Businessmodel of Alphabet

Customer Segments

Alphabet has a diversified markets business model, with various unrelated customer segments that have different needs and problems. While Google focuses on customer’s Internet needs, the other divisions‘ solutions include everything from life sciences research to venture capital funding.

Value Proposition

Alphabet offers two primary value propositions: performance and brand/status.

The company has demonstrated strong performance. On February 1, 2016, its market capitalization grew to $547.1 billion, surpassing that of Apple and making it the most valuable public firm. Apple regained its status on February 3rd, but Alphabet roared back in May to retake the title. As of June 2016, Apple was back on top, but Alphabet remains its strongest challenger. In terms of sales, Alphabet generated $75 billion in 2015, up from the $66 billion it earned in its prior form in 2014.

The company maintains a strong brand as a result of its main subsidiary. The Google brand is one of the strongest and most-liked globally. The e-mail provider Gmail is the most popular one in the world, with a market share of 69.2% as of September 2015. Google Search is one of the top three search engines globally. All of the subsidiary’s core products (including Android, Chrome, Maps, YouTube, and Google Play) have more than one billion monthly active users.

Channels

Alphabet’s main channels are its website and those of its subsidiaries. The company promotes its offering through its social media pages as well as various advertising and promotional initiatives.

Customer Relationships

Alphabet’s customer relationship is primarily of a self-service nature. Customers utilize its products and services (primarily the Internet-related offerings provided under the Google brand) while having limited interaction with employees.

Key Activities

Alphabet’s business model entails maintaining robust platforms for its various subsidiaries.

Key Partners

Alphabet does not have a formal partnership program. However, it has formed a number of alliances since its founding in late 2015, which fall into the following categories:

Product Partnerships – The company is working with Fiat Chrysler to build 100 self-driving automobile prototypes based on the manufacturer’s Pacifica minivan. The collaboration represents the first phase of a joint effort to develop autonomous vehicles. Alphabet will use the prototypes to test its own self-driving technology.

Integration Partnerships – The company is partnering with LiveRamp, a provider of data onboarding software that connects digital marketing platforms. The two will complete system integrations involving Google DoubleClick Digital Marketing solutions and Google Analytics 360 Suite. The outcome will allow LiveRamp customers to activate their first-party e-mails across Google Search, YouTube, and Gmail.

Community Partnerships – The company is partnering with Cuba to expand the country’s Internet connectivity. It is also working with the Organic Romerillo Museum in the capital of Havana to provide Google Chromebook and Google Cardboard (a brand of inexpensive virtual reality headsets) to visitors, connecting the products to the Internet. It plans for more developments in the nation.

Key Resources

Alphabet’s main resource is the collection of employees it maintains who have significant expertise in their respective fields and offer strong service. As of December 2015, these include 23,336 research and development workers, 19,082 sales and marketing workers, and 8,452 employees in general and administrative functions. The company possesses important physical resources in the form of data centers it operates in the United States, Asia, Europe, and South America.

Cost Structure

Alphabet has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of revenues, a variable expense. Other major drivers are in the areas of research and development and sales/marketing.

Revenue Streams

Alphabet has one primary revenue stream, online advertising from third parties. It is divided into two main categories:

Performance Advertising – Creates relevant ads that users click, resulting in direct connection with advertisers. Most of the third parties pay Alphabet when a user engages in the ads.

Brand Advertising – Increases users’ awareness of advertisers’ offerings through video, images, text, and interactive ads that play across different devices. Alphabet helps third parties display digital videos and other ad types to specific audience groups for their marketing campaigns.