Google's Moat Strategy: Defending Search Engine Dominance

Google's Rise and the Competitive Threat from Bing

Google is perhaps the most well-known name in the internet world and is certainly the most widely used search engine. When it first became a publicly traded company in 2004, its stock sold for $85 per share (Google Investor Relations FAQs). Google stock was trading at $605 per share by 2011 (NASDAQ.com) — incredible growth over seven years. Yet Google is not without competitors and is not so stable as to be entirely immune to market changes. In order to protect its place in the market and to position itself for future growth, Google launched a business strategy targeted toward defending its territory while simultaneously opening avenues for expansion.

In the late 1990s and early 2000s, Google's main competition was Yahoo. Google's search engine capabilities were so powerful that it soon outstripped Yahoo in both market share and performance. The use of Google's search engine became so pervasive that the word itself entered the vernacular as a verb meaning "to look something up on the internet" — as in, if you want to know more about something, just "Google" it. However, the launch of the search engine Bing by Microsoft gave Google a serious run for its money. A study conducted in early 2011 found that not only was Bing a more efficient and accurate search engine than Google, it was also capturing a growing share of the market — 27% as of February (Rosoff).

The 'Moat' Strategy Explained

In response to the emerging threat of Bing and other search technologies, Google adopted what is often referred to as a "moat" strategy to defend its business. The name comes from a well-known quote by successful investor Warren Buffett: "In business, I look for economic castles protected by unbreachable 'moats'" (Schonfeld). In the moat strategy, a company protects the health of its primary product by creating a diverse layer of supporting products that funnel business toward the primary product and prevent competitors from encroaching on its market share.

Android: Defending the Mobile Search Frontier

Google had been pursuing this moat strategy since it acquired Android technology in 2005. With the advent of smartphones equipped with default web browsers, Google needed to ensure it had access to the burgeoning smartphone market for its search engine. Its solution was to develop the Android software platform for mobile phones and to give it away for free. The Android platform has — what else? — Google as its default search engine, allowing Google to retain a stronghold in an increasingly mobile web culture.

Chrome and Chrome OS: Neutralizing Microsoft's Browser Advantage

The second section of Google's strategic moat is Chrome, the web browser the company launched in 2008 to compete with Internet Explorer and Firefox, among others. Its primary target was Microsoft. Google's CEO Eric Schmidt explained that the business strategy behind Chrome was to prevent Microsoft from manipulating its enormous browsing presence — through Internet Explorer — to favor its own services, namely Bing, and thereby weaken the presence of the Google search engine. Noting the limitations of Microsoft's browser, Google set out to create its own browser that would not only outperform Internet Explorer but would also favor its own search engine (Martellaro). Google subsequently began expanding the Chrome brand into Chrome OS, an operating system designed to compete with Microsoft Windows but tailored toward the niche market of netbooks.