Google Case Study

Google is in the business of online search. The company maintains a website which is one of the most visited websites in the world. Google has indexed more than 8 billion web pages on the web and is the most popular search engine on the web today. Anyone with an Internet connection can use the website to look for information that s/he needs. Google has become one of the most recognized brands of today because of its vastly popular search engine. The google interface is available in more than 100 languages to users worldwide. The company generates revenue through the advertising programs. The advertising program consists of advertisers advertising with google and then google uses its search technology selecting which web page should host the ad. Every time someone clicks the ad revenue is shared between google and the publisher of page where the ad is being hosted.

Google Search appliance is another source through which google generates its revenues. The search appliance is a hardware and software solution that companies can use to implement google search technology to their internal and external information.

To support these programs google maintains 25 sales offices in 14 countries and specialized sales teams are deployed in 13 vertical markets. Apart from providing support to existing users there exists direct sales teams. These teams target advertisers with large advertising budgets and are more in a role of relationship building than one off sales.

Competition

Google faces intense competition for its primary search business and Microsoft and Yahoo! are its two main competitors.

The groups in which the company competes can be classified in three main groups -

• Users for the search engines.

• Advertisers who register for the AdWords program.

• Web sites to attract and retain websites to become member of the google network.

Financials

Google has shown tremendous growth in revenues and profits and still continues to go strong in the quarters in fiscal 2005 as well. The company has grown from revenues of $19.1 million in 2000 to revenues of $3.18 billion for the year ended 2004. In the same period the company has turned around from a loss of $14.6 million in 2000 to a profit of $399 millions in the year ended 31 December 2004. The diluted EPS for the company has been $1.46 in the fiscal ended 2004.

Advertising revenues (discussed earlier) made for 94%, 97% and 99% of the total revenues of the company in the year 2002, 2003 and 2004. The balance of the revenues is derived from licensing of the web search technology, license of search solutions to enterprises and the sale and license of other products and services.

As is clear from the above figures that google derives most of its revenues from advertising. There are two forms of advertising. One in when a user goes to the google website and searches for something, the result page would invariably have certain ads. This is called advertising on Google website. The second type of advertising is the text and image ads that one sees on various web pages. The revenue that google makes on such ads is called Google Network websites.

Now since the revenue on Google Network Websites