Strategic Audit of Google

1271 words | 5 page(s)

Industry Overview

Founded as a government-funded online firm for indexing the internet that quickly grew into the most popular internet search engine, Google has emerged as one of the world’s leading technology companies, leading to the need to found a separate technology parent company, Alphabet (Barr & Winkler, 2015). While Google has expanded into a number of markets, as the company now offers a variety of services and technology products, the core of Google’s operations centers on the digital advertising market. Google offers a number of means by which organizations can market, such as Google Adwords and banner advertising. In this industry, Google remains the dominant competitor. Google has a 62% market share in U.S. search engines (Statista, 2017), while being responsible for nearly one-quarter of all banner and promoted content ads on U.S.-based websites (Statista, 2017). Social media platforms, especially Facebook, have captured much of Google’s market share in this market, though the market has expanded quickly with the rise of social media.

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The digital marketing landscape has changed drastically in the past decade, as the findings above suggest. Google and other search engines revolutionized the internet, making it much more accessible and paved the way for digital advertising, especially through search engine keyword advertising and banner ads. Consumers could now quickly find the content that they sought. But the introduction of social media, beginning with Myspace and then the catalyzing force Facebook, meant that consumers were viewing content much more quickly. Google helped establish the notion of a digital consumer profile, on which advertising choices could be focused. Google relied on search queries from profiled users. In contrast, Facebook encouraged users to generate their own profiles, identifying their own likes and interests, while engaging with their favorite brands and ideas. This thrust personalized digital marketing efforts forward, creating many more opportunities for Google, while companies such as Facebook captured more and more of Google’s market share in digital advertising. YouTube emerged as the leading video content provider, providing more opportunities for digital advertising. Google’s acquisition of YouTube signals the company’s willingness to purchase market share and expand its services and influence well-beyond search engine and banner ad marketing. Thus, the current state of the industry is one that Google is entrenched, but being led, in at least some aspects, by other technology companies, such as Facebook and Amazon, which directly connects consumers to products. Google remains the dominant search engine and has acquired the dominant online advertising-based video content provider, YouTube. Nonetheless, the industry will be dependent on the forthcoming technological innovations. Depending on who is the first to develop such innovations, or acquire them once developed, the industry will largely be shaped by these innovators.

Competitor Analysis
The internet search and digital advertising industry is highly segmented, with Google dominates internet searches in the U.S. and throughout most of the West, other rivals are dominant in their respective markets. Relatively few regulations, a lack of antitrust law application and enforcement, and extremely cheap supply means that competitors in this industry can quickly build brands, drive revenue, and become dominant in a particular market, often a market that the competitor has carved out. Featured below is a Porter’s Five Forces analysis of Google’s industry.

Porter’s Five Forces
Competitive Rivalry
Google’s industry features moderate levels of competitive rivalry.
Rivals in the industry are extremely powerful, influential, and dominant in particular segments of the industry.
This suggests that the industry is heavily segmented.
As discussed above, Google has a dominant market share in the search engine market, allowing Google to dominate SEO considerations, keyword advertising, and, to a large extent, non-social media banner and paid content advertising.
Meanwhile, Facebook dominants the social media marketing market, with competitors such as Twitter and Instagram still struggling with monetization strategies.
Amazon and a few other major firms dominate other markets in this industry.
Such strong rivalry combined with segmentation and the clear dominance of Google in several markets suggests that there are moderate levels of competitive rivalry in this industry, such that prices are not forced down, nor are individual monopolies allowed to gouge.

Supplier Power
Supplier power is miniscule in this industry.
As Amazon has demonstrated, cloud computing and storage is extremely cheap.
Google does not have to worry about a supply of the internet (in some abstract form), websites, content, or anything else that Google relies on to deliver its products and services.
This allows Google and its rivals in the industry to innovate and expand quickly with relatively little risk of supply shortages.

Buyer Power
Buyer power is moderate in this industry.
As is the case with most technology industries, brand images are very important for driving consumer sales.
Because Google remains the dominant search engine, companies will continue to rely on advertising through Google.
Similarly, Google offers a number of free marketing and analytics services, helping to establish and maintain its dominant brand image in the SEO, keyword advertising, and similar markets.
Google’s YouTube dominates in the advertising-based video content market, but there is considerable more buyer power in this market, as there are numerous websites for viewing video content, including social media platforms.
Google has managed to use its dominant brand to decrease buyer power in the video content market by predominantly featuring YouTube videos in its videos search tab.
Threat of Substitution
The threat of substitution looms large in the technology industry, but Google may be the exception because it has become so entrenched in the internet.
Google is a verb, now, demonstrating its successful integration into (and founding of) the internet search industry.
Even so, more innovations like Facebook would mean an even greater diminishing of Google’s market share, outside of the scope of internet searches.
Technological innovations serve as the greatest threat of substitution.
Perhaps a small company finds a more efficient way for consumers to find content online.
What minimizes this threat is the difficulties with achieving technology patents and the prospects for Google to acquire this company.
Google has acquired more than 250 companies and is always on the look out for emerging ideas from nascent companies (Finkelstein, 2017).

Threat of New Entry
Of the threat of substitution is relatively small, existing primarily because of the prospect of technological innovations, then the threat of new entrants into Google’s internet search market, specifically, is miniscule.
The barrier to entry are massive. Google has already invested heavily into becoming the dominant search engine.
If there are any threats to Google’s place in the search engine and digital marketing industry, it will be on the digital marketing side, not the search engine side.
Even if there was a threat of new entry, Google would likely be able to quickly mimic it or, more practically, simply acquire the new entrant, as it has done hundreds of times already.
It is quite clear that while there are always threats from small companies generating innovation in technology-driven industries, companies such as Google are in a position to remain dominant, opting to acquire emerging companies rather than risk competition.
Google will continue to dominant the search engine market and its many revenue-generation avenues, but it faces heavy competition from industry rivals that, while not generating revenue primarily through search-engine-based services, have carved out their own markets in this industry.

  • Barr, A., & Winkler, R. (2015). Google creates parent company called alphabet in restructuring. Wall Street Journal. Retrieved from: https://www.wsj.com/articles/google- creates-new-company-alphabet-1439240645
  • Finkelstein, S. (Ed.). (2017). Advances in mergers and acquisitions (Vol. 16). Emerald Group Publishing.
  • Statista. (2017). Share of search queries. Retrieved from: https://www.statista.com/statistics/267161/market-share-of-search-engines-in-the-united- states/

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