Business Model of Google

PROJECT REPORT
ON
MENTORSHIP REPORT SUBMITTED IN THE

PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE PGDM
Submitted By:
Mr. Abhishek Pandav
PGDM (2010-12)
Under the Guidance of

Mr. B. Ram Mohan
Mr. Ajay Bansal
Jagannath International Management School
Kalkaji, New Delhi.
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“A Study on the Business Model of Google”
ACKNOWLEDGEMENT
It gives immense gratification to place on records my profound gratitude

and sincere appreciation to each and every one of those who have helped
me in this Endeavour. I am ineffably indebted to Mr. B.Ram.Mohan and
Mr.Ajay Bansal for their conscientious guidance and encouragement to
initiate this study that helped me to accomplish this project. I extend my
sincere thanks for their cooperation and valuable suggestions from time to
time that made my study more meaningful. Any omission in this brief
acknowledgement does not mean lack of gratitude.
Abhishek Pandav.
PGDM 3A.
Roll no-1.
CONTENTS
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1. Methodology .....................................................................7
2. Introduction.......................................................................9
3. Background Note .............................................................11
4. Insight on Google Business Model ..................................14
4.1 Infrastructure Management ...........................................16
4.1.1 Parallel Processing .....................................................17
4.1.2 Page Rank Technology ..............................................19
4.2 Value Configuration .......................................................22
4.3 Capability .......................................................................23
4.4 Acquisitions and Partnerships .......................................24
4.5 Adwords ‐Revenue Generation Model ..........................25
4.5.1 Benefits of Adwords ...................................................26
4.6 Cost Structure ...............................................................34
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4.7 Distribution Channel ......................................................34
4.8 Ideas ..............................................................................35
4.9 Experiments ...................................................................36
4.10 Recruitment ..................................................................36
4.11 Value Proposition .........................................................37
5 Swot Analysis ....................................................................39
6 Criticisms ...........................................................................39
6.1 Click Fraud .....................................................................39
6.2 Security ...........................................................................40
7 Competitors ........................................................................40
7.1 Google and Microsoft ......................................................40
7.2 Google and Apple ...........................................................42
7.3 Google and Yahoo ..........................................................43
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7.4 Google and Amazon .......................................................43
7.5 Google And Facebook ....................................................44
7.6 Google and Cisco ...........................................................45
7.7 Google and IBM ..............................................................46
7.8 Google and Nokia ...........................................................47
7.9 Google and Mozilla ..........................................................47
8 The Road Ahead .................................................................48
9 Annexure .............................................................................49
10 References ........................................................................56
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Google’s mission is “to organize the world’s information and make it
universally accessible and useful.”
“Google- A modern management pioneer that has much to teach us about

how to build companies that are truly fit for the 21 st century”.
The Future of Management, London Business School Professor, Gary

Hanel.
“As we go forward, I hope we’re going to continue to use technology to make

really big differences in how people live and work.”
Sergey Brin, CoFounder of Google.
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1. Methodology
Descriptive Case Study-
It covers the scope and depth of the case being covered. A theory formulated ahead of
time, is reviewed and debated upon, and serves as a design for the descriptive case
study. The contexts covered under a descriptive case study are as follows-
Initiation and Structure of the Organization
• Year of origin, who or what was the main source of support in creation of the
organization,
the source of funding, the legal grants, the organizational structure
Organizational Evolution
• How has the organization transfomed over the years.

• What were the events that led to the changes?
• What activities have been completed or are currently under way?
• The planning and implementation strategies
Relationship with other organizations
• Mergers, collaborations, partnerships with other organizations.

• Competition
Relationship with the Government
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• The organizations relationship with the Government, and how the relationship has
affected
the organization
Effect on Society
• The contribution of the organization to the society. The perception of the society about
the
organization.
• The corporate social responsibility of the organization
Policies
• How the organization deals with multiple issues. The policies of the organization with
respect to various social issues.

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Research questions
A descriptive case study methodology will be undertaken .The case would broadly focus
on the following aspects:
• A detailed approach to the business model of Google.
• Revenue generator model of Google.
• The changes in the business model of Google over the years alongside with increased
competition.
• Insights into the business models of its major products, and their relative contribution
to the revenue generated
• Comparative analysis of Google’s Business model with its competitors.
2. Introduction
Google Inc. is an American public corporation , earning revenue from advertising

related to its Internet search, e-mail, online mapping, office productivity, social
networking, and video sharing services as well as selling advertising-free versions of the
same technologies. The Google headquarters, the Googleplex, is located in Mountain
View, California. The company is running millions of servers worldwide. Who would
have predicted that two friends with an idea, working in a garage, would one day
revolutionize internet search advertising?
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Google was founded by Larry Page and Sergey Brin while they were students at
Stanford University and the company was first incorporated as a privately held company
on September 4, 1998. The initial public offering took place on August 19, 2004, raising
$1.67 billion, implying a value for the entire corporation of $23 billion. Presently it has a
market capitalization of 179.41$bn.
Whenever a company becomes wildly successful in a brief span of time, it becomes an

object of fascination for corporate executives, students and even general public. It
becomes a new role model for business success. Google is still an young company and
it has yet to be tested by adversity. By taking a close look at Google’s business model,
important insights can be deciphered. Most of Google’s success can be traced to three
innovations, firstly a brilliant insight into the organization of information, secondly, a
creative act of imitation, and lastly a breakthrough in the engineering of computer
systems.

