Google - Designing and Managing Services - CASE ANALYSIS

Google - Designing and Managing Services - CASE ANALYSIS -...

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MARKETING MANAGEMENT Google Designing and Managing Services Case Analysis 2009
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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. A. Mission Google s mission is to organize the world s information and make it universally accessible and useful. B. Capacity 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
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C. Competitive Environment: By 2005, Google s remarkable success had engendered a perhaps inevitable backlash. Many Google advertisers charged that the company neglected customer service. Interactions with the company had left other business partners feeling that Google s management was unresponsive, self-centered, and dangerously cocky. 56 Industry pundits issued warnings
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about the company s ever-expanding scope and its enormous influence. Even foreign governments voiced their concerns. Yahoo! As a leading Internet portal with revenue of $5.3 billion in 2005, $1.1 billion in operating income, and more than 345 million worldwide monthly visitors, Yahoo! competed head-to-head with Google in search and paid listings. Most of Google s new products also had direct rivals at Yahoo!, including Google s Local Search, Video, Home Page, Froogle, Gmail, Maps, and Picasa. By early 2006, Yahoo! seemed locked in an arms race with Google. Yahoo! had an
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Google - Designing and Managing Services - CASE ANALYSIS -...

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