its Internet empire through several large-scale acquisitions. One of these includes a USD 1.65 billion stock deal to acquire YouTube in 2006. It also acquired SkyBox Imaging in June 2014 at USD 500 million to obtain its satellite technology and improve the accuracy and clarity of Google Maps. Google also extended its online advertising business when it acquired DoubleClick in 2007 at USD 3.1 billion.
The acquisition of the Android mobile operating system in 2005 at USD 20 million is another notable business strategy made by Google. This move was partly responsible for popularizing the smartphone and tablet markets, as well as for helping the company establish its firm grounds on the consumer electronics market and compete alongside the iOS operating system of Apple in the smartphone and tablet market segments. After all, the operating system has enabled the company to extend its Internet-related and products to mobile users while also exploring other mobile-related technology ventures.
As an expansion strategy, acquisitions have enabled Google to enter new markets and improve existing market shares. Moreover, as a technology strategy, these acquisitions have expanded its technological capabilities by empowering existing products and services and exploring other valuable technology-related ventures. These acquisitions have allowed Google to corner the diverse market of technology-dependent consumers.
Revenue Strategy Through Online Advertising
Online advertising is at the core of Google. The Internet giant generates billions of dollars from advertisers that buy or place advertising spots on varied online platforms through different agencies or ad networks. Note that more than 90 percent of the total revenue of Google comes from online advertising.
There are several ways the Internet giant delivers ads online. The first is through Google Search, in which the company monetizes online search queries by allowing advertisers to buy and place ad spots on search result pages. These advertisements are displayed in accordance with relevant search queries.
Another way of delivering ads is through the websites of online publishers such as news media organizations and bloggers. The company has partnered with these publishers through the AdSense for Content program, thus allowing them to display ads from the AdWords and DoubleClick networks.
Other publishers and content creators can also display online advertisements through specific AdSense programs such as AdSense for Search and AdSense for Video.
YouTube is another ad revenue-generating platform. Google has been delivering different types of online ads from simple banners to rich media to users. It has also allowed producers or content creators to earn revenues from their published YouTube videos.
Similar to AdSense, AdMob is also another ad program specifically tailored for mobile app developers. Among the list of developers that are using this program are Sega and Rovio. Ads from the Google network have also appeared in various categories of apps to include productivity tools and mobile games.
Vertical Strategy Through Industry interdependence
Another remarkable business strategy of Google is the creation of interdependence across different industries and sectors through vertical integration or alignment. The company has successfully promoted the importance of the Internet, digital communication, and other technologies at the forefront of diverse business organizations.
Take note of the publishing and media industries as a collective example. The AdSense program remains one of the best online advertising programs because of the expansive list of advertisers and the possibility for higher revenue generation. This fact has prompted established online publishers and media organizations to use AdSense for their online revenues.
Another example is the dominance of Google Search. This search engine remains the most popular globally, and the Internet giant maintains this dominance by creating and maintaining an ecosystem that depends on other Google products and services.
The popularity of this search engine is evident from the fact that website developers and owners are developing their sites based on the established policies and standards set forth by Google. A case in point is the emergence of search engine optimization and digital marketing practices built around Google Search technology.
Android is also a testament to how the business strategy of Google resulted in interdependence across industries and sectors. This mobile operating system was responsible for reigniting the mobile businesses of established consumer electronics companies such as Samsung and Sony. It has also launched the mobile businesses of newer industry players such as Huawei and Xiaomi.
The growing markets for smartphones and tablet computers have also spawned newer software companies dedicated to developing mobile contents or apps such as games and office productivity tools.
Conclusion: Understanding the Business Strategy of Google
Note that the discussion above is a general overview or snapshot of the business strategy of Google. Of course, there is more to Google than the strategies mentioned above. But it is undeniable that central to the Internet giant is the need to maintain leadership by introducing innovations and adapting technological breakthroughs.
Through product strategy that revolves around creating and maintaining complementary Internet-related services and products and acquiring relevant technology ventures, Google is able to retain and expand its stronghold, as well as maintain a competitive advantage by cornering diverse technology-dependent consumers while raising barriers to entry. Apple Inc. has employed a similar strategy.
Google further corners these technology-dependent consumers by making other businesses from other industries and sectors dependent on its services and products. The result is an ecosystem of various businesses, brands, and products and services wherein Google plays an influential role.
The billion-dollar advertising business remains the fuel that keeps Google running. Note that the Internet giant is both a technology and a media company. The aforementioned strategies involving diversification, acquisition, and vertical industry integration are all sustained and improved further to supplement this advertising business.