Google SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats
Rebekah Howe; Alex Harrison contributed reporting from Atlanta.
December 9, 2011
December 9, 2011
Opening Vignette
In 1996, Larry Page and Sergey Brin, Stanford University graduate
students, began a research project that they hoped would interconnect
the world, enabling technologies for a single, integrated and universal
digital library. They began exploring the components of the internet to
familiarize them with the concept and overall structure. Working
together the two students built a search engine called “BackRub” that
used links to determine the importance of individual web pages. By 1998
they had formalized their work to create the company known today as
Google.
The company’s mission is to re-organize the world’s information and it make universally accessible and useful. Google has grown by leaps and bounds; however it remains necessary to constantly reassess the external environment in light of the strengths of weaknesses within the firm to sustain competitive advantage.
Conducting a SWOT analysis on Google requires an overlapping internal and external focus. The following analysis will begin with an internal focus of the firm’s strengths and weaknesses, which will later help to uncover the external opportunities and threats.
The company’s mission is to re-organize the world’s information and it make universally accessible and useful. Google has grown by leaps and bounds; however it remains necessary to constantly reassess the external environment in light of the strengths of weaknesses within the firm to sustain competitive advantage.
Conducting a SWOT analysis on Google requires an overlapping internal and external focus. The following analysis will begin with an internal focus of the firm’s strengths and weaknesses, which will later help to uncover the external opportunities and threats.
Strengths
Google runs the gamut with its renowned search engine technology and
is second to none in the search engine marketplace as it stands. Among its competitors
that proliferated the early search engine market (i.e., Yahoo, Aol,
lycos, hot bot, msn, infoseek, ask jeeves, etc.), Google quickly became a
household name as searchers discovered that it was not the run of the
mill search engine. While most search engines displayed non
differentiated results for keyword search terms, Google set itself apart
from the rest by displaying more unique information that did not
readily come up elsewhere (Sweney, par. 4).
How did Google accomplish the feat of providing more beneficial, unique content than the rest? The secret lies in the proprietary algorithm that Google used to determine how useful content was. Web pages were ranked according to relevance and notoriety.
The essence of the Google search engine is reinforced by its brand equity, says researchers with Research Results, Inc. Google has topped the list of the world's most powerful brands, with new research estimating its value to be 86 billion dollars, says Millward Brown internet marketing research firm. The WPP-owned research company Millward Brown puts Google at number one in its annual top 100 global brand power list for the second year in a row with a 30% annual increase in value.
Google on average receives 34,000 searches per second, 2 million per minute, 121 million per hour, and 2 billion per day). Research Results inc., an internet marketing firm reports that 97% of all prudent users of the internet use Google as their first choice for finding relevant and quality information. People readily trust Google, because of the utility in finding relevant information, because Google is renowned for its ability to provide high quality, highly relevant, and unique information to its users. The Google brand promotes dependability, reliability, accessibility, and speed.
Google occupies a place at the top of the minds of online consumers as well. Even the word “Google” and “search” are used synonymously. Instead of using the verb, “search,” many people just say, “Google it.” A Google search has become the most recognized method to find information on the Internet.
Among the 2 billion searches performed daily, nearly half of those searches are done so in search of every-day products and services. And although many searches are made in search of information, such information often leads to the final stage of buyer readiness. The trend for combined income housing has helped make Google a multi-billion dollar corporation with an unprecedented increase in the amount of online buying in the United States among other countries. This economic trend has made Google Adwords the largest and most profitable search engine marketing tool available today.
Google Adwords is an advertising platform that places relevant text ads to the right of Google search results. Most businesses use Adwords, because of its high conversion rate. Adwords converts more actual buyers than any other search marketing platform to this day. At the forefront of the program's success is the versatility it offers. Users can choose how much to pay per click, the geographic boundary the ad is to be displayed, the number of times the ad is displayed, and when the ad is displayed. Advertisers do not have to pay by the number of clicks on an ad advertisement; they can also pay by number of actual converted sales. And because the income generated from online advertisers is nearly all profit, this marketing tool is easy to promote, with free advertisements for new users.
In addition to providing useful information, Google also offers a tool designed to help site owners create useful information. The Analytics tool is used to determine where a website visitor came from, how long they stayed, and how well the information conformed to the user’s needs. Further details include:
This tool provided to site owners helps them create quality content, which makes Google more valuable in return. No other search engine provides this capability. It gives Google a strategic advantage of providing quality content that scores high on relevance.
