Googlenomics - An economic analysis of Google’s Innovation

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The project is an attempt to study the economics behind the google's innovation and how the company leverage's these innovations for further profits

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  • An economic analysis of Googles Innovation. By Saurabh Agarwal 1212049 Surabh Jain 1212050 Swati Bajaj 1212063 Swati Jain 1212064 Utkarsh Jain 1212066 Submitted on Aug 31, 2012 Googlenomics
  • 2 Goooooooooogle Table of Contents What is Google?............................................................................................................................................4 Googles Two Sided Market......................................................................................................................5 What is Innovation......................................................................................................................................5 Google and Innovation..................................................................................................................................6 Google's Product Development Philosophy .............................................................................................6 Googles Culture........................................................................................................................................7 Google and Product Innovations ..................................................................................................................8 Innovations in YouTube ........................................................................................................................8 Google Search ...........................................................................................................................................9 Gmail.......................................................................................................................................................10 Innovations in Gmail ...........................................................................................................................10 Google driverless car...............................................................................................................................11 Project Glass............................................................................................................................................11 Google Chrome ......................................................................................................................................11 Google Analytics......................................................................................................................................11 Android...................................................................................................................................................11 Google Fiber ...........................................................................................................................................12 Google Nexus Q ......................................................................................................................................12 Google Maps ...........................................................................................................................................12 Innovations in Google map..................................................................................................................12 Google and IP.............................................................................................................................................13 Google and Trademarks..............................................................................................................................13 Exploitation of network Effects...................................................................................................................14 Google and Economies of Scale & Scope....................................................................................................14 Google and Auctions...................................................................................................................................15 Auction of IPO.........................................................................................................................................15 AdWords/Ad sense Auction....................................................................................................................16 How does Ad word Auction work? .....................................................................................................16 How does Google determine which ad is shown where?...................... Error! Bookmark not defined. How does Google determine what you pay?......................................................................................17
  • 3 Goooooooooogle Google and Two Part Tariff.........................................................................................................................17 Google and Learning Curve.........................................................................................................................19 Conclusion...................................................................................................................................................20
  • 4 Goooooooooogle What is Google? Google Inc. is an American multinational corporation which provides Internet-related products and services, including internet search, cloud computing, and software and advertising technologies. Advertising revenues from AdWords generate almost all of the company's profits. The company was founded by Larry Page and Sergey Brin while both attended Stanford University. Google was first incorporated as a privately held company on September 4, 1998, and its initial public offering followed on August 19, 2004. The company's mission statement from the outset was "to organize the world's information and make it universally accessible and useful" and the company's unofficial slogan is "Don't be evil". With the mission of organizing the worlds information and making it universally accessible and useful Google also believes in the set of core philosophies. Focus on the user and all else will follow o Google believes in doing what is best for the user and everything else will follow. Its best to do one thing really, really well o Google does search and does it really well. They are market leaders in search and also build search as part of their other products like Gmail, Google drive etc. Fast is better than slow o Google believes in speed, may it be speed of searching on its page or may it be breaking its own records of performance in Chrome web browser. Democracy on the web works o Google promote a lot of open standards and feel that the web itself gives enough signals for what is good and what is bad. They harness this very well in their PageRank algorithm in search. You dont need to be at your desk to need an answer o Google sees a lot of potential in the mobile world and believes it will be essential for future growth of the company. In Fact many of their products are becoming mobile first. You can make money without doing evil o Google generates its revenue from ads displayed on its products and strives hard to make the ads non-intrusive to the user, moreover it does not charge the advertiser till user has expressed interest in the ad by clicking it. Theres always more information out there.
  • 5 Goooooooooogle The need for information crosses all borders. You can be serious without a suit. Great just isnt good enough. Googles Two Sided Market Google operates in a two sided market, where it serves both consumers via the products like search Mail etc. and advertisers and publisher with products like blogger, YouTube and ad sense. With the goal of making worlds information universally accessible, Google builds products varied for consumers like Gmail, Search, Android, and Chrome with the common aim of making the information available when needed. They also display ads only when is relevant to the user so that its beneficial for both users and advertisers. It also shares revenue to publishers for the ads shown on their websites via ad sense. It works in two ways for Google to meet their mission, it promotes publishers to get good content online by rewarding them and it also helps Google to organize more information in useful way. What is Innovation? Innovation is the creation of better or more effective products, processes, services, technologies, or ideas that are readily available to markets, governments, and society. Innovation differs from invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to the creation of the idea or method itself What is IPR: Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce. Industrial Property includes patents for inventions, trademarks, industrial designs, copyrights, trade secrets
  • 6 Goooooooooogle Google and Innovation Googles innovations can be attributed to two factors: Google's Product Development Philosophy and Google's Culture. Google's Product Development Philosophy Google follows a 70-20-10 formula to divide its product investments in three ways. Seventy percent targets its core search and advertising products, 20 percent focuses on related products, and 10 percent centers on the most experimental products. These experimental projects include ones where the company remains unsure if users will adopt the service or if it would make money, but such experiments are critical for the long term. Another important factor here is the way Google acquires companies. Google