1. Situation Analysis
The name Google can appear synonymous with all aspects of online search. However,
with its revenue stream essentially flowing from this single source, Google will increasingly
require alternative channels to maintain its spectacular revenue growth. Marketers might very
well be the beneficiaries of these alternatives, especially when it comes to still-to-be-realized
potential growth areas such as local search, video marketing and classified ads.
Nonetheless, Google's business today literally warps perceptions of search engines as a
whole because it so dominates the space.
In Google's case, dominant means that its 2005 revenues made up nearly half of all US
paid search ad spending, according to eMarketer estimates. By the end of this year, Google
will grow only fatter, with a 57 percent share of this spending.
Google s mission is to organize the world s information and make it universally
accessible and useful.
Google, based in Mountain View, California, had gross revenues of $6.1 billion in 2005
and an operating income of $2.0 billion. As of year-end 2005, the company had 5,680
employees and cash and equivalents of $8.0 billion. (See Exhibit 2 for Google financials
1999-2005.) Founded in 1999, the company completed its IPO in August 2004 with an $85
offering price. Google s share price had climbed to $414 by year-end 2005, giving the
company a $123 billion equity market value. Its website, Google.com, had a 37% share of all
U.S. searches in Q3 2005; Yahoo.com, its closest rival, had a 30% share.5 Leveraging its own
traffic and that of AOL, Ask.com, and other affiliates, Google garnered about 60% of U.S.
search-related advertising revenue in 2005.6 Outside the United States, Google.com held a
commanding 68% share of all search traffic in Q3 2005.7