Besides the search platform that made Google a search engine giant, Google's core competency is not limited to search engine technology. The company specializes in providing free software that is used by most businesses worldwide. Google's feature rich, and experience facilitating applications are used for a variety of purposes. Customized email systems create a great service to organizations of 100 or less employees for free. Google provides software such as Google Chrome, Google Toolbar, Gmail, and Google Plus, all of which are low-cost, simple and continuously updated. The Google 360 application allows team members to come together online and edit documents in real time. Though Google might have begun as a search engine, it has continued to improve and enhance its many operations and services including various forms of advertising and web applications for all kinds of tasks.
Consistent Growth: Unlike many technology companies, Google has consistent revenue streams from their advertising business. Google is the most visited website on the internet, and for this reason, they have no shortage of customers looking to advertise using their platform. Many technology companies must issue debt and equity to pay for research and design, which can be costly; however, Google has been able to accumulate a significant cash reserve, which allows them to expand and invent at a lower cost than smaller competitors.
How did Google accomplish the feat of providing more beneficial, unique content than the rest? The secret lies in the proprietary algorithm that Google used to determine how useful content was. Web pages were ranked according to relevance and notoriety.
The essence of the Google search engine is reinforced by its brand equity, says researchers with Research Results, Inc. Google has topped the list of the world's most powerful brands, with new research estimating its value to be 86 billion dollars, says Millward Brown internet marketing research firm. The WPP-owned research company Millward Brown puts Google at number one in its annual top 100 global brand power list for the second year in a row with a 30% annual increase in value.
Google on average receives 34,000 searches per second, 2 million per minute, 121 million per hour, and 2 billion per day). Research Results inc., an internet marketing firm reports that 97% of all prudent users of the internet use Google as their first choice for finding relevant and quality information. People readily trust Google, because of the utility in finding relevant information, because Google is renowned for its ability to provide high quality, highly relevant, and unique information to its users. The Google brand promotes dependability, reliability, accessibility, and speed.
Google occupies a place at the top of the minds of online consumers as well. Even the word “Google” and “search” are used synonymously. Instead of using the verb, “search,” many people just say, “Google it.” A Google search has become the most recognized method to find information on the Internet.
Among the 2 billion searches performed daily, nearly half of those searches are done so in search of every-day products and services. And although many searches are made in search of information, such information often leads to the final stage of buyer readiness. The trend for combined income housing has helped make Google a multi-billion dollar corporation with an unprecedented increase in the amount of online buying in the United States among other countries. This economic trend has made Google Adwords the largest and most profitable search engine marketing tool available today.
Google Adwords is an advertising platform that places relevant text ads to the right of Google search results. Most businesses use Adwords, because of its high conversion rate. Adwords converts more actual buyers than any other search marketing platform to this day. At the forefront of the program's success is the versatility it offers. Users can choose how much to pay per click, the geographic boundary the ad is to be displayed, the number of times the ad is displayed, and when the ad is displayed. Advertisers do not have to pay by the number of clicks on an ad advertisement; they can also pay by number of actual converted sales. And because the income generated from online advertisers is nearly all profit, this marketing tool is easy to promote, with free advertisements for new users.
In addition to providing useful information, Google also offers a tool designed to help site owners create useful information. The Analytics tool is used to determine where a website visitor came from, how long they stayed, and how well the information conformed to the user’s needs. Further details include:
- Geographic area where the user accessed the internet
- The keyword that was searched to bring the visitor
- Reveal questions the user might have
- How long the visitor stayed
- Which pages were viewed
- The click through rate (number of pages viewed divided by time)
- Other website specifics
This tool provided to site owners helps them create quality content, which makes Google more valuable in return. No other search engine provides this capability. It gives Google a strategic advantage of providing quality content that scores high on relevance.
Besides the search platform that made Google a search engine giant, Google's core competency is not limited to search engine technology. The company specializes in providing free software that is used by most businesses worldwide. Google's feature rich, and experience facilitating applications are used for a variety of purposes. Customized email systems create a great service to organizations of 100 or less employees for free. Google provides software such as Google Chrome, Google Toolbar, Gmail, and Google Plus, all of which are low-cost, simple and continuously updated. The Google 360 application allows team members to come together online and edit documents in real time. Though Google might have begun as a search engine, it has continued to improve and enhance its many operations and services including various forms of advertising and web applications for all kinds of tasks.
