GOOGLE Case study
1) What are the key factors behind Google’s early success? Google’s early success can be explained by four key factors. Since Google was a second-mover, it benefitted from Yahoo!’s and others’ experiences in order to improve its service and overall performance. 1. A well-conceived algorithm: technology advantage as a key factor (learning from Yahoo!’s mistakes) Google took advantage of the growing frustration towards Yahoo!’s failure to prevent or to control spam. Brin and Page studied the algorithms used by Yahoo! and others in order to improve them. They created Page Rank, an algorithm for online researches which shortlisted pages that were linked to by other pages. This algorithm enabled more relevant results and therefore increased user satisfaction. Later, when getting in the actual search business, they followed the same process: studied the market and improving the offer. Google first used a cost per impression but subsequently created its own cost-per-click model in 2002. It chose to weight the CPC bids by the actual CTR/expected CTR (click-through rate). This weighting enabled them to maximize revenue while making sure that their users were happy (and not bothered by irrelevant ads). 2. A protected advantage
Google licensed its search technology and algorithm. This contained two advantages. First and foremost, it protected innovation and their monopoly over it. Moreover, Google generated revenue from selling their researches to Yahoo! and only focused on that at the beginning. In addition, Google was also able to discover the search business market due to their sales. These licenses enabled them to make a first step in the market it wanted to conquer, to understand it and to highlight the problems and/or the needs. Google started to build its brand. 3. A simpler and improved offer
Google offered a different type of search engine. It corrected problems arisen in the industry and succeeded in creating a simpler research engine. The white page with the Google logo is a good illustration of their key motto “simple & basic”. This page would be filled up with the research results, with very simple design, without the overload of information, content tools nor an editorial content that were not directly related to the search itself. Furthermore, it initially did not ‘spam’ users with advertisement. This was a relief for users. Later Google did allow and generate advertisement but the only links that were sponsored had to be related to the research. This type of advertisement was generally perceived as more useful and less intrusive by users. Philadelphe Knellwolf, Vincent Perraud, Maÿlis Chapellier, Alexandra Ivanova March, 19th 2014 4. A well-managed, efficient organisation
Finally, Google also succeeded due to its innovative management. Even though Brin and Page shaped their effective management only after the initial success, their distinctive methods and their expertise was a key success factor from the very beginning. Brin and Page brought engineering experience and innovative ideas together. Eric Schmidt complemented the team by bringing in the business experience at Sun Microsystems or Novell where he was PDG before entering the Google team. 2) Do you think the search business will become more concentrated? An industry is said to be concentrated when one or a small number of firms provide a large amount of the industry’s total production. As the U.S. Search Engine Market Share graph (Exhibit 2) highlights, Google owns almost 70% of the market. The search business is therefore monopolistic or oligopolistic (with Yahoo!). In this context, the question whether it becomes more concentrated, will depend on whether Google will continue growing. First of all, the very nature of this industry seems to call for concentration. The more pages the search companies are able to index the more successful they are. This is due to network effects of a two-sided market such as paid listed advertising platforms...
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