Renee Blaauw

Case Study; Google Inc.

Google; a company everyone knows, used by more than two third of search engine customers around the world with a market share that is still growing. Since its start-up in 1999 Google has grown its Net Income to $ 4.227 billion and increased Share value from $85 in 2004 to over $600 in 2010. You might wonder how does Google generate this revenue? Who are its customers? What business is Google in?

In 1999 when Google first introduced paid listings, the company started with a cost-per-impression model; an advertiser was charged a fixed amount each time a user viewed an ad, whether or not the user clicked the ad. Due to competition from companies such as Overture, Google switched to the more commonly used cost-per-click (CPC) model. To maximize its revenue Google weights its CPC bids. The ratio of an ads actual click-through rate to its expected click-through rate. Since an ad with a low click-through rate generated less revenue for Google, those adds would be shown less prominently. The more time people spend on the web, the more revenue Google generates.

A logical conclusion to draw from this revenue model is that Google’s main customers are the companies advertising on Google’s ‘products’ such as its search engine, Gmail, Google Maps, etc. Those are the companies that generate revenue and made Google profitable. Google’s latest addition; the Nexus One will generate more activity on the web, which leads to higher revenues for Google. Whether Nexus One can turn a profit isn’t the issue, the key is to get people to go surf the web.

Google is known for the products its offering; Gmail, Google search, and Google Maps are used by the majority of the computer literate population. However Google’s prime business is advertising. Without the profit generated from advertising Google would probably not exist.