Businessmodel of Google
Customer Segments
Google’s key customer segments are internet users, advertisers, mobile users, developers and enterprises.
Advertisers pay Google for sponsored ads on web searches or on its AdSense network, enabling Google to offer most of its online features for free to regular internet users.
The popularity of Google’s mobile platform Android means that mobile users are also a key customer segment. Developers who make apps for the android platform are another key segment, since they pay Google for the privilege of selling their products in the Google Play Store.
Value Proposition
Google is widely regarded as the world’s best web search engine, making it a useful tool for a huge number of internet users. It also offers an impressive range of other services to web users for free.
For advertisers, Google represents a very effective and easy method of promotion. Google ads have very high rates of user interactivity because so many people use Google and the ads are normally relevant to searches the user has conducted. This is invaluable for anyone wishing to market their goods or services, giving Google a clear advantage over many traditional advertising channels.
Through Android, Google also provides a valuable platform for mobile developers to sell their apps, and for consumers to buy them.
Channels
Google’s search engine websites, with different national versions for most countries on Earth remain a key channel for users, but over the years Google has branched out to offer a huge array of services through channels such as email system Gmail, social network Google+, and the Android phone platform. Google owns a large number of other large websites, most notably Youtube, which serve as further user channels.
Google also have a large sales force that focuses on selling their advertising services to businesses.
Customer Relationships
Google maintains close relationships with its advertising partners through the Google Network, a branch of Google’s customer service department that helps businesses make the most out of Google’s promotional services.
Google’s relationship with its regular users is largely automated through its sophisticated online softtware.
It possesses a large, dedicated sales team for courting the business of larger clients.
Key Activities
Google employs over 20,000 software engineers around the world who are always developing new services while updating, improving and streamlining its existing ones.
Apart from continually investing in the development of its web services, Google invests very widely in developing a huge range of technologies. These activities include some intrepid “moon-shot” programs. These are generally hugely audacious projects in fields such as biotechnology and space travel. These investments are currently research, rather than profit oriented, but through these ambitious endeavours, Google hopes to pioneer new technologies that might eventually generate massive new revenue streams in the future. Since 2015, many of these ventures are no longer undertaken by Google itself, but by other subsidiaries of Alphabet Inc, although they are still largely funded by Google’s ad revenues.
Google invests heavily in head-hunting and operates effectively as a talent vacuum, with recruitment teams dedicated to drawing in the best individuals from other industries and hiring the best graduates from the world’s top universities.
Key Partners
A very large number of clients ranging from individuals to multinational corporations pay Google to help advertise their services and goods.
Google benefits from relationships with many distribution partners, such as many web browsers that feature Google Toolbar.
Mobile phone manufacturers are an increasingly significant partner for Google as the Android eco-system continues to expand. Google offers phone manufacturers an operating system for their phones that is compatible with the wide range of apps available the Google Play store.
Payment processors are another key partner, assisting with the sale of apps in the Play Store.
Huge numbers of websites bring Google revenue by using Adsense, which places Google’s sponsored links on their websites. They are also key partners, generating a significant portion of Google’s total revenues.
Key Resources
The key resource that enabled Google to outperform its early rivals as a search-engine was the ingenious but relatively simple PageRank, but since then the Google platform has developed to contain a variety of hugely sophisticated algorithms that enable it to function as both a better search-engine and a better advertising platform than its rivals. In fact, Google has created a huge variety of software and IT architecture which continue to be valuable assets.
Its massive data centres are a hugely valuable physical asset. It owns dozens around the world which it uses to, among other thing, process the billion web searches its users conduct every day. These data centres are some of the largest in the world and are a key resource that is utterly essential for Google’s day to day running.
It’s brand is also a huge asset. Google is a ubiquitous feature in billions of people’s experience of the internet and is by far the most visited site on the internet. The ubiquity of the Google brand is illustrated in how the word “google” has become a common verb – to “google” something is a common phrase that everyone understands.
Cost Structure
Google’s vast data centres have very large running costs. Google spends heavily to maintain and expand them to meet the huge demand for server space created by its ever-increasing volume of traffic.
Googles invests heavily in the maintenance of its vast IT architecture, hiring thousands of world-class programmers, and putting them to work on not only the maintenance of its current services but also on the research and design of new products.
Google has to pay Traffic Acquisition Costs to its Adsense partners, in return for them directing traffic to their sponsored ads. This is a large expenditure.
Google also invests heavily in its large marketing and customer support departments.
Revenue Streams
Google continues to generate over 90% of its revenue from advertising, although the Android ecosystem is proving to be increasingly lucrative. Ad revenue comes from sponsored links on Google searches, but also from a wide range of websites who subscribe to Google’s Adsense service.