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3. Background Note
Exhibit 1
Google began as a research project by Larry Page and Sergey brin in 1996, who were
both students at Stanford University, California. They believed that a search engine
analysed the relationship between websites would produce better results. They realised
that the search engines that existed at that time were deeply flawed. Their search
engine was originally nicknamed “BackRub” because the system checked back links to
estimate the importance of a site.
The domain google.com was registered on 15 th september 1997, and the company was
incorporated as Google Inc. on 4th September 1998 at a friends garage in Menlo Park,
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California. The name “Google” originated from a common misspelling of the word
“googol”, which refers to 10 to the power 100, the number followed by a 1 followed by
one hundred zeros. The total initial investment raised for the new company amounted to
almost $1.1 million, including a $100,000 check by Andy Bechtolsheim, one of the
founders of Sun Microsystem. After quickly outgrowing two other sites, the company
leased a complex of buildings in Mountain View at 1600 Amphitheatre Parkaway from
Silicon Graphics (SGI) in 2003. The company has remained at this location ever aince
and the complex has since come to be known as the GooglePlex.
Exhibit 2
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Google has a simple, clean, clear, minimalistic user interface, no frills, just the logo and
the search box- easy and fast to load. Bottom line is : If the user visits a search engine,
what he wants to get is simply that : just a search engine- search engine which is fast
and reliable. If the user wants a generalistic portal, he goes to a portal, not to a search
engine. Larry Page and Sergey Bri, the google executives, understood this, and this
was what they deleivered. The Google search engine attracted a loyal following among
a growing number of Internet users who liked its simple design and useful results. But
just serving free search results was not much of a business model. In 2000, Google
began selling advertisements associated with search keywords. The ads were text-
based to maintain an uncluttered page design and to maximize page loading speed.
Keywords were sold based on a combination of price bid and clickthroughs, with bidding
starting at 5 cents per click. It imitated the concept from Goto, but Google perfected the
process. Another important reason for Google’s success is the design of its parallel
processing computer system. Housed in multiple data centre around the world, the
system is able to crunch numbers and process transactions at an extremely rapid pace.
This has given Google an edge over its competitors Microsoft and Yahoo. The future
competition among these companies will be fought as much on the power and the
efficiency of their machinery, as on the attractiveness of the services.
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4. Insight on Google Business Model.
Exhibit 3- Nine Bricks Business Model.
Source-http://www.hec.unil.ch/aosterwa/Phd/Osterwalder_Phd_BM_Ontology.pdf
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Exhibit 4
Source-http://www.hec.unil.ch/aosterwa/Phd/Osterwalder_Phd_BM_Ontology.pdf

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4.1 Infrastructure Management.
Google requires large computational resources in order to provide their service. When a
client computer attempts to connect to Google, several DNS servers resolve
www.google.com into multiple IP addresses, and the client is directed to different
Google clusters. A Google cluster has thousands of servers and once the client has
directed to the server additional load balancing is done to send the queries to the least
loaded web server. In computer networking, load balancing is a technique to distribute
workload evenly across two or more computers, network links, CPUs, hard drives, or
other resources, in order to get optimal resource utilization, maximize throughput,
minimize response time, and avoid overload. This makes Google one of the largest and
most complex content deleivey networks.
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Exhibit 5.
4.1.1 Parallel Processing.
Google runs on a distributed network of thousands of low-cost computers and can

