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    Google Porter's 5 Forces

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    w荣毅
    Google dominates the online search and advertising industries due to high barriers to entry including large capital requirements and an established user base. While switching costs are low, Google provides many products and customizes search results to attract and retain customers, enhancing its bargaining power over customers. Google also wields strong bargaining power over suppliers through its dominant advertising platform and opaque bidding system. The online search industry features high rivalry between major competitors like Google, Microsoft, Yahoo, and Facebook, who are all developing new products and platforms to attract users and advertisers. Currently, no substitutes exist for internet search engines, though this dominance may decrease as advertising shifts to social media and mobile platforms.

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    Google Porter's 5 Forces

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    w荣毅
    932 views3 pages
    Google dominates the online search and advertising industries due to high barriers to entry including large capital requirements and an established user base. While switching costs are low, Google provides many products and customizes search results to attract and retain customers, enhancing its bargaining power over customers. Google also wields strong bargaining power over suppliers through its dominant advertising platform and opaque bidding system. The online search industry features high rivalry between major competitors like Google, Microsoft, Yahoo, and Facebook, who are all developing new products and platforms to attract users and advertisers. Currently, no substitutes exist for internet search engines, though this dominance may decrease as advertising shifts to social media and mobile platforms.

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    Google dominates the online search and advertising industries due to high barriers to entry including large capital requirements and an established user base. While switching costs are low, Google provides many products and customizes search results to attract and retain customers, enhancing its bargaining power over customers. Google also wields strong bargaining power over suppliers through its dominant advertising platform and opaque bidding system. The online search industry features high rivalry between major competitors like Google, Microsoft, Yahoo, and Facebook, who are all developing new products and platforms to attract users and advertisers. Currently, no substitutes exist for internet search engines, though this dominance may decrease as advertising shifts to social media and mobile platforms.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    932 views3 pages

    Google Porter's 5 Forces

    Uploaded by

    w荣毅
    Google dominates the online search and advertising industries due to high barriers to entry including large capital requirements and an established user base. While switching costs are low, Google provides many products and customizes search results to attract and retain customers, enhancing its bargaining power over customers. Google also wields strong bargaining power over suppliers through its dominant advertising platform and opaque bidding system. The online search industry features high rivalry between major competitors like Google, Microsoft, Yahoo, and Facebook, who are all developing new products and platforms to attract users and advertisers. Currently, no substitutes exist for internet search engines, though this dominance may decrease as advertising shifts to social media and mobile platforms.

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    The document discusses Porter's Five Forces analysis of the online advertising and search engine industries, noting the high barriers to entry, high bargaining power of customers, low bargaining power of suppliers, and high rivalry in the industries.

    The barriers to entry the search market are very high due to the huge capital required to build infrastructure and establish a network, as well as the intense competition from existing major players like Google which already have well established brands.

    Google controls a large majority of internet search ad space, around 70% according to reports. Advertisers bid for keywords in an opaque process where Google has full control over placement and ranking. This gives Google high bargaining power over advertisers.

    External analysis: Porters Five Forces (online advertising industry and the search engine industry)