Consistent Growth: Unlike many technology companies, Google has consistent revenue streams from their advertising business. Google is the most visited website on the internet, and for this reason, they have no shortage of customers looking to advertise using their platform. Many technology companies must issue debt and equity to pay for research and design, which can be costly; however, Google has been able to accumulate a significant cash reserve, which allows them to expand and invent at a lower cost than smaller competitors.
Weaknesses
International Reputation: AlthoughGoogle
is a company that has grown to be the number one search engine, in the
United States, a few problems have occurred. Foreign countries are not
open to the amount of information Google needs for certain
applications. As Read Write Web states, leaders from ten countries
wrote Google criticizing the privacy of new applications (Melanson,
2010). The applications that are referred to are Google Buzz and Google
Street View. Google has also faced a problem with China. Google
looked to expand their services into the China region, but China
experienced problems with the search engine. The Chinese government was
very dissatisfied with the information that is displayed while
searching the Web. Steven Levy discusses the last draw for China was
when they searched certain words and vulgar sites appeared (2011).
Today’s generation of business is all about expanding internationally.
For Google to expand internationally they will need to customize their
services based on each countries culture. As of right now, Google is
not in a position to satisfy foreign countries cultures.
Revenue: As with all channels of media, Google survives on one thing and one thing only, and that is advertising. Larry Kim describes how 97% of Google’s revenue comes from advertising (2011). This is not seen as a weakness for Google as of the year 2011, but it could reap a negative outcome for the future. We have seen how the newspaper and print industry has disappeared over the years. No longer do people would walk outside and grab the newspaper in the morning.
Nowadays most individuals wake up and find out what is going on either through their phone, tablet, or computer. The new generation is focused on finding out information every hour on the hour. This undoubtedly creates an opportunity for advertising on the Web through Google. The question is not about the popularity of Google but how long this trend of advertising on the Web will last. As the generations change, so could the advertising industry. Google without having to depend so heavily on advertising.
Security: Google has recently begun its infiltration into the mobile and tablet PC device industry. Google is known for its openness of information which is a problem, when dealing with security measures. During the initial stages of the android tablet development, Google has experienced faulty applications and unreliable system designs. This system flaw has taken place because of Google’s lack of concern with security protection. This was witnessed when hackers intruded the 2.3.3 and earlier versions of the android tablet allowing disclosure to user’s personal information via open wireless access. According to an article in the 2011 Washington Post, 97% of Android users were affected because of they had the earlier versions. Google is working towards creating a more secure and stable environment for its user’s. Substantial evidence supports that Google should take security issues more seriously by either outsourcing security work or designing a tighter system. While Google’s expertise is centered on its search engine, further security measures could be devoted to personal computing and mobile devices.
Google Android: The wave of smart phone popularity has provided a huge customer base for Google’s products. The Android is now the most widely used operating system, and has increased awareness of other tools offered by Google, such as Google Maps, Google Offers, Google Finance, and others in the rapidly expanding Android Application Market.
Google’s Employees: Google not only creates a unique environment for their customers but also for their employees. Google’s has a reputation for hiring highly educated and highly motivated individuals. One of their philosophies: You can be serious without a suit; in this philosophy they describe their employees as energetic, passionate people from diverse backgrounds with creative approaches to work, play and life. Furthermore, Google philosophy sets a corporate culture that is a huge internal strength. The culture promotes creativity and this creativity spills over into their services and products. The employees at Google have very unconventional office activities that helps the brain think differently and more creatively.
Revenue: As with all channels of media, Google survives on one thing and one thing only, and that is advertising. Larry Kim describes how 97% of Google’s revenue comes from advertising (2011). This is not seen as a weakness for Google as of the year 2011, but it could reap a negative outcome for the future. We have seen how the newspaper and print industry has disappeared over the years. No longer do people would walk outside and grab the newspaper in the morning.
Nowadays most individuals wake up and find out what is going on either through their phone, tablet, or computer. The new generation is focused on finding out information every hour on the hour. This undoubtedly creates an opportunity for advertising on the Web through Google. The question is not about the popularity of Google but how long this trend of advertising on the Web will last. As the generations change, so could the advertising industry. Google without having to depend so heavily on advertising.