therefore carry out fast parallel processing. Parallel processing is a method of
computation in which many calculations can be performed simultaneously, significantly
speeding up data processing. Google has three distinct parts:
 Googlebot, a web crawler that finds and fetches web pages.
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 The indexer that sorts every word on every page and stores the resulting index of
words in a huge database.
 The query processor, which compares your search query to the index and
recommends the documents that it considers most relevant.
Exhibit 6.
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Googlebot, Google’s web Crawler.
Googlebot is Google’s web crawling robot, which finds and retrieves pages on the web
and hands them off to the Google indexer. It functions much like a web browser, by
sending a request to a web server for a web page, downloading the entire page, then
handing it off to Google’s indexer. Googlebot finds pages in two ways: through an add
URL form, www.google.com/addurl.html and through finding links by crawling the web.
Google Indexer
Googlebot gives the indexer the full text of the pages it finds. These pages are stored in
Google’s index database. This index is sorted alphabetically by search term, with each
index entry storing a list of documents in which the term appears and the location within
the text where it occurs. This data structure allows rapid access to documents that
contain user query terms.
Google’s Query Processor
The query processor has several parts, including the user interface (search box), the
“engine” that evaluates queries and matches them to relevant documents, and the
results formatter. PageRank is Google’s system for ranking web pages. A page with a
higher PageRank is deemed more important and is more likely to be listed above a
page with a lower PageRank.
4.1.2 Page Rank Technology
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We've developed an interesting trick that speeds up the first step: instead of storing the
entire index on one very powerful computer, Google uses hundreds of computers to do
the job. Because the task is divided among many machines, the answer can be found
much faster. To illustrate, let's suppose an index for a book was 30 pages long. If one
person had to search for several pieces of information in the index, it would take at least
several seconds for each search. But what if you gave each page of the index to a
different person? Thirty people could search their portions of the index much more
quickly than one person could search the entire index alone. Similarly, Google splits its
data between many machines to find matching documents faster.
How do we find pages that contain the user's query? Let's return to our civil war
example. The word "civil" was in documents 3, 8, 22, 56, 68, and 92; the word "war"
was in documents 2, 8, 15, 22, 68, and 77. Let's write the documents across the page
and look for those with both words.
civil 3 8 22 56 68 92
war 2 8 15 22 68 77
both words 8 22 68
Arranging the documents this way makes clear that the words "civil" and "war" appear in
three documents (8, 22, and 68). The list of documents that contain a word is called a
"posting list," and looking for documents with both words is called "intersecting a posting
list." (A fast way to intersect two posting lists is to walk down both at the same time. If
one list skips from 22 to 68, you can skip ahead to document 68 on the other list as
well.)
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Ranking
Google uses many factors in ranking. Of these, the PageRank algorithm might be the
best known. PageRank evaluates two things: how many links there are to a web page
from other pages, and the quality of the linking sites. With PageRank, five or six high-
quality links from websites such as www.cnn.com and www.nytimes.com would be
valued much more highly than twice as many links from less reputable or established
sites.
If a document contains the words "civil" and "war" right next to each other, it might be
more relevant than a document discussing the Revolutionary War that happens to use
the word "civil" somewhere else on the page.
Also, if a page includes the words "civil war" in its title, that's a hint that it might be more
relevant than a document with the title "19th Century American Clothing." In the same
way, if the words "civil war" appear several times throughout the page, that page is
more likely to be about the civil war than if the words only appear once.
Running a search engine takes a lot of computing resources. For each search that
someone types in, over 500 computers may work together to find the best documents,
and it all happens in under half a second.
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4.2 Value Configuration
Google is different. Google is expanding its area of participation in the value chain. In
other words, its search technology and infrastructure is merely a utility that allows it to
do what really bring over 90% revenue and income - advertising. Google is primarily an
advertising company, simply because it is the only company that allows any business to
start advertising online without any need for professional copy writers or graphic
designers or help from any advertising salesperson.
Nearly everything that the company does , including building big data centres, buying
optical fibers, promoting free wifi access, fighting copyright restrictions, supporting open
sourcesoftware, and giving away web services and data is aimed at reducing the cost
and expanding the scope of internet use. Simply put, Google wants information to
be free.
Even though the business model spells-out how a company makes money, and the
value propositions are what the company offers, not all value propositions have the
purpose to generate direct revenues. Reasons can be to, increase the value of
existing intellectual assets and capabilities, get access to new assets and capabilities,
create momentum for a new technology, lower cost of development, reduce risks, build
new markets, attract the best people, etc.
Google as an example
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Google generated 99% of total revenues 2007, and 97% of total revenues in 2008 from
advertising, still most of Google's value propositions are not directed towards its
advertisers.
Exhibit VII
Users A very large number of value propositions, often provided for free.
Network Revenues in return for relevant ads on their sites.
Partners
Organization Money saving proposition by outsourcing IT needs to Google.
s
Developers Providing platforms such as GWT for free to enable development of
rich content.
Employees Working conditions, “own time”, job security.
Google Growth, financial performance.
Owners
Society Free tools such as blogs and localized versions of Google in
developing countries.
4.3 Capability
Complementary Advantage
Complements are any products and services that tend to be consumed together.For
Google anything that happens on the internet is a compliment to its main business.The
more the people use internet, the more ads they see, and the more money.The vast
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breadth of Google’s compliments and its ability to push the price of the compliments to
zero , is what sets it apart from other firms. It faces far less risk in product development
than other usual business does. It routinely introduces half finished products and
services as online “betas”, because it knows that even if the offering fails to win a big
share of the market, they will still generate advertising revenue.
The real secret to Google’s mystique is that of a company that understands the
possibilities of technological change, and where to look for the small companies with
big ideas that will change established business models. And in that way, it is following
in the time-worn footsteps of other acquisitive giants like Cisco Systems and Microsoft.
Like any other giant multinational, Google knows that if it needs to constantly add new
products and services to its business.
4.4 Acquisitions and Partnerships
Since 2001, Google has acquired many companies, mainly focusing on small venture
capital companies. In 2004, Google acquired Keyhole, Inc. The start-up company
developed a product called Earth Viewer that gave a 3-D view of the Earth. Google
renamed the service to Google Earth in 2005. Two years later, Google bought the
online video site YouTube for $1.65 billion in stock. On 13 April 2007, Google reached
an agreement to acquire DoubleClick for $3.1 billion, giving Google valuable
relationships that DoubleClick had with Web publishers and advertising agencies. Later
that same year, Google purchased GrandCentral for $50 million. The site would later be
changed over to Google Voice. On August 5 2009, Google bought out its first public
company, purchasing video software maker On2 Technologies for $106.5 million.
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4.5 Adwords- Revenue Generation Model
Most search engines provide two types of results listings in response to the same user
query: organic (also called "natural" or "free") listings, and paid listings (i.e.,
advertisements). Google keeps these two types of listings separate, and ads are noted
by the phrase "Sponsored Links" appearing above them. On Google, although both
organic and paid results appear in response to the same user query, the results are
independent of each other. The ranking of an organic search result has no bearing on
the ranking of any ads, and vice versa. This makes it possible for an advertiser to
perform well in the paid listings and have an ample online presence, even if their site
isn't present in the top organic search results.
Google introduced a smart, innovative and quite risky business model - Adwords - and
the pay per click concept. The risk proved winning, and the innovative business model
worked. Today Adwords is Google main source of revenues. AdWords analyzes every
Google search to determine which advertisers get each of up to 11 "sponsored links" on
every results page. It's the world's biggest, fastest , a never-ending, automated auction.
Thousands of advertisers worldwide use the Google Adwords program to promote their
products and services on the web. Advertisers bid in an open and competitive auction to
have their ads appear alongside the search results for particular keywords. They can
specify the geographic location and time of the day for their ads to appear .The adwords
program includes local , national and international distribution.
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4.5.1 Benefits of Adwords
Relevance
One of the biggest benefits AdWords offers is the ability to precisely target ads to users
based on their interest, as well as a number of other factors like location, language, and
demographic. The result is that the user sees highly relevant ads, which they are more
likely to click on. And because ads on search engines show only in response to a user's
query, the user is also more likely to be further along in the buying cycle, and more
likely to be ready to convert.
Return on Investment (ROI)
Online advertising is thoroughly measurable, making it easy to tell whether or not you're
meeting your advertising goals. Every user's click is tied to a particular ad, keyword, and
search query, all of which you can track and decide to improve whenever you like. If you
spot a trend, you can create, modify, or delete keywords, ads, and campaign targeting
selections within seconds. This allows you to be more responsive and more in control
when it comes to improving your ROI.
Reach
Every day, Internet users conduct millions of searches on Google. When you use
Google AdWords, you have the opportunity to capture any segment of that broad
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worldwide audience that's actively looking for products, services, information, and
websites. By giving your products or services a presence during relevant user searches,
you're ensuring that you're visible in a crucial point in the customer's buying cycle --
when the user is actively searching for what you're offering.
Pay per Click Advertising
Pay-Per-Click (PPC) is the best way to send immediate, targeted traffic to your website..
An advertiser has to pay every time his ad receives a click. The Advertisers decide the
keywords relevant to their offer that should display their ad and the maximum amount
they are willing to pay per click for that keyword.
Categories are ranked by the cost per click that advertisers generally have to pay,
weighted by distribution, and then separated into three bundles: high cap, mid cap,
and low cap. "The high caps are very competitive keywords, like 'flowers' and 'hotels,'"
Tang says. In the mid-cap realm you have keywords that may vary seasonally—the
price to place ads alongside results for "snowboarding" skyrockets during the winter.
Low caps like "Massachusetts buggy whips" are the stuff of long tails.
Placement Targeting
Placement targeting lets advertisers choose individual sites in the Google Content
Network where they'd like their ads to appear. A placement can be an entire website, or
it can be a subset of pages or ad units on a site, as defined by the site's publisher. For
example, a news site might offer advertisers the chance to place ads across their entire
site, only on its front page, or just in ad units on the upper half of its sports pages.
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Placement targeting gives advertisers even greater flexibility to control exactly where
their ads show.
Ad Rank
Ads are positioned on pages based on their Ad Rank, which is a combination of your bid
and a relevancy metric called Quality Score. The ad with the highest Ad Rank appears
in the first position, and so on down the page.
A Quality Score is calculated every time the advertiser’s keyword matches a search
query – that is, every time the keyword has the potential to trigger an ad. Quality Score
is a formula that varies based on the bid type, where the ad is showing, and targeting
type. However, the main concept remains the same. Because Quality Score measures
relevancy, a high Quality Score generally means that the ads will appear in a higher
position and at a lower cost-per-click (CPC).
Adwords cost
Google charges a one-time AdWords activation fee upon account creation to ensure
that our advertisers are committed to creating well-targeted advertisements. The fee
also helps cover the costs associated with creating, maintaining and, if applicable,
cancelling an account.
Google Search Network
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It includes Google search pages, search sites, and properties that display search results
pages, such as Google Product Search and Earthlink. AdWords ads can appear
alongside or above search results, as part of a results page as a user navigates through
a site's directory, or on other relevant search pages.
Google Content Network
It includes news pages, topic specific websites ( art and humanities, business,
entertainment, health, food, music, sports, technology, travel, etc) and other properties
such as gmail and The New York Times that allows to extend the reach of the ad
campaign to pages where users are actively engaged with the content, not just doing
searches. AdWords ads can appear on a webpage if the content and url of that page
match the keywords in the campaign.
AdSense is an ad serving program run by Google. Website owners or affiliates can

