GOOGLE: WHO ARE THEY REALLY? July Written by: Zain Sood, Research Analyst Sophie Lyall, Senior Analyst

Transcription

1 GOOGLE: WHO ARE THEY REALLY? July 2014 Written by: Zain Sood, Research Analyst Sophie Lyall, Senior Analyst

2 INTRODUCTION Only a few companies emerged from the 1990 s dot-com bubble to become household names, and Google is one of them. Founded by two Stanford PhD students, Larry Page and Sergey Brin, in 1998, Google s core business is, and always has been, using data and algorithms to target consumers with paid advertising. However, the pursuit of expanding this core business has taken Google far beyond their original search engine platform: They now offer a wide range of other well established ancillary services such as Gmail, Google maps, Google Wallet and Google+. All this, coupled with Google s recent foray into hardware and spate of acquisitions has led to confusion and concern over what Google s plans for the future really are. Here, we consider why Google have had to look beyond the search engine, and ask where the company aims to be in the future, before addressing the fundamental question: Google, who are they really? WHY HAVE GOOGLE HAD TO LOOK BEYOND THE SEARCH ENGINE? Google s traditional web-based advertising still accounts for around 90% of their revenue. However, as the market evolves, Google are at risk of losing ground to some firms that may not previously have been seen as direct competitors. Google s current strategy is best described by VisionMobile as Flatten, Expand, Mine : Flatten: Google aims to ensure that as many consumers as possible use its platforms to access the internet. It does so by offering Chrome and Android free to developers Expand: They complement this by offering a range of free to use services (Gmail, Google Talk, Google Maps, Google+), all with the aim of getting more traffic Mine: This final step is the most important. Google data-mines users behaviour, allowing them to understand and target users more efficiently. These free services are merely tools used to gather and process information into the product that Google sells: targeted advertising. Industry Expert They do all of this fantastically well; we search, browse the web, , get directions and run our mobile phones, all through Google. However, the trend of moving from computers to smartphones and tablets threatens this strategy. That advertisements are not particularly well displayed on mobile screens is only the start of Google s problems. Even on an android platform, through which Google receives location data, the profile that can be built up on the consumer is incomplete. The detailed data mining that Google relies on is only possible when people browse the web via its search engine, or use Google-developed

3 apps. However, it is estimated that only 20% of a smartphone user s time is spent browsing. Facebook gains visibility over user data, allowing them to more effectively target smartphone users with advertising, therefore challenging Google s domination on a mobile platform. Other opportunities to make inroads into the mobile space are also being closed off: Apple s newest operating software uses Bing as the search engine for its digital assistant, Siri. Web browsing accounts for only 20% of smartphone usage time The rest of their time is spent using apps, most of which Google have not developed. Here, Facebook is a much bigger player. By linking apps to the social networking site, Google is feeling the pressure to find new ways to earn money with Facebook aiming to challenge their core search and advertising business. Industry Expert The answer, therefore, is relatively simple: Google has had to look beyond the search engine because the relevance of this platform to consumers is likely to decline. To retain data domination, Google must adapt and develop new ways to reach users. _ WHERE ARE GOOGLE AIMING TO BE IN THE FUTURE? In a word, everywhere. Google want to be catering for the consumer of the future before any other company gets there. They want to use their data to understand consumers and predict behaviour, allowing them to shape the next generation of technology-related practices and habits, while using the intelligence and nous of their handpicked graduates to generate the sorts of ideas that caused Larry Page and Sergey Brin to found a small search engine with big ambitions in At its core, Google are very good at collecting and analysing data, and creating algorithms, but neither of these skills are easily packaged for consumers without the use of a platform. The Google search engine is one platform, the Android operating system is another, and it is logical for Google to continue reaching consumers by developing future-focussed, innovative new platforms that turn its core skills into consumer products, from contact lenses that track blood sugar levels, to driverless cars. One example of this is Google s recent acquisition of the home automation company Nest. According to the Google Nest website, the intention is to develop Nest s philosophy

4 of reinventing unloved but important devices in the home such as thermostats and smoke alarms into a broader range of products that use data to make consumers lives safer. The partnership is still in its early days, but initial product plans include Google Bee, a personal drone that monitors a home while residents are away on holiday. Other examples include Project Loon, which aims to provide internet in hard-to-reach and disaster-affected areas by transmitting internet access from a network of balloons in the stratosphere. Today, each of these projects seem bizarre on some level, but in both cases, Google is using its capabilities in a slightly anxious attempt to future-proof its access to data, and thereby its longevity more broadly. Google is currently testing Project Loon balloons in New Zealand GOOGLE: WHO ARE THEY REALLY? Put simply, Google is an organisation with the inventive ethos of a dot-com start up, but the scale and challenges of a global corporate giant. Google s aim is to monetise its core capabilities surrounding data analytics. However, this aim relies on amassing large amounts of consumer data. Therefore Google s core challenge is which products and services it can offer consumers to capture their data. Its traditional approach has been to use the search engine platform, but that is increasingly under threat. Google, therefore, has to look for routes around this. Because of its dot-com start up ethos, it does so by creating and inventing, and by supporting the next generation to bring futuristic ideas into fruition. Therefore Google s investment, and with it its hopes for long-lasting relevance, are directed towards projects that may at first seem outlandish, but that it hopes will grow to be the next big thing, providing a future proof source of consumer data.

5 This is exemplified by Google Glass. To the consumer, Google s foray into fashion may seem an outlandish step. However, in many ways, Google Glass, along with each of the other examples cited in this paper, is Google s response to an age-old corporate problem: The marketplace is shifting, and consumers are moving away from Google s core desktop platform. How can Google stay ahead of the curve to retain market relevance? Their answer: Integrate more closely with consumers than even mobile devices are able to; be the closest, simplest port-of call for information. The Glass concept may well seem strange to the consumer at the moment, but Google are conscious of this, and they are attempting to normalise the technology. At $1500 and being quite a radical idea, Google understood that their original consumers would be the wealthy and the ultra-geeks. So by starting off slowly, and trialling the product on techies, they got people used to the concept of the Glass before releasing it to the general public. Google Glass user Google Glass, therefore, is an example of how Google aim to solve a common corporate issue by creating and inventing. They are using their data and staff to attempt to be ahead of the curve in terms of predicting consumer needs, and anticipating which technologies could meet future demand, so therefore how they can continue capturing and monetising consumer data. CONCLUSION As a large, inventive organisation with strong capabilities and significant resources, Google will continue to be a formidable force in the foreseeable future: They will continue to expand to develop and provide platforms that provide them with access to data They will continue to develop hardware so that these platforms are more easily accessible to consumers They will continue to seek to monetise collected data Therefore they will continue to be simultaneously a highly attractive partner that has a deep understanding of consumer trends and behaviours, and a colossal threat that sees no defined limit to its reach. About White Space White Space is a market analysis consultancy, specialising in new market entry, proposition development support and customer experience optimisation. We have significant experience working in a range of sectors. White Space s multi-disciplinary approach enables us to draw on relevant experience from a broad range of industries. Our years of experience in technology research and strategy provide a valuable viewpoint on some of the hot topics currently driving the sector.