    Potential New Entrants: Low The barriers to enter the search market are high. Potential new entrants have to take the resources available into consideration. First, a huge amount of capital is required to build a complete and sophisticated network, both in infrastructure and contacts. This could be seen when Sun co-founder, Andy Bechtolsheim writes a check for USD 100,000 to Larry Page and Sergey Brin in establishing Google Inc. With regards to this, Google has one of the largest distributed computing/grid systems in the world (Carr 2006 Baseline). Furthermore, Google is a well established company. In 2011, Google is ranked 4th (worth over USD 55,317) in Interbrands assessment of top global brands. Also, the intense competition in both the online advertising industry and the search engine industry (fortified by the introduction of various tools and applications) reflects that the market is relatively saturated. Despite low switching costs, potential new entrants have to display distinctive competences in order to attract users. Bargaining Power of Customers: High As the switching cost is low, Google comes up with a variety of products that has managed to attract users and feed their expectations and intended tasks, as ex-Vice President of Search Products and User Experience, Marissa Mayer thinks that Google should be like a Swiss army knifeL clean, simple, the tool you want to take everywhere. Most of the products require customers to sign up for an account, which explains Googles ability to understand customers behavior based on their browsing history has enhanced its performance to provide more relevant and reliable search results. This creates customer satisfaction is a vital part of creating loyal customers for a specific brand (Weisbein 2009 best techie). Bargaining Power of Suppliers: Low Googles ad system is a reliable source of income because both the ad-making partner and adreceiving individual are both customers of Googles (Morrow 2008). In 2011, Google earned revenue of USD 37.9 billion, which its 96% came from online advertising. The finance and insurance industry was the largest portion of advertisers, spending over USD 4 billion. The AdWord bidding system eliminates rare negotiations between advertisers and Google salesperson as well as concerns about price increases, and it makes billing simple and more transparent (Girard, 2009). Advertisers say they have no bargaining power because Google controls so much Internet search ad real estatemore than 70%, according to the U.S. Justice Department (Orey 2009 Bloomberg). Advertisers bid for keywords for the website which their advertisement is placed. However, the bid that advertisers place on Google is confidential as well as the process in calculating the placement and ranking of the advertisement. Googles approach of such lack transparency may affect advertisers credibility. Rivalry: High

    The internet services industry consists of a number of products developed by several competitors. Investors hope Google keeps finding new opportunities to grow, somewhat like Apple has done by moving into new markets with new solutions (Hartung, 2011 innovation excellence). Throughout the years, Google has been developing its product range, and in 2010, launched the Android operating system in smart phones. Despite the spectacular ramp-up in Android smart phone sales, Google hasnt yet successfully monetized that platform (Hartung, 2011 innovation excellence). However, Google is still the leading internet search provider, with a market share of 66.7% in September (Lardinois 2012, techcrunch). Its closest competitor, Microsofts Bing (with a market share of 15.9%), is so far behind in both market share and revenue that Google has become, effectively, a monopoly (Katz 2012 WSJ). In the meantime, Yahoo!s market share continues to decline, while the new CEO Marissa Meyer (which left Google for the position) focuses on the Process, Bureaucracy and Jam (PB&J) initiative to execute faster, hire top talent, and make Yahoo the absolute best place to work. PB&J is Google-like and quintessentially Mayer - data driven, democratic, and fun (Sellers 2012 CNN). Potential Substitutes: Low Currently, there is no suitable substitute for the internet search engine. In fact, internet has been an alternative mode for other media. This is probably due to the lack of accessibility to the internet and user interfaces, like computers. The growth rate of online advertising has been increasing tremendously. Online advertising, in terms of expenditure by advertisers, is projected to overtake printed media by 2012 (Mitra, 2012 sramanamitra.com). To convey their message, advertisers nowadays have focused on the internet because of its number of audience and users. Animated advertisement and videos have also contributed in the growth of this industry.

    Competitors Analysis Brand competitor: Yahoo Yahoo! Was founded in 1995 by Jerry Yang and David Filo, which were both Stanford University students. Despite its early establishment 3 years earlier than Google, and early listing on the stock exchange on 1996, Google has been distributed itself as a healthier company. Yahoo got a big boost in profit after garnering $2.8 billion from the sale of its stake in Chinese ecommerce giant, Alibaba (Guglielmo 2012 Forbes) Marissa Mayer, the new CEO of Yahoo! was brought in last July to Industry competitor: Facebook The social media provider has about 500 million users Industry competitor: Apple

    Search ads market share will fall: Although search advertising will remain the largest segment, growing to $33 billion, its share of online ads will fall from todays 55% to 44%. No wonder Google is rushing headlong into display and mobile advertising, not to mention social media.

    Strategy Current situation Potential situation Capability (Strength and weakness)

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