enroll in this program to enable text, image and video advertisement on their sites.
Revenue is generated on a per-click or per-thousand-ads-displayed basis and the ads
are administered by Google. AdSense program includes AdSense for search and
AdSense for content. AdSense for search was launched in first quarter of 2002 and is
Google’s service for distributing relevant ads from its advertisers for display with search
results on the Google Network member’s sites. AdSense for content launched in first
quarter of 2003, distributes ads from Google’s advertisers that are relevant to content
on Google Network members sites. If the page is about flowers, Google would place
ads related to flowers on that page. Google advertisers are required to pay Google a fee
each time a user clicks on one of the ads displayed on Google Network member’s
websites. Many websites use adsense to monetize their content. AdSense has been
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particularly helpful for delivering advertising revenue to small websites that do not have
the resources for developing sales program and sales people.
Exhibit 8
Exhibit 9 Some of the Partner Sites in Google Content Network
United CNN,About.com,The New York

States Times,Hollywood.com,Napster.com,Myspace,Linkedin,Orkut, You tube
Germany Youtube Automotive,Bikersjournel.de, Google Finance, Stockworld,
Myvedio, Netlog,Xing
United HeraldTribune,TheIndependent,Euronews,Afterdawn.com,Softpedia,Last.fm
Kingdom ,Lyrics.com
Source: http://www.google.com/adwords/contentnetwork/partners.html#
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Exhibit X Adwords Terminologies
Keyword
The keywords you choose are the terms or phrases you want to prompt your ad to
appear. For example, if you deliver fresh flowers, you can use "fresh flower delivery" as
a keyword in your AdWords campaign. When a Google user enters "fresh flower
delivery" in a Google search, your ad could appear next to the search results.
Placement
Like keywords, placements are another way for you to control where your ads appear. A
placement is usually a website where you'd like your ad to appear. For example, if you
select www.example.com/sports as a placement, your ad could appear on that site.
Image ad
A graphical ad, which can be static or animated, that runs on the Google Content
Network. Also called a display ad
Campaign & Ad Group

