COMM 550: Intro to Electronic Commerce

Key recommendations for Google’s next frontier

Kris Hodgson

University of Alberta

MACT program

Introduction

From starting off as a search engine in Mountain View, California in 1999, Google Inc.

has become a tech giant that has innovated right out of its comfort zone. In Q2 2015,

the company saw $17.7 billion in revenue plus revenue growth of 11 per cent year-over-

year (Google Investor Relations July 16, 2015). In that release, Google’s CFO Ruth Porat

says “we are focused every day on developing big new opportunities across a wide

range of businesses. We will do so with great care regarding resource allocation.” That

great care seems to be lacking and will be discussed later.

Through digital disruption, Google has succeeded in creating hybrid value (unlocking

trapped value and creating new benefits) (pg. 39 Fisher) by bringing the world to our

fingertips faster through information density (pg. 14 Laudon). Google has surpassed

Yahoo and AltaVista with an effective value proposition from its onset bringing

customers back daily because of its accuracy, speed and effective algorithms. Google is

ubiquitous because it has effectively reduced our cognitive energy so much that even

spelling mistakes are corrected. Google enriched Web 2.0 with its acquisition of

YouTube, the “world’s largest online consumer-generated video posting site” (pg. 16

Laudon). This same Californian company helped bring friction-free commerce into the

invention years. Early on, many saw Google as having an unfair competitive advantage

over others who were struggling for recognition. “Google’s ever-expanding agenda has

put it on a collision course with nearly every company in the information technology

industry” (Kelleher 2005). Christine Varney, assistant attorney general for antitrust at

the Department of Justice, has repeatedly made remarks about Google’s “monopoly in

Internet online advertising” (pg. 13 Edelman and Eisenmann). Google’s revenue model

was excellent when it began tying in advertising with its search engine. There is still

great potential to bring additional revenue into Google’s operations, by going back to

what it’s good at.

Problem identification

While companies like EBay have found both actionable and meaningful market

segmentation (pg. 49 Mohammed), Google has started to lack its sizzle because it is

stretching itself too thin. My recommendation is for Google to reign in its innovation

and focus on its core competencies. Just like Google’s Statement of Philosophy point #2

“It’s best to do one thing really, really well”(pg. 19 Edelman). Here are the five areas

Google needs to focus on to remain at the top of its game: 1) remain a trusted source

for users when searching for quality information with targeted advertising, 2) retain a

reliable e-mail service with a large amount of cloud storage, 3) continue to manage an

effective Android mobile phone system that rallies innovations with Apple, 4) maintain a

street level mapping application that is second to none and finally, 5) remain a

responsible steward of the largest video database in YouTube.

If Google still wants to continue to tackle new areas and dive into odd new ventures

as it has with Google Glass, Google + and self-driving cars, it won’t be these ventures

that will keep it top of mind. Because as quickly as this behemoth has swept to the top,

it could just as quickly fall from grace.

In the area of social networking, Google + has been a weak foray because it has not

effectively brought its online community together for any purpose. The interface is

clumsy, awkward and is far from compelling. But Google doesn’t mind and that’s the

issue. “Google policy encourages engineers to spend 20 per cent of their time working

on projects of their own choosing (pg. 7 Edelman and Eisenmann). In Google’s owner’s

manual, its founder Larry Page wrote: “Do not be surprised if we place smaller bets in

areas that seem very speculative or even strange.” (Page and Brin 2004). Google’s idea

of unleashing innovation is great, but what’s best is for that innovation to be channeled

in the right direction. By avoiding this focus, the company appears adrift at sea.

Outside of the five areas of success I have mentioned above, the company is not

competing as effectively as it could be which defies its #10 Statement of Philosophy:

“Great just isn’t good enough” (pg. 20 Edelman). Google faces strong competition from

companies like Apple that are also wanting to increase their marketshare.

As mentioned in Porter’s chapter on the Five Competitive Forces that Shape Strategy,

Google faces rivalry among its existing competitors (pg. 4 Porter). Google has fallen into

a common pitfall that happens when a company “pays equal attention to all of its forces,

rather than digging deeply into the most important ones” (pg. 16 Porter).

