Learn about the components that make up Google's business model, such as their Value Proposition, Resources, Market Segmentation, Activities and Cost Structure.
Imagine how the world would be if Google didn't exist. There would be no Google maps, Gmail, or other Google tools. However, today Google has become a part of our daily lives. It helps in answering our questions and makes our lives easy.
Google has dominated all the other search engines for over two decades. In the search engines market, Google holds 92.49% market share worldwide.
Looking at Google's success, the question arises of how Google has managed to become so prominent in almost twenty years.
The answer to this success can be found in Google's business model. A business model holds great significance for businesses since it is responsible for a business's success or failure.
A business model is a plan for making a profit. It identifies the products or services the company plans to sell. A business model provides a roadmap for the business to operate in the future. A business model covers essential business components, due to which clarity is ensured in the business operations.
Other than that, a well-defined business model helps make other people aware of the business. Moreover, a business model identifies the potential audience and anticipates the expenses.
A good business model helps new and developing companies attract investment and succeed. However, every business has a different business model according to which it operates.
Google was founded in 1998 when the internet grew massively due to the dot-com boom. Initially, Google was introduced as a search engine. Then, it achieved massive success as a search engine.
In no time, Google dominated all the other search engines and became the world's most used search engine. After a few years in the market, it broadened its canvas by offering other online services such as Google News, Gmail, Google Maps, etc.
Soon Google became one of the world's biggest media companies. Currently, Google is the most visited website. According to the statistics, Google is accessed 92.5 billion times a month.
Looking at the success of Google, we can assume that it would have a very well-structured business model. The business model of a company like Google would be useful for other companies who want to create a business strategy similar to Google.
Through its business model, Google developed an organized way of doing things that allowed them to achieve such unprecedented growth.
We have now discussed the significance of Google and the need for a business model. Let's proceed further and learn about the components that make up Google's business model, but for that, it is essential to know what a business model canvas is.
Business Model Canvas
People find it difficult to understand a business model and remember its components. However, a business model canvas is a simpler way to represent a business model. It helps visualize the entire business model, making it easy for the readers to understand the business model concept.
In a business model canvas, the entire business model is explained in an organized manner. All the business model components are included in the business model canvas, and appropriate information is provided below. Now we'll discuss all the business model canvas components in detail.
Value Proposition of Google
Identifying the value proposition in any business model is very important. The value proposition helps businesses communicate the purpose of their existence to consumers.
It is further used to tell potential consumers how their product will benefit them. Google's value proposition targets advertisers, consumers, and content creators.
For Advertising Agencies
It makes advertisers understand that using Google for posting ads is the most accurate way of advertising since ads on Google are only shown to the people who are potential customers.
For Content Producers
The value proposition of Google tells content producers that Google provides the opportunity to content creators to make money by posting their content through monetization.
For Users
It tells the users that Google is offering you to use the world's largest search engine for free. Moreover, it ensures that with Google, they will have access to information from around the world in an organized, fast, and simple way on their devices.
Resources of Google
Businesses require resources to perform their activities. Business resources are divided into different categories, such as human, physical, intellectual, and financial. These different types of resources are needed for any business to run smoothly. In this section, we'll highlight what resources Google possesses.
Google is a big company that has offices in 154 different locations with 156,500 employees. Besides that, being a tech company, Google possesses patents, intellectual property, Googlebot, search algorithms, etc. Besides all these things, Google also has a fantastic team of entrepreneurs and a skillful CEO.
Market Segmentation of Google
It is often said that the prime objective of running a business is to make money, which is true to some extent. However, businesses can only generate revenue if they attract more customers to consume their products. However, to do that, it is essential for businesses to identify its market and audience first.
Businesses have to be very specific while determining their market and audience since all strategies and policies of the business rely on these two things. Google has divided its potential audience into three categories. Let's discuss the three categories that Google targets.
1. Advertisers
For any online platform, advertisers are a significant audience. Similarly, Google also targets advertisers. Advertisers include all the people selling their products online, big or small. By targeting them, Google can generate revenue as they will be using Google to post ads for their products.
2. Content Creators
Another segment that Google targets are content creators. Google targets people who post their content on the internet, trying to get it monetised, such as vloggers, bloggers, and content writers.
3. Users
Lastly, the third category that Google targets are everyday users. These are the people who access the internet to get information or to get entertained. The two categories mentioned above rely on these users since they are the mass that any online platform would love to attract.
Partners of Google
This section of the business model highlights the key partners of a business. Of course, businesses interact with many people, including suppliers, buyers, and other people. Anyone from whom a business takes resources can be named as a partner.