AdWords accounts are organized into campaigns and ad groups. You start with one
campaign, which has its own daily budget and targeting preferences. You can have
multiple campaigns running and might choose to create one campaign for each product
or service you want to advertise. Within each campaign, you have one or more ad
groups, which are sets of related ads, keywords, and placements.
Impression (Impr.)
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The number of impressions is the number of times an ad is displayed on Google or the
Google Network. Monitor your impressions to see how many people your ad is shown
to.
Click
If a customer sees your ad and clicks on it to learn more or to do business with you, it is
recorded in your account as a click. Monitor your clicks to see how many people choose
to enter your website from your ad.
Clickthrough Rate (CTR)

Your clickthrough rate (CTR) is a metric that helps show how your ads are performing.
The more relevant your ads are, the more often users will click on them, resulting in a
higher CTR. The system calculates your CTR as follows: Number of ad clicks/number of
impressions x 100.
Cost-per-click (CPC)
Under the cost-per-click (CPC) pricing model, AdWords charges you for each click your
ads receive. You won't incur anycosts if your ad is displayed and users don't click it.
CPC bidding is the default for ads running on Google and the Search Network. Most
advertisers also choose it for their campaigns that focus on getting a direct response
from their audience, whether a sale, sign-up, or other action.
Maximum cost-per-click (maximum CPC)

The highest amount that you are willing to pay for a click on your ad. You can choose to
set a maximum CPC for individual keywords or for all the keywords within an ad group.
Cost-per-thousand impressions (CPM)
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With some campaigns, you can choose to pay for views of your ad rather than clicks.
The maximum CPM is the most you're willing to pay for each thousand impressions, or
views of your ad. CPM bidding is only available for campaigns that target the Content
Network and not Google search or search partner sites.
First page bid estimates

Your AdWords account will show a first page bid estimate for each of your keywords.
This metric estimate the cost-per-click (CPC) bid needed for your ad to reach the first
page of Google search results when the search query exactly matches your keyword.
The first page bid estimate is based on the Quality Score and current advertiser
competition for that keyword.
Optimization
An optimization is the process of creating/editing keywords and ad text (or adjusting
other parts of the account) to improve the performance of AdWords ads.
4.6 Cost Structure.
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Estimates of the power for over 450,000 servers range upwards of 20 megawatts, which
cost on the order of US $2 million per month in electricity charges.
AdSense Cost- The formula is familiar: Sell ads, in many cases around content Google
doesn’t own; turn over the bulk of that revenue to the owner of the content; repeat until
the end of time. Google’s business that runs ads around others contents and pays the
owners the bulk of related revenues. This business is less profitable then AdWords,
which runs targeted ads around Google’s search results. And there are indicators that
gap will widen.
4.7 Distribution Channel.
Exhibit 11.
Exhibit 12
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4.8 Ideas.
They use a process that lets ideas really thrive. Ideas come from everywhere. Some
people think that ideas come from top down. Some think they come from the bottom up.
They come from everywhere. Google has several active e-mails lists just for ideas. It’s
odd for a company of 200 people to have a miscellaneous mailing list. Employees
compile all of those ideas, discuss them, and prioritize them. This is a tool at Google
called Sparrow. It’s a typical web page, but it allows in page editing. These are basically
project ideas. There are also little widgets. They pop up a form and you can add new
ideas to the list. We literally have hundreds if not thousands of project ideas that we
consider and prioritize. If you make the capturing of ideas simple and low cost, a lot of
people will share ideas.
4.9 Experiments.
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Google launches its products quick and often. They believe that the easiest thing to do
is put it out there in public, listen to the feedback and see what people think is important.
Through Google Labs is a great tool to get, immediate responses to a particular idea
and revive early feedback on the projects. All these project are called Googlettes (baby
google) startups within the startups. Another example is Orkut, which is named after
one of Google’s core engineers. We have something we call 20% time. Orkut's is
actually the social coordinator for Google. But because of his social network interests,
Orkut dedicates his side time, his 20% time, to work on whatever he wants to work on.
Orkut started working on building this social networking site. He sent a mail out to the
miscellaneous list, and within hours, we had 1,000 employees signed up. This really
sparked people's imagination, thus Orkut was launched.
4.10 Recruitment
Many organizations have changed their pay or benefits in order to attract better
workers, but no one has changed every professional job in the company just so that the
work itself is the primary attraction and retention tool. Rather than letting work, jobs, and
job descriptions be put together by the "out of touch" people in corporate compensation,
Google's founders (Larry and Sergey as everyone calls them), HR director Stacy
Sullivan, and the leadership team at Google have literally crafted every professional job
and workplace element so that all employees are:
- Working on interesting work
- Learning continuously
- Constantly challenged to do more
- Feeling that they are adding value.
The key element of changing the work so that the work itself becomes a critical
attraction and retention force and driver of innovation and motivation is what Google
36
calls "20% work." There is no concrete definition of what 20% work means, but
generally for professional jobs it means that the employee works the equivalent of one-
day-a-week on their own researching individually selected projects that the company
funds and supports. Both Google Groups and Google News products are reported to
have started as a result of personal 20% time But its greatest value is that it drives
innovation and creativity throughout the organization. At Google, innovation is expected
of everyone in every function, not just product development. The 20% time, along with
the expectation of continuous and disruptive innovation, has driven the company's
phenomenal success in product and service innovation. Yes, in this rare case, HR
activities and policies are actually driving corporate business success.
4.11 Value Proposition

