To understand the Google value proposition, a good place to start is the financial information website, in particular the 2011 10k report, and the latest 10Q report for 2012. Following some data that got my attention:
– How Google define itself: Google is a global technology leader focused on improving the ways people connect with information. Our innovations in web search and advertising have made our website a top internet property and our brand one of the most recognized in the world. Our mission is to organize the world’s information and make it universally accessible and useful
-How Google segments its customers: We serve three primary constituencies, 1) Users: we provide users with products and services that enable people to more quickly and easily find, create, and organize information that is useful to them, 2) Advertisers: we provides advertisers with cost-effective ways to deliver online and offline ads to customers across Google-owned websites and through the Google Network, 3) Google Network Members and Other Content Providers. We provide members of our Google Network with our Google AdSense programs
-Where Google business is primarily focusing to create value for its customers: 1) search (S), 2) advertising (A), 3) operating systems and platforms (OSP), and 4) enterprise (E). Some additional detail:
- Search: we maintain a vast index of websites and other online content, and make it available through our search. In January 2012, we launched Search plus Your World
- Advertising: executed via the following technologies: AdWords/AdSense, DoubleClick Ad Exchange/Google Display
- Google Mobile: Mobile advertising is still in relative infancy. Note: in May 22 the acquisition of Motorola created a total of 3 operational areas: Google, Mobile, and Home
- Google Local: Users can find information for millions of local queries like shops, restaurants, parks and landmarks right on Google.com, on Google Maps and on Google Maps for mobile
- Operating Systems and Platforms: Android. Working closely with the Open Handset Alliance, developed Android, a free, fully open source mobile software platform. Google Chrome OS and Google Chrome. Both the Google Chrome OS and the Google Chrome browser are built around the core tenets of speed, simplicity, and security. Google+. In June 2011, we launched Google+. As of January 2012, over 90 million people have joined Google+
- Google TV: is a platform that gives consumers the power to experience television and the internet on a single screen, with the ability to search and find the content they want to watch. The Google TV platform is based on the Android operating system and runs the Google Chrome browser
- Google Books: The Google Books platform (including reading applications, an electronic bookstore –eBookstore-, book search, and personal library management) is designed to help people discover, search, and consume content from printed books online. Through the Google eBookstore, we make available for sale popular books in electronic book format to complement our large collection of free public domain books
- Enterprise: Google’s enterprise products provide familiar, easy-to-use Google technology for business settings. Through Google Apps, which includes Gmail, Google Docs, Google Calendar, and Google Sites, among other features, we provide hosted, web-based applications that people can use on any device with a browser and an internet connection. In addition, we provide our search technology for use within enterprises through the Google Search Appliance (real-time search of business applications, intranet applications, and public websites), on their public-facing sites with Google Site Search (custom search engine), and Google Commerce Search (for online retail enterprises). We also provide versions of our Google Maps Application Programming Interface (API) for businesses (including fully interactive Google Maps for public and internal websites), as well as Google Earth Enterprise (a behind-the-company-firewall software solution for imagery and data visualization). Our enterprise solutions have been adopted by a variety of businesses, governments, schools, and non-profit organizations. Google Apps is the first cloud computing suite of message and collaboration tools to receive U.S. government security certification
-How Google thinks about culture: We take great pride in our culture. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex technical challenges. Despite our rapid growth, we still cherish our roots as a startup and give employees the freedom to act on their ideas regardless of role or function within the company. We strive to hire the best employees, with backgrounds and perspectives as diverse as our global users. At December 31, 2011, we had 32,467 full-time employees, consisting of 11,665 in research and development, 11,933 in sales and marketing, 4,651 in general and administrative, and 4,218 in operations
With this value proposition, using key resources like its employees and its platforms, Google is capable to reach a customer segment that in the first 6 months of 2012 paid 21,609M$ (Note: In all the 2011 revenues have been 37,905M$), generating a net profit 5,675M$. Most revenues (96%) are generated by Adwords cost-per-click service. The main cost is traffic acquisition, being in 2011 34.8% of the revenues. This cost includes also the internal IT costs. Other costs are research and development, sales and marketing, and general and admin expenses.
Now that you understand the Google value proposition, can you visualize its business model?