Mainly four types of partners exist. One sort of partner is the one with whom a business goes into a joint venture. Some of the partners are strategic allies, while the other two are a business's buyers and suppliers.
Talking about Google, its main partner is its customers. The main partners of Google are divided into the same three categories as the market segmentation. However, the main partners of Google are the users of Google who use any of its products.
Moreover, other partners of Google are the content creators who use google as a portal to upload their content. Advertisers are also significant partners of Google, who advertise their products using Google ads and make websites that are shown on Google searches.
Besides these three categories, all the developers, manufacturers, shareholders, and Google's parent company, Alphabet, is also Google's partner.
Activities of Google
A business has a list of essential activities for its smooth functioning. Therefore, the section identifying key business activities holds great significance in a business model. This section covers all the activities a business does to ensure its smooth running and increase its customer base and revenue.
Like any other business, Google also wants to increase its customer base by providing quality products. This is why Google is currently working on some things.
Crawl and Index
To facilitate the users, Google sorts out and organizes the existing pages on the global web, based on their content, to add them to a worldwide index.
Making Results Relevant
The internet has become a place where people can see what they want to see, and Google has taken that concept to an entirely new level. For each search, Google shows pages according to the keywords out of more than 8 billion pages.
Improving Searching Process
Google identifies search terms that are most commonly faced by users and presents them in autocomplete, which makes it convenient for users to find what they're looking for. In addition to presenting user-chosen search terms, Google tries to disqualify sites that promote spam, misinformation, and click-baiting.
Customer Relationship of Google
Customers have certain expectations of businesses that they patronize. Therefore, businesses need to build relationships with their consumers to grow. One of the most important things a business can do is to build customer loyalty by keeping them informed.
This means giving them regular reports on how they are doing and any special offers that might be available. Customers want to feel like they're being listened to and cared for, so ensure you respond to their messages quickly and accurately.
Although Google is essentially self-service, it still maintains a good relationship with its customers by providing them with the best product. In addition, the algorithms of Google help you with results, ads, and other things.
The results obtained by users are based on what they've entered into the system. These algorithms are designed to ensure the relevancy of information by competing against others that include it in their results.
Distribution Channels of Google
This business model section holds great significance as it identifies what channel a business will adopt to make its products available to consumers. Every business must identify the proper channels to ensure its product reaches its target audience.
Google's primary distribution channels are Android app stores and its own search engine. Google also uses platforms such as Gmail, Chrome, etc., to notify users about its products.
Moreover, recommendations are sent to users through other platforms such as Youtube, Play Music, and Play Store. Besides these, Google benefits from its own ecosystem by using them as product distribution channels.
Cost Structure of Google
To establish a business, it is essential to do all the calculations correctly. In addition, to avoid problems in the future, costs should be calculated correctly. A business can never experience success if it doesn't have a properly well-defined cost structure. This section of the business model helps businesses to identify all the significant sources of expense.
Since Google is a tech company, it must spend a lot on research and development. In 2021, Google spent $31.5 billion on R&D. Google spends such a significant amount on R&D since it has to stay updated with the latest technological developments.
Other than that, Google spends significant money on sales and marketing. In recent years, Google spent $18.5 billion on sales and marketing.
Google has to spend so much on sales and marketing to stay ahead of its competitors and secure its market share. Other than these two expenses, Google spends on data centers and other general operations of the company.
Revenue Streams of Google
The revenue streams are of great importance to a business. The revenue stream can also be modified and introduced correctly. A small change in the revenue streams can be beneficial for the business.
This portion is used to highlight the revenue streams for the business. In addition, it will help the business to determine which streams should be kept and which should be discontinued.
Google's advertising revenue accounts for a significant portion of the company's total earnings. However, the company's ad-powered search engine is perhaps the primary revenue source.
Moreover, Google Ads, Google AdMob, Google AdSense, and Google Shopping account for a significant percentage of its marketing revenues. At the same time, YouTube is another significant revenue stream. Besides these sources, Google Pixel smartphones, YouTube Premium, and Google Cloud help the company generate revenue in several ways.
Besides Google's personal products, it also generates revenue through acquisitions. On average, Google acquires one company per week.
Google's Business Model: Final Word
Today's article was about Google's business model. To start off, we discussed the significance of Google in today's world and how it has emerged as the largest search engine that now offers other products too.
We also shed light on how important it is for businesses to have a business model as it provides a roadmap to the businesses.
Since Google is a tech giant with billions of users, we then decided to discuss Google's business model. So then, all the components of Google's business model that have helped Google to succeed were discussed in detail. Google's business model helped us understand the fundamentals upon which Google runs. However, Google's SWOT and PESTLE analysis will help us understand the internal and external factors that impact the operations of Google.