Security: Google has recently begun its infiltration into the mobile and tablet PC device industry. Google is known for its openness of information which is a problem, when dealing with security measures. During the initial stages of the android tablet development, Google has experienced faulty applications and unreliable system designs. This system flaw has taken place because of Google’s lack of concern with security protection. This was witnessed when hackers intruded the 2.3.3 and earlier versions of the android tablet allowing disclosure to user’s personal information via open wireless access. According to an article in the 2011 Washington Post, 97% of Android users were affected because of they had the earlier versions. Google is working towards creating a more secure and stable environment for its user’s. Substantial evidence supports that Google should take security issues more seriously by either outsourcing security work or designing a tighter system. While Google’s expertise is centered on its search engine, further security measures could be devoted to personal computing and mobile devices.
Google Android: The wave of smart phone popularity has provided a huge customer base for Google’s products. The Android is now the most widely used operating system, and has increased awareness of other tools offered by Google, such as Google Maps, Google Offers, Google Finance, and others in the rapidly expanding Android Application Market.
Google’s Employees: Google not only creates a unique environment for their customers but also for their employees. Google’s has a reputation for hiring highly educated and highly motivated individuals. One of their philosophies: You can be serious without a suit; in this philosophy they describe their employees as energetic, passionate people from diverse backgrounds with creative approaches to work, play and life. Furthermore, Google philosophy sets a corporate culture that is a huge internal strength. The culture promotes creativity and this creativity spills over into their services and products. The employees at Google have very unconventional office activities that helps the brain think differently and more creatively.
Opportunities
Opportunities:
Identifying opportunities involves looking at changing industry factors to identify changing consumer demand which, in turn, reveals emerging opportunities. According to proponents of the I/O view, external (industry) factors take precedence over internal factors affecting strengths and weaknesses (David 74). Key external factors in the communications industry have a direct impact on the sustaining competitive advantage and potential attractiveness of various strategies, and opportunities. Most Industry factors (i.e., technology, market segments, and populations) reveal opportunities with a threat exposing offshoot.
Google Plus:Google Plus is in a great spot to combine all of Google’s services and become the best social networking and internet search tool available. Google has successfully become the go-to place for just about anything on the web; however, all of these tools on Google are unique and stand-alone from the other tools Google offers. With Plus, this changes.
Maps: Google offers “Latitude” which is an application that gives a real-time feed of where your mobile device is (assuming you have your Latitude App activated.) From Google Plus, a user’s friends could go view Google Maps using their Latitude App and get a map of exactly where all their friends are. This could be hugely popular in the social scene, as one user might use Google Plus to figure out which Bar has the most friends in attendance or it could be hugely popular for parents, wishing to find out where their child when it’s 2 hours after curfew.
Offers: In today’s competitive environment, brick and mortar retailers are getting slammed by online sites such as Amazon. However, Google Plus could change this. Imagine the benefit to a store if by using Google Latitude and Google Maps, they knew when a person was near their location. If the user allows it, stores could access their location and make them special offers, such as a “20% off coupon, good for the next 2 hours.” Something like this would definitely increase foot traffic in stores and make it less appealing to shop online and more appealing for users and retailers to become a part of Google Plus.
Shopping: The consumer is always curious about product reviews. Through Google Plus, a user could see which of his or her friends have purchased or viewed certain products. Additionally, Google Shopping could have an interface that links to Google Offers to show coupon deals available for certain products.
News/Finance: The investing and current events concerned community is made up of millions of users who enjoy hearing other peoples’ thoughts on a particular company’s stock, news about the company, or just global news in general. News effects everyone in one way or another, and if Google Plus was able to make it easier for users to exchange viewpoints on anything from a company’s next earnings report to a natural disaster in China, Google’s News and Finance services could become drastically more popular.
Other Services: There are countless services provided by Google. As with the examples above, a Google Plus interface could only make these services more popular and more useful to the online and “real world” communities.
iMobi:iMobi is a relatively small company that has rapidly emerged as one of the leaders in developing mobile advertising. The company offers businesses high quality mobile apps, mobile web sites, mobile integration, and bulk SMS services. The company is highly dependent on the success and popularity of the Android, but is offering a very profitable and robust service that could fit directly into Google’s business model. If Google acquired this company, the integration of mobile applications into Google’s Android device would become much more seamless and even more attractive to businesses looking to enhance their mobile presence.
