Have you ever wondered about the secret behind Google’s huge success? Let me tell you what it is. It’s all about the business model. In this article I will walk you through Google’s business model and its patterns that made google not only an amazing company but an industry influencer that’s difficult to compete with, especially if it’s about generating sales for businesses using paid search optimization.
Google aside, all successful startups have one thing in common: A decent business model.
By business model, I don’t mean a lengthy document with many pages and financial forecasts. In fact, the era of using old school business modeling is over. The new approach towards startup’s business plan which is based on the amazing business model canvas make business planning for startups easy and efficient.
In fact, One important element in Google’s business model that differentiates Google from other enterprises is the fact that Google is using the Multi-sided platform business model pattern. By providing a free platform for web surfers to search the internet, Google gain access to invaluable data about almost everyone.
Since Google, like every other platform, need to generate money their business model focuses on Advertisement. When you look at Google’s services and offering such as Gmail, Google Docs, Google Search, you can find a dedicated spot for advertisement.
The question is how could Google attract so many visitors and sell that many advertisement places?
This questions brings us to reviewing Google’s Business Model. Many people seem to believe that advertisement is the main focus of Google’s business, however, advertisement is not the only revenue stream of Google and its parent company, Alphabet.
In fact, the main factor that differentiates Google’s business model from other advertisement platforms is the insights and analysis of people’s online behavior. That data contributes greatly to Google’s value proposition.
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What’s Google’s Value proposition:
Google’s business model is empowered by three Value Propositions. Although Google has different value proposition for its users, they all literally follow one single philosophy: providing very targeted advertising globally.
Value Proposition #1: Google for Webmasters.
The first group that Google targets is webmasters. Google’s value Proposition to those who have a website is about enabling them to monetize their content and earn money from content.
Google also provides services like Blogger.com, a free blogging platform to widen its reach to the content owners who don’t want to have a registered domain name or a separate website.
The company also helps bloggers and online content publishers to earn money through a very interesting content monetization service known as “AdSense”. AdSense allows content publishers to show google Ads on their site and earn money
Once content publishers apply for AdSense and receive their approved account, the arrangement will be as if you are a Google partner. Google will share certain percentages of the revenue made from your website. This way Google’s business model is not limited to showing ads on its search result pages.
Value Proposition #2: Google for Advertisers.
Advertisers are business owners or individuals who want to reach out to customers faster, and indeed they are willing to pay for it.
Unlike Bing and Yahoo that could not capture the advertisement market as good as the Big G, Google is still being the world’s largest network for online advertisement.
According to the latest trend, these days Google is facing a big competition against Facebook and Instagram. Although achieving high revenue by Google is inevitable, the company’s business model and its value proposition to advertiser segment relies on quality and high quantity visitors it can attract.
To achieve that, Google had introduced a service called AdWords that encourages startups, small businesses, enterprises and individuals to advertise online and promote their services using Google ads.
Since advertisers are very concern about their ads price and return of investment (ROI), Google provide them with an option to optimize their online advertisement campaign and refine it based on a few important options such as: search volume, keywords, demographic, location, etc.!
Specific targeting features provided in Google AdWords helps to increase the chance of user engagement. This way Google’s business model ensures advertisers that only ads relevant to the search term are displayed.
Ultimately, Google Ads are regularly shown on search engine results as well as the other networks such as content publisher’s web sites that earn from AdSense service.
Google’s business model: Revenue stream?
As a multi-sided platform, Google designed its business model to have 1 revenue stream. In other words, the business model is about making money from 1 segment “Advertisers”. It’s obvious that the more ads it displays to web surfers; the more money google earns from advertisers.
Google’s business has a strong differentiation factor that put the company in a supreme position. Advertisers cannot buy advertising space from Google and they have to go through a bidding process set by AdWords.
AdWords looks into the popularity of the keywords and the narrowness level of the target audience, and then proposes a biding price per advertisement impression, cost per installation, cost per click, etc.!
The pricing mechanism is fairly simple: Keywords with Higher search volume and popularity has higher price.
On the contrary, Google’s revenue from AdWords enables the company to focus on continuous improvement of free offerings such as search engine, Gmail, and AdSense which motivates even more content owners to become AdSense partners and help google succeed in online business.
Author Bio:
Ehsan Jahandarpour is a globally recognized startup coach and inventor of the “Launch your startup in a heartbeat” framework. Ehsan has raised the bar by helping companies like Microsoft, PETRONAS, and many startups to take their business model, business operation and promotion strategy to a different level. Ehsan shares his strategies, and proven startup frameworks in his blog https://jahandarpour.com. Follow him on Twitter @jahandarpour or LinkedIn.
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