How Google evolved as a search engine over the decade! Success Factors, SWOT, Financial Analysis

This article talks about the search engine industry. A search engine is a program that uses
keywords or characters to pull the information from different web sources and present them in
the form of links based on relevancy, speed, and freshness. ~ 93% of online experiences begin
with the use of search engines. Of all the search engines, Google dominates the market with
~88% share as per the recent studies and the rest is captured majorly by Baidu, Bing, and Yahoo.
This industry is around 25 years old and the companies earn mainly through advertisements.

Google’s competitive position

Started in 1997, Google is now a market leader in search engines with over 100 billion
searches per month. In terms of web search, Microsoft’s site-Bing ranks second with about 5.5%
market share and Verizon Media’s site- Yahoo comes in third place in the U.S. with around
3.00% market share. Baidu leads the search engine market in China and ranked 5 in the world as
per Alexa in April 2021.

Apart from these, Google faces indirect competition from Amazon and Facebook. Users now
bypass Google search as they get better and specific results from these platforms. These
platforms have a huge user base with interconnected search results that are disrupting the
experience that was earlier provided by Google and these can lead to a paradigm shift in online
searches.

Five Forces analysis

The five forces model analysis helps in determining the profit potential of any industry based
on the characteristics of external factors in the business environment. These can be understood
as:

Bargaining power of suppliers – Weak Force: A large number of suppliers in the
market and Google’s dominance in the space has been a weakening force for the
suppliers in the market. Apart from this, Google provides several other services that
bundle with the requirements of the users, and it becomes hard for them to switch.

Bargaining power of buyers – Moderate Force: The number of buyers in the segment
is very high which reduces their bargaining power. Additionally, several competitors that
host similar services like Google. Companies are making mobile operating systems that
can control the usage of Google and its service. This increases the options for buyers and
hence there is a decent buying power of buyers in the market.

Competitive rivalry or competition – Strong Force: Although Google does not have
many competitors in the search engine game, the competition to gain market share is
high. In the rapidly changing technological space, companies like Amazon, Facebook,
etc. are investing heavily in research and development to come up with unique and
innovative solutions. The low switching cost for customers also has raised the bar for the
competition.

The threat of substitutes or substitution – Moderate Force: Google has fewer threats
from the substitutes in the market. There are very few companies that provide services
and products similar to Google and also the quality of results offered by Google is
significantly better than that from its competitors. However, companies have been
continuously spending a lot on advertisements that encourage users to switch from the
current mode of searching. They offer interesting ways for users to spend their time and
money.

The threat of new entrants or new entry – Moderate Force: The low cost of starting
and doing business in the online space has been a driving force for those who want to be
the new entrants. Entry is easy. However, companies need to come up with niche
solutions to stand out from the existing ones. The increasing number of web compliances
has also led to several hindrances in their growth.

Industry driving forces and key success factors

The search engine market is expected to reach USD 44.37 billion by 2024. The market
has evolved due to rapid changes in technology and innovation. Heavy expenditure in
advertisements by companies has led to the growth of both buyers and sellers in the space. The
digital world in the hand of every individual and the speed at which their requirements get
fulfilled has been the major driving force for the growth of the search engine industry. New
technologies like voice search, search through images, etc. have enhanced the user experience
like never before.

Some of the key factors that led to the success of Google are:

Monetization of search: Searching has been a regular thing in every individual’s
calendar and Google has been one of the best information providers in almost every
space. Google used AdWords that transformed into an automated, pay-per-click ad
auction that brought the concept of relevance to digital advertising, and this created huge
revenues for the company

Leadership: A strong tightly coordinated leadership group is one of the main factors
that led to the company’s success.

Marketing: Google has become adept at marketing itself as a brand name. The subtle
marketing ads such as Google Doodle have been very successful at catching favorable
attention. Along with this, Google continues to come up with extremely personalized
advertisements for different kinds of markets creating an impressive brand value for
itself.

Technical excellence and cutting-edge experience: Google worked to provide its users
with the best available technology. It continuously worked on the basics such as
creating “Universal Search,” then “Realtime Search,” and “Google Instant” to make the
process of searching information interactive, appealing, and convenient for the users.
Apart from this, several free add-on services such as Gmail, storage drive (limited), and
having them integrated made things very convenient for users. From mobile operating
systems to important softwares, Google has successfully set its strong position in the
market.

Innovation on the Internet and Beyond: Apart from the search engine business,
Google always had an eye for new ventures and acquisitions in other spaces. It
expanded to other businesses such as wearable tech, mobile operating systems, driverless
cars, and renewable energy. These businesses have helped Google bring a large number
of users in indirect ways.

SWOT analysis of Google

Google, as a search engine has revolutionized the digital world and has transformed the
global economy. Corporations, professionals, students, households, and almost everyone has
now become dependent on Google in one way or the other. Google ranks at 2nd position as per
Forbes, “the world’s most valuable brand list,” after Apple. SWOT Analysis of Google can
give you an understanding of the current position of the brand.

Strengths: People are used to clicking or visiting Google web whenever they have to search for
anything. That way, it has been able to set a pseudo-monopoly in the search engine market.
Google’s parent Alphabet Inc. is currently valued in the market at more than $1 trillion. It is one
of the fastest-growing companies in the world and has grown from fewer than 300 employees in
2001 to over 120,000 in 2019. Also, with the most advances and innovative solutions, Google
has made its place at the top in the market.