From its modest start as a search-engine research project at Stanford University in the
mid- 1990s, the Google universe has expanded exponentially with new products and
services. It's already a word processor, e-mail service, smartphone, and aims to be a
storehouse of every printed word in human history. Google allows us to cruise the
streets of New York and Rome, or scour the surfaces of the moon and Mars. We can
track global flu trends, monitor our household energy usage or simply edit photos.
Google wants to own your every waking minute online--at home, while in transit, at
your workplace, wherever you happen to be. It makes connectivity so easy, on a
desktop, laptop or mobile phone. How much easier via a little-known business called
Google Applications that allows us to instantly share Google calendars, spreadsheets,
memos, reports, e-mail, corporate blogs, presentations and more--much, much more--
by storing them in Google's enormous data centers. These bundled office-suite services
make Google money on subscriptions, but they are also something of a Trojan horse to
37
pull more people onto the Internet so that Google can make even more money from
ads.Google makes users ever more dependent on it to get through the day.
Exhibit 13 List of Google Products.
Desktop Standalone Applications Chrome,Earth,Pack,Picasa,Talk,Sketch

Up, Quick
Search,Adwords Editor
Desktop Extensions Dashboard Widgets,Toolbar, Gears
Online Mobile Products Blogger ,Buzz,Calender,Gmail,News,
Igoogle,Product Search,Reader,Picasa,
latitude,
Maps Navigation
Downloadable Mobile products Gmail, maps, sync,Talk,Voice, You Tube,
Web Products Account Management‐ Dashboard
Advertising‐Adsense,
Adwords,Optimizer,DoubleClick, Tv Ads
Communication & publishing‐ Apps,
Blogger,Buzz,
Calender,Docs,Gadgets,Gmail,
Igoogle,Orkut,Picasa, Reader, Voice,
Wave, You
Tube
Development Android, AppEngine,Code,Chrome OS,
Mapping City Tour,Map Maker,Building Maker,Mars,
Moon,Sky Map, Transit
Search Alerts,Base, Blog Search, Book Search,
Check
Out,Dictionary, directory, Finance, Image
Search, News, Product
Search,Scholar,Vedio,
Web History,WebSearch
Statistics Analytics,Gapminder,Trends
Hardware Google search appliance,Nexus one
5. Swot Analysis.
38
Exhibit 14
Speed.
WEAKNESS
Extra services.
Relevance ranking. One main source of revenue only.
Top 10 web brands in US. Lack of focus.
King of search. Advertising- only from technological perspective.
STRENGTHS
SWOT Click Fraud.

Legal trials.
OPPORTUNITIES Information skills will disappear.
Unmapped Countries. Print collection become less visible.
Reach new content. Users get confused.
Possibility of censorship.
THREATS.
6. Criticisms.
6.1 Click Fraud
Google has also been criticized by advertisers regarding its inability to combat click
fraud, when a person automated script is used to generate a charge on advertisement
without really having an interest in product.
39
6.2 Security.
There have been some concerns about national implications in Google Earth,
contention is that the software can be used to pinpoint with near precision accuracy the
physical location of critical infrastructure, commercial and residential buildings, bases,
government agencies and so on.
Google Eath has been criticized by a number of special interest groups, including
national officials as being on invasion of privacy and even posing a threat to national
security.
7. Competitors
7.1 Google and Microsoft.
Microsoft is a company that has had one of the dominant impacts in the IT industry. So
without a doubt it is Google’s biggest adversary in 2011 and these two giants will be
locking their horns for market supremacy in areas such as search, collaboration tools
and browsers. Talking of these two giants, Google has reigned as leaders in search but
with release of BING in May 2009, Microsoft has raised a few questions amongst in
Google’s management team. Microsoft has inked BING related deals with Twitter,
Facebook and Yahoo.
40
Microsoft collects sales and licensing revenue for its products, Google's business model
relies overwhelmingly on selling ads around its services. Despite its foray into so many
different sectors, a whopping 97% of Google's revenues still come from web- and
search-related ads. And for all the takeover deals it's done, Google has yet to come up
with an alternative revenue stream.
Google's attack on Office is likely to be much tougher and slower. The fact remains that
Microsoft has long-standing customer relationships across the globe, a network of
consultants and integrators, and a strong customer support system. Besides, Microsoft
is already making moves to the cloud, such as with June's launch of Office 2010. But
there are problems. First of all, the infrastructure costs for cloud-computing are
higher than traditional software. This could lessen the margins on Office, which are a
staggering 64%. Also, as Google gets more traction, there will likely be downward
pressure on pricing.
The Wall Street Journal reported that Google says Microsoft is waging a global proxy
campaign to cause trouble for Google with antitrust authorities around the world. As
evidence, Google points to two European companies -- both with ties to the software
giant in Redmond, Wash. -- that have filed complaints about Google with European
antitrust authorities.
Google Apps is designed to undercut sales of Microsoft products, including Exchange

