Google's search dominance and advertising-based business strategy

Google

With a book of corporate lore than includes using rubber exercise balls for chairs and scrounging for computer parts on university loading docks, Google has today risen from those humble origins to become one of the largest Internet companies in existence. They specialize in search, tackling the longtime computing problem of finding meaningful information in an endless sea of data. They have built an empire around the high tech needle-in-haystack game, closing May 23, 2008 with a market cap of $172.5 billion.

Today, Google has hundreds of employees and offices in locations around the world in addition to its Silicon Valley headquarters. They continue to devise new ways to deconstruct and rebuild the search function to provide better access to the web's information.

The company derives almost all of its revenue from advertising and has been able to capitalize on growing trends in online advertising revenue. The company sees its competitive advantage in doing one thing well, and strives to do so by attracting and retaining the best talent in the world. Google has recently launched several new search ventures, and a charitable arm, Google.org.

Planning

Google's long-term goals at this point are still oriented towards improving its search function. Another long-term goal is to expand their advertising base. They are working to capture a greater flow of income from their existing core traffic.

After that, Google seems to have little sense of long-term strategic focus. They understand that their business is rapidly changing, and long-term planning often only refers to two or three years out. For example, the shifts in their competitive environment recently with the Microsoft purchase of Yahoo, which would have merged their two largest competitors. The proposed merger has now fallen through, again signaling a shift in the competitive environment. These kinds of drastic changes are constantly affecting their industry, so it is understandable that they have little sense of long-term focus.

If we take Google's long-term vision to be its long-stated overall corporate vision - which seems reasonable given that the company is only ten years old and that the industry remains in a constant state of flux - then they have a handful of core strategies that they are employing to achieve that. They continue to focus on advertising as a key source of revenue, and to that end have been constantly working to develop new technology in an attempt to capture more of the Internet's revenue streams.

Google is also working to continually improve their search mechanisms. They have in recent years diversified their search features to include such things as Google Earth and are working on an enhanced version of the image search, something which is requiring them to develop entirely new search algorithms.

They are also rapidly expanding their geographic focus as well. While they have developed a dominant market position in the English-speaking world, they have tremendous opportunity for growth in other parts of the world. This has lead to them setting up offices in countries across the globe, and included the controversial partnership with the Chinese government, which allowed them to operate but with censored search results.

Organizing

Google is organized along both geographical and functional lines. Geographical units are largely responsible for bringing Google to international markets. They operate in places as diverse as Israel, China and Korea, and are mainly a marketing arm. There are some issues with local languages that are addressed at these subsidiaries as well.

At the heart of Google's organizational structure are small, cross-functional project teams. These teams bring together people of varying expertise to work on key company projects. The bulk of the company's work is done through these teams, in particular with regards to the generation of new ideas and projects for the company.

In addition, employees are given time to take on their own projects, which could be individually or in teams. This relatively unsupervised time is granted under the principle of 70-20-10, wherein 70% of the worker's time is given to his or her main job, 20% to other related projects, and 10% to his or her personal pet projects. This encourages workers to not only seize the opportunity to develop their ideas but also to form their own teams, possibly putting together different skill sets in a unique way.

Leading

Google manages conflict in an informal manner. The company does not appear to have a rigid system of internal conflict resolution. Employees work together to forge solutions to disputes, and there is a relatively high degree of workplace harmony.

Google also takes a proactive approach to conflict resolution by dealing with the root causes of workplace conflict. By empowering their employees to work on whatever project they are capable of regardless of status, they reduce the impact that political power can have on an employee's career, replacing it with an achievement-oriented focus.

Another proactive component to reducing workplace conflict is to create an environment that, while not stress-free, facilitates the reduction of stress. They also incorporate team-building strategies, from the high-end food at their restaurants to roller hockey games. In addition, the company treats its employees very well. This is less to reduce workplace conflict than to reduce defections to competitors but it serves the purpose nonetheless.

Google has managed change in the industry by staying to its focus and branching out slowly. They realize that the robustness of their search engine is their main source of competitive advantage, and that this source is not sustainable unless they continually improve it. As such, they have maintained their focus on search.

They have expanded their product offerings gradually over the years, adding new forms of search. This has allowed them to maintain their advantage in search. By maintaining a leadership role in one of the most critical Internet functions, Google has positioned itself as above the change in the industry. The changes in the Internet business have been rapid since Google's inception, but in that time Google has remained relatively stable, building upon existing competencies rather than trying to overhaul its business to suit the shifting winds of a fast-moving industry.

While Google has moved slowly in expanding beyond their core business, they have experienced rapid internal changes, as the company has grown in the span of ten years from three employees working in a garage to hundreds of employees working all over the world. They have managed internal change well. The stability of their business model has been a factor in retaining staff, as have the incentives offered, but they were also lucky enough to have struck upon sound internal philosophies from the outset. Their early policies and programs have been maintained to this day, demonstrating ample flexibility.

To be fair, the largest tests for Google's ability to manage both external and internal change are yet to come. They are into an acquisition, still mainly focused on smaller companies but they have also added Doubleclick recently. Google has for much of its existence merely scaled up its early organizational structure and culture. Acquiring other companies changes the organizational dynamic, and Google has rarely been tested, but if it continues its path of acquisition, it will face this problem.

Conclusion

Google has proven in its limited history to be a leader in the business world. Management understood from the outset what made the company successful and have spent most of their energies scaling those philosophies up to the size of a global information powerhouse. They are now entering the first major tests of their organizational prowess. They must now integrate other business lines into their search and advertising-based model. They must integrate outsiders into a corporate culture that has remained stable since the firm's inception. Google has proven exceptionally successful at everything they have attempted to date, but they are now facing these new challenges and it remains to be seen if they are able to manage them with the same degree of excellence that has characterized the company to date.