Weaknesses: Google has been criticized by many experts for its overreliance on its privacy
policies, especially when it comes to hiding information about algorithms. The company was
recently fined for breaching the EU’s online privacy laws. The company also relies majorly on
its advertisement-related revenue which is 84% of its total revenue projects. Advertisement
space is highly cyclical and competitive and the new players in the market are coming up with
smarter advertising solutions. Apart from this, Google has been unsuccessful at making a place
in the social media space and the main players in this domain have been impacting its business.

Opportunities: Google has been making entry into newer markets such as mobile devices,
wearables and diversifying its product line to include cloud services, audio-video services,
assistants, etc. These are some of the most demanded products and services in the market. In
2019, about 5.5% of Google’s annual revenue came from its Google Cloud Platform (GCP) and
its services which are close to $8.9 Billion. Google has its feet in almost every emerging market.

Threats: As per data collected by EMarketer, it is expected that Google’s US digital ad
revenue is going to see a decline in market share. The regional search engines such as Baidu in
China, Yandex in Russia, etc. have a huge population as their audience. Their technical expertise
and heavy expenditure on their research and development is a continuous threat to Google. Apart
from this, the change in the search methodology has also changed in recent years. A significant
switch to the search on platforms like Amazon and Facebook has been observed.

Financial analysis for Google’s performance between 2009 and 2019

The annual revenue of Alphabet Inc. has increased from $ 23,651 Million in 2009 to
$161,857 Million in 2019. With this, companies Net Income rose from $ 6,520 Million in 2009 to
$34,343 in 2019. This shows that the company grew over 7 times in the last 10 years.

Profitability Analysis: Google’s Income statement ratios for-profits show a stable growth rate
between 2009 and 2019. Some of the below ratios reflect a positive trend for most of the
profitability ratios.

Liquidity Analysis: Based on the below liquidity ratios of Google, they are easily able to meet
its short-term obligations even though they are declining year on year. It could suggest that
Google is not holding dead resources and that cash balances are being reallocated efficiently to
generate further income through reinvestment in long-term assets.

Solvency Ratios: With a low Debt Equity ratio, it is clear Google can easily meet its long-term
obligations.

Valuation analysis: Google’s PE Ratio shows a great valuation wherein in 2019, for every $1 of
Google’s earnings, investors are paying 27.25. This has been stable over the years. The company
reflects a strong growth rate in its EPS year on year. This shows that investors believe Google
shows great potential for future returns.

Strategies necessary to allow Google to strengthen its lead in the search industry and to
make a success

Google has been excelling in the search engine industry but the increasing competition
requires strategies that help in the continuous evolution of the business. Google has its feet in
almost every emerging market but at the same point of time has faced shutdowns and failures in
several cases. They are in the search business, but more specifically, they want more people to
use products they have that may be powered by search to surface contextual ads to them. Here
are some strategies for different segments that can be used to strengthen its lead in the search
industry:

a. Smartphone business: The smartphone business is one of the most competitive
markets globally where every company in this business is spending heavily on their
research to bring something new each day. However, Google has not been able to
compete in this segment due to the price of its products. The main idea was to have
more and more people on Google through these devices to surface maximum ads and
add more data to provide higher quality search results. Reduction in prices of their
phones to match products that offer similar features and help the company with better
sales and eventually more users of Google.

b. Cloud computing: Google has been a pioneer as a technology company but has to
still cover a long journey to reach that level in the service industry. In the cloud
computing space, Google stands at third position after AWS and Microsoft Azure. It
entered late into the market. As per an estimate by Canalys, it currently holds just 7%
of the market for cloud infrastructure. However, if Google can work on a few aspects
such as enhanced security, better pricing, and leverage its big data for analytics, a
better position in the market can be captured. This position can also be achieved if the
needs of monolithic enterprise systems — like SAP HANA, Infor and IFS, etc. are
catered for better integration.

c. Entry into the emerging markets: Google’s mission statement is to organize the
world’s information and make it universally accessible and useful. The company,
however, failed to set up a strong base in China due to several challenges. Entry into
the emerging markets can help them expand their business. India, Brazil, and Russia
are the top emerging markets, and if the products and services are brought in these
countries after considering factors such as type of users, local needs, affordability,
technical challenges that people need to be prepared for, personalized products, etc., it
can help the company strengthen the existing business.

d. Other recent ventures: Google has acquired 225 organizations so far with Pointy
being the most recent one done in January 2020. Google has been aggressively
investing in most of the innovative spaces. It invested in both SolarCity and Tesla, two
companies with ties to Elon Musk. It acquired Fitbit in the wearable segment to
compete with Apple and Samsung against their smartwatch series. Entry into different
types of ventures can help in the collection of the increased userbase. Analytics around
this data can be used to deliver better and personalized search results and hence a better
user experience.


Recommendation concerning any potential ethical lapses at the company

Like any other company, Google also has to deal with ethical issues regularly. It started
in 2007 when controversy regarding privacy and security was raised by Street View. The data
collected by search engines and tools at stages such as sign-ups, access requests, get utilized in
different ways and this has led to the rising concerns of a huge set of the userbase. It’s easy to
put your trust when a big company like Google asks you to enter your information on their web
browsers, in an encrypted connection or not. Google is now one of the AI leaders and it can help
Google fix ethics problems if it is implemented properly. It should develop a powerful AI that
could help them navigate through these issues and provide a decision matrix that can keep the
firm from constantly raised concerns around privacy and data security. Apart from this, a strong
organizational culture and leadership control can play a critical role in adhering to ethical
requirements.




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