and SharePoint. Microsoft has responded with Office Web Apps, free Web-based
versions of Word, Excel, PowerPoint and OneNote that are due out in 2010. Last but
not the least; the browser war between these two is giants are likely to heat up in 2010.
So 2010 awaits the answer if ever so popular Microsoft’s premier browser’s market
share could be brought down.
41
7.2 Google and Apple.
Being from partners to rivals. Apple is one of the stringent opponents for Google in the
year 2011. Today, Apple and Google have been locking their horns in the field of
Smartphone, Mobile App Store, OS, Mobile Ad and Online Music and so on. Likewise,
Apple is more than up to the task of battling Google in these areas as well as browsers,
where Google Chrome competes against Apple Safari. But battle between will intensify,
as the market for the digital music and SmartPhones is all set for growth in 2010.
Google’s music search along with its partner MySpace and Pandora are looking to
compete with Apple itunes, which was the no 1 music retailer in US in2009. Further,
Google’s Android iPhones continues to grab hold of the market all round the globe.
7.3 Google and Yahoo.
42
When it comes to search, one of the Google’s biggest competitors besides Microsoft is
Yahoo. Yahoo has been in the market with variety of products in areas of e-mail.
Messenger, News, Search and Analytic services. So without doubt it will be a fearsome
competitor for Google. In 2009, Yahoo made some improvements in 2009 by integrating
search with its rich content. Users can watch videos or stream music straight from the
Yahoo search results page.
All the competitors look to outperform Google in the market with different joint forces
being formed by their rivals.
7.4 Google and Amazon.
43
In 2009, Google’s effort of scanning millions of out-of-print books and incorporating
them in online search did gain up some momentum and helped themselves to publish
over 500000 digital books for free to customers of Sony Reader and Barners and Noble
Nook, which is due in January. Further, there claims of opening up Google Editions ,an
e-book store, has opened up new rivalry with Amazon.
Amazon with his Kindle e-book reader is one of the leaders in e-book reader’s market.
The other area which Google is taking on Amazon is in cloud computing. Google’s Apps
Engine, a newbie cloud computing platform that allows developers to create their own
Web applications and run them on Google’s infrastructure will be competing with
Amazon’s Elastic Computing Cloud (EC 2) which has already grab hold of the market
since its launch in 2006. So it will be the battle of cloud computing and e-book
readership between these two giants.
7.5 Google and Facebook
Facebook is well armored with its mass appealing social networking site while Google is
equipped with its diversified product portfolio. But for both of these companies, the real
money is on ads. Google has around 90% of its revenue coming from the ads while
Facebook has over 70% of revenue coming from ads. So, putting both these biggies on
the same plate , we see that advertisement is cash cow for them. Both these companies
44
bank on user data to move up the profit. Ultimately, that is what both these giants are
fighting for- increasing user base so as to increase the probability of increasing the
revenue.
With ever increase use of social networking and the rise of Facebook, Googles worry
seems to be viable one. Orkut offers Google Friend Connect, a tool for Web publishers
to add social networking content to their sites, in direct competition with similarly named
Facebook Connect. Meanwhile Facebook has sought out relationship with several arch-
enemies of Google, including Microsoft and Yahoo.
7.6 Google and Cisco.
45
Google definitely has a tough challenge against Cisco. With years of experience on web
based collaborative platform, WebEx, and superior VOIP service. Cisco poses a threat
to Google’s wave and voice. In addition to this, Cisco also is looking to enhance its
video conferencing quality by focusing on collaboration through internet video, desktop
video and consumer Telepresence.
In addition to this, Cisco’s presence in Cloud is another leading edge it has over
Google. As Google is looking to take everything to the web, it certainly will face a good
competition from Cisco on this front.
Moreover, according to Networkworld, Cisco is looking to enter into Smartphone market

in very near future. Thus we might see Cisco giving a hard time to Google’s Nexus one
in coming days.
7.7 Google and IBM.
2010 is likely to reopen Google’s rivalry with IBM with the release of new collaboration
tools such as Google Wave. Google has stepped into the battlefield with its low cost
46
hosted collaboration tools such as Google Apps. Google will compete against IBM’s
Lotus Lives, which has attracted more then 2 million businesses in the last 2 years.
7.8 Google and Nokia.
Today, Nokia has had grab hold of the phone market with 4 out of 10 mobiles sold. With
increase in use of smart phones, means the IT giants Google will be in rivalry with Nokia
in periphery of operating systems for SmartPhones. Symbian Open source operating
system will be competing with Google’s Android. Nokia with recent deals with Microsoft
is all set to bring office mobiles to Symbian devices.
7.9 Google and Mozilla.
With release of Google Chrome, Google has stepped into ever so popular browse
battle. Mozilla has been in the markets for years and now this step from Google is likely
47
to create conflict of interest between these two. Of late the war between the two has
heated up even more. The battle has now gone to default search. Mozilla now has
shown intent to kick Google out from its default search engine status. The latest rumors
show that Mozilla is now eyeing a deal with Microsoft to make Bing its default search
engine in Firefox. This will result in double war zone; first the obvious browser war and
now the war over default searches.
8. The Road Ahead.