The two biggest issues I see Google having is its organizational development and

management team. These two pillars of an effective business model I call into question

because of what I see as trying to herd cats when looking at what direction Google is

going. While one would assume Google has a strong and effective market strategy, the

way it puts all its eggs into every single basket when it tries to roll out new innovations

like Google Glass or self-driving cars, would cause any investor in the company to

second guess how Google is going to generate revenue from these risky and in my view,

outrageous ventures. There are others like John Battelle who have called Google’s

organizational development and management team into question. “They are … first and

foremost engineers. And engineers are not the best communicators, nor do they make

the best diplomats or business development executives” (Battelle 2005).

Discussion of Alternatives and Recommendation

The recommendation is for Google to focus deeper into its top five successful

ventures. Google has a competitive advantage in these areas and it can stop trying to be

the next social media platform with Google +, it can drop the idea of Google Glass and it

can park its ridiculous looking self-driving cars. The recommendation for Google moving

forward is to build on its success and build on its revenue model. This includes looking

for new and effective ways that media outlets can take online advertising to the next

level. Like it effectively tied its search engine into targeted advertising, Google can take

a bold step into linking media outlets with more effective and seamless ads that tie into

content. Right now online ads are afterthoughts and can be skipped in YouTube and

ignored as you scroll through the latest news release, but Google can do more in this

realm.

Google should also explore partnering with EBay and Amazon to create a stronger

value proposition when consumers bid or purchase items online. With the algorithms it

has in its search engines, Google can add those into EBay and Amazon to have

integrated advertising related to the items they are purchasing. Google could also create

a virtual shopping environment opening up a whole new arena for those still skeptical of

purchasing clothing online. By staying in Google’s intended market space and becoming

more of an expert in the areas where it does well, it will continue to dominate these

areas. Another recommendation is for Google to dive deeper into its Google maps

application with enhanced advertising tied into the street-level view of stores and

businesses globally. It could create a three-dimensional shopping experience where one

can browse items in a virtual store environment. In addition to Google Maps, developers

can take their 360-degree image capturing software to continue documenting hiking

trails in park spaces giving hikers and outdoor enthusiasts a sneak peak before they

head out the next day. In the Android market space, Google can work on linking any

vehicle’s navigation systems with mobile phones. In video, Google can enhance the

YouTube experience with HD video and 3-D video playback.

Conclusion

To conclude Google can retract its innovative gusto just enough so it can continue to

dominate the market spaces where it is already doing well. Collaborations with other

businesses in these areas like Amazon and EBay will open up great revenue potential

and keep investors faithful that Google will remain at the top of its game. Google can

channel innovations from employees to pursue areas of expertise. These areas include

perfected search engine options like Google Scholar, increasing the scope of targeted

advertising tied to global media outlets, Google maps that can make better use of

targeted advertising, Android mobile phones that can integrate with vehicles and finally,

YouTube can create an immersive experience with both 3-D and HD. Brin and Page need

to revisit their philosophy statements because with great focus comes great innovation.

References

Battelle, J. (2005) The Search: How Google and its rivals rewrote the rules of business and transformed our culture. Penguin Group. New York, NY.

Edelman, B., and Eisenmann, T. Google Inc. in 2014. Harvard Business School. Case 915-004, September 2014.

Google Investor Relations (2015). Google Inc. Announces Second Quarter 2015 Results. [Press release]. Retrieved from https://investor.google.com/earnings/2015/Q2_google_earnings.html

Kelleher, K. (2005, December). Who’s Afraid of Google? Wired. 233-236.

Laudon, Kenneth et al. (2014) E-Commerce Business Models and Concepts. E-commerce. Business. Technology. Society. (pp. 54-98). Upper Saddle River, New Jersey: Pearson Education Inc.

Mohammed, Rafi et al. (2003) Framing the Market Opportunity. Internet Marketing: Building Advantage in a Networked Economy. (pp. 32-78). New York, NY: McGraw-Hill.

Page, L and Brin, S. (2004, April 29) Letter from the Founders: ‘An Owner’s Manual’ for Google Shareholders. Google Inc. Form S-1 Registration.

Porter, M. (2008, January) The Five Competitive Forces that Shape Strategy. Harvard Business Review. Watertown, MA: Harvard Business Publishing.