Google Business Model

Business Model

"Google generated about $21 billion in revenue last year.  The vast majority of that revenue, well over 95%, comes from advertising via its search engine and its AdSense program, which places ads on millions of websites" (Parr, n.d.).

"The current pre-dominant business model for commercial search engines is advertising" (Spencer, n.d.).  Google's search engine has ranked number 1 in the Alexa index proving itself to be the leader in search engine usage.  This can also be noted that Google has become synonymous with web search.  Often you will hear how people would "google" the information rather than "search" for it.

"The other side of Google's hugely successful business plan is innovation" (Spencer, n.d.). This is demonstrated in the products and services that Google incorporates into its brand.  Let's examine the technology behind the brand.

Technology

Google's search technology is reliant upon computer algorithms to determine search positioning:

  • PageRank:  The technology that determines the importance of each page.  It considers "500 million variables and 2 billion terms" to determine how a page will rank in the search engine (Google Corporate Information, n.d.).
  • Hypertext-Matching Analysis:  The technology that analyses page content and ensures the results returned are relevant to the query entered into the search engine.

The technology that Google uses to underpin its data centres are of utmost importance in ensuring Google has the "scale, speed and efficiency to serve its rapidly growing number of users" (Weber, 2008). Google also uses two advertising services to gain significant revenue: AdWords (places relevant ads alongside Google's earch results), and AdSense ("revenue-sharing deals... [that place] Google's context-driven adverts on third-party websites" (Weber, 2008).  This short video describes how Google advertising works:

YouTube Video

Google AdSense

"Google believes relevant advertising can be as useful as search results or other forms of content" (Google Business Overview, n.d.).  To this end, Google has developed the AdSense program to enhance the user's experience to a website.  While utilising the technologies behind Google Search, AdSense uses keywords to precisely target results so advertising content is delivered based on page content.  Google believes "advertisers, publishers, and information seekers all profit as a result (Google Business Overview, n.d.).

Google AdWords

In combination with AdSense Google developed the "AdWords [program] for advertisers who want to reach a qualified audience as efficiently as possible" (Google Business Overview, n.d.).

The PageRank and Hypertext-Matching Analysis appears to function to produce the best possible matches for a user's search query.  AdWords and AdSense deliver content-appropriate advertising based on the publisher's content.  This effectively creates a relationship between content publishers and advertising publishers, generating sense of network economy, value and effect.

Customers have needs, wants and nice-to-haves and traditional business models fulfil these for their customers.  Google offers its customers needs, wants, and nice-to-haves for free (Pollard, n.d.). In return, whether knowingly or not, users create data whilst using Google services and products which creates information that is listed in the Google Search Engine; advertisement is then tailored based on the content delivered.



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References:

Google Corporate Information. (n.d.). Retrieved July 02, 2010 from http://www.google.com/corporate/business.html

Parr, B. (n.d.). The Google Revenue Equation, and Why Google's Building Chrome OS. Retrieved July 6, 2010 from 
 

http://mashable.com/2009/07/11/google-equation/


Pollar, D. (2005). Retrieved July 10, 2010 from http://blogs.salon.com/0002007/2005/10/16.html

Spencer, C. (n.d.)  A look at Google's business model.  Retrieved July 20, 2010 from http://wwww.helium.com/items/710040-a-look-at-googles-business-model

Weber, T. (2008). A decade on: Google's Internet economy. Retrieved July 3, 2010 from  
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