Google‘s chief executive Eric Schimdt predicted a massive shift of advertising revenues
from the fixed web to mobile platforms similar to that of print publications to the internet.
The change would happen because mobile advertising could be more precisely
targeted, making it more effective. When Google Inc. in January began to sell its Nexus
One mobile phone from its own web site, online retailers could be forgiven for worrying
the search engine giant one day might stomp all over them.
What’s more, Google’s vast store of knowledge about consumer behavior, and about
how that behavior is changing minute to minute, would give Google an extraordinary leg
up as a web retailer. “They know what people want through search, they know what is
hot. It’s almost an unfair advantage,” says Kevin Lee, CEO of search engine marketing
firm Didit.com LLC.
It’s not clear how far Google intends to press that advantage. But the company has said
that its Nexus One e-commerce site, Google.com/phone, will not be its last venture into
selling directly to consumers via the web. “It’s the first in what we expect to be a series
of products which we will bring to market with our operator and hardware partners and
sell through our online store,” Mario Queiroz, the company’s vice president of product
management, wrote in a blog post as the phone went on sale.
48
Google Editions, meanwhile, is set for launch in the first half of the year. Customers who
buy ebooks from this Google store will be able to access the works through most
computer, phone or e-book readers. This device-agnostic approach sets it apart from
Amazon, which uses a proprietary e-book format designed primarily for its own Kindle
reader.
The plans in the works suggest Google is likely to focus on selling digital goods, such as
e-books and entertainment content, taking advantage of its vast web infrastructure and
massive amounts of data about online shoppers. Moving further into hard goods would
require Google to invest in warehouses and distribution networks, which would be a big
departure for this web-centric company.
Whatever direction Google takes, data from search will serve as a guide, and any
moves into retail likely will boost Google’s core business. Every click a consumer makes
when conducting a search and every word used in a Gmail message, helps Google
better understand what consumers are looking for, when they are looking for it and
where that search comes from. Google can use that data to stay on top of trends and
build ever more detailed pictures of various consumer types, advantages for any
retailer.
9 Annexure
Exhibit 15
Google Vision
Focus on the user and all else will follow.
It's best to do one thing really, really well.
Fast is better than slow.
49
Democracy on the web works.
You don't need to be at your desk to need an answer.
You can make money without doing evil.
There's always more information available.
The need for information crosses all borders
You can be serious without a suit
Great just isn't good enough.
Exhibit 16
Exhibit 17 Mergers and Acquisition
50
51
52
53
54
55
10. References.
1. Dr. John Sullivan, A Case Study of Google Recruiting,

http://www.drjohnsullivan.com/.
2. Nicholas G Carr, The Google Enigma, http://www.startegy-

business.com/.
3. Sergey Brin and Lawrence Page, The Anatomy of a Large Hypertextual

Web Search Engine, http://infolab.stanford.edu/pub/papers/google.pdf.
56
4. Rob May, Swarm Theory and Corporate Strategy,
http://www.businesspundit.com.
5. Brent Hummer, Greg Jones, Audre Wilde, steve Ellison, Google

Strategic Plan, http://www.dailyspeculations.com.
6. Sheriff Ramadan, Google Marketing Secrets, http://ezinearticles.com.
7. Stephen E Arnold, Where is Google Going,

http://www.googleguide.com.
8. Tom Taulli, Google takes another shot at Microsoft Office,

www.dailyfinance.com.
9. 10 Toughest competitor of Google,

http://technology.globalthoughtz.com.
57

Business Model of Google

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PROJECT REPORT

MENTORSHIP REPORT SUBMITTED IN THE

Under the Guidance of

It gives immense gratification to place on records my profound gratitude

3. Background Note .............................................................11

4. Insight on Google Business Model ..................................14

4.1 Infrastructure Management ...........................................16

4.1.1 Parallel Processing .....................................................17

4.1.2 Page Rank Technology ..............................................19

4.2 Value Configuration .......................................................22

4.3 Capability .......................................................................23

4.4 Acquisitions and Partnerships .......................................24

4.5 Adwords ‐Revenue Generation Model ..........................25

4.5.1 Benefits of Adwords ...................................................26

4.6 Cost Structure ...............................................................34

4.8 Ideas ..............................................................................35

4.9 Experiments ...................................................................36

4.10 Recruitment ..................................................................36

4.11 Value Proposition .........................................................37

5 Swot Analysis ....................................................................39

6.1 Click Fraud .....................................................................39

6.2 Security ...........................................................................40

7.1 Google and Microsoft ......................................................40

7.2 Google and Apple ...........................................................42

7.3 Google and Yahoo ..........................................................43

7.5 Google And Facebook ....................................................44

7.6 Google and Cisco ...........................................................45

7.7 Google and IBM ..............................................................46

7.8 Google and Nokia ...........................................................47

7.9 Google and Mozilla ..........................................................47

8 The Road Ahead .................................................................48

“A Study on the Business Model of Google”

“Google- A modern management pioneer that has much to teach us about

The Future of Management, London Business School Professor, Gary

“As we go forward, I hope we’re going to continue to use technology to make

Sergey Brin, CoFounder of Google.

“A Study on the Business Model of Google”

Descriptive Case Study-

Initiation and Structure of the Organization

• How has the organization transfomed over the years.

Relationship with other organizations

• Mergers, collaborations, partnerships with other organizations.

Relationship with the Government

“A Study on the Business Model of Google”

“A Study on the Business Model of Google”

• A detailed approach to the business model of Google.

• Revenue generator model of Google.

• Comparative analysis of Google’s Business model with its competitors.

Google Inc. is an American public corporation , earning revenue from advertising

“A Study on the Business Model of Google”

Whenever a company becomes wildly successful in a brief span of time, it becomes an

“A Study on the Business Model of Google”

“A Study on the Business Model of Google”

“A Study on the Business Model of Google”

“A Study on the Business Model of Google”

Exhibit 3- Nine Bricks Business Model.

“A Study on the Business Model of Google”

“A Study on the Business Model of Google”

“A Study on the Business Model of Google”

4.1.1 Parallel Processing.

Google runs on a distributed network of thousands of low-cost computers and can

 Googlebot, a web crawler that finds and fetches web pages.

“A Study on the Business Model of Google”