Google Books:Google Books is a service offered by Google that is essentially a database of thousands of books (in their entirety and free). Google could expand this service to offer E-Books for sale, much like the Kindle Store by Amazon. With the Tablet PC market expanding rapidly, and Google’s Android Operating System leading the way, Google could position themselves to take substantial market share in the multi-billion dollar E-Book industry.
Google TV: Google has set up free ultra-fast fiber optic networks in trial areas, such as Kansas City. The internet speeds available with this fiber-optic network present a great opportunity to offer streaming video content. Google TV is in a position to do this. Currently, shows and movies are offered online through services such as NetFlix or Hulu. Many people have already opted to ditch cable television and use an antenna to get local stations and use NetFlix to watch all their favorite TV shows and movies. Google’s YouTube service offers many television shows and movies and with some work and acquisitions, Google could easily offer everything that the likes of NetFlix or Hulu does. To make it more attractive, these services could be streamed using Google’s Fiber Optic network, which would essentially replicate the expensive service offered by the likes of Comcast. Americans pay a fortune to get access to television shows and movies. Accessing all of these things via online channels is the future and Google has the tools to be a very profitable leader in the broadcasting industry.
Identifying opportunities involves looking at changing industry factors to identify changing consumer demand which, in turn, reveals emerging opportunities. According to proponents of the I/O view, external (industry) factors take precedence over internal factors affecting strengths and weaknesses (David 74). Key external factors in the communications industry have a direct impact on the sustaining competitive advantage and potential attractiveness of various strategies, and opportunities. Most Industry factors (i.e., technology, market segments, and populations) reveal opportunities with a threat exposing offshoot.
Google Plus:Google Plus is in a great spot to combine all of Google’s services and become the best social networking and internet search tool available. Google has successfully become the go-to place for just about anything on the web; however, all of these tools on Google are unique and stand-alone from the other tools Google offers. With Plus, this changes.
Maps: Google offers “Latitude” which is an application that gives a real-time feed of where your mobile device is (assuming you have your Latitude App activated.) From Google Plus, a user’s friends could go view Google Maps using their Latitude App and get a map of exactly where all their friends are. This could be hugely popular in the social scene, as one user might use Google Plus to figure out which Bar has the most friends in attendance or it could be hugely popular for parents, wishing to find out where their child when it’s 2 hours after curfew.
Offers: In today’s competitive environment, brick and mortar retailers are getting slammed by online sites such as Amazon. However, Google Plus could change this. Imagine the benefit to a store if by using Google Latitude and Google Maps, they knew when a person was near their location. If the user allows it, stores could access their location and make them special offers, such as a “20% off coupon, good for the next 2 hours.” Something like this would definitely increase foot traffic in stores and make it less appealing to shop online and more appealing for users and retailers to become a part of Google Plus.
Shopping: The consumer is always curious about product reviews. Through Google Plus, a user could see which of his or her friends have purchased or viewed certain products. Additionally, Google Shopping could have an interface that links to Google Offers to show coupon deals available for certain products.
News/Finance: The investing and current events concerned community is made up of millions of users who enjoy hearing other peoples’ thoughts on a particular company’s stock, news about the company, or just global news in general. News effects everyone in one way or another, and if Google Plus was able to make it easier for users to exchange viewpoints on anything from a company’s next earnings report to a natural disaster in China, Google’s News and Finance services could become drastically more popular.
Other Services: There are countless services provided by Google. As with the examples above, a Google Plus interface could only make these services more popular and more useful to the online and “real world” communities.
iMobi:iMobi is a relatively small company that has rapidly emerged as one of the leaders in developing mobile advertising. The company offers businesses high quality mobile apps, mobile web sites, mobile integration, and bulk SMS services. The company is highly dependent on the success and popularity of the Android, but is offering a very profitable and robust service that could fit directly into Google’s business model. If Google acquired this company, the integration of mobile applications into Google’s Android device would become much more seamless and even more attractive to businesses looking to enhance their mobile presence.
Google Books:Google Books is a service offered by Google that is essentially a database of thousands of books (in their entirety and free). Google could expand this service to offer E-Books for sale, much like the Kindle Store by Amazon. With the Tablet PC market expanding rapidly, and Google’s Android Operating System leading the way, Google could position themselves to take substantial market share in the multi-billion dollar E-Book industry.
Google TV: Google has set up free ultra-fast fiber optic networks in trial areas, such as Kansas City. The internet speeds available with this fiber-optic network present a great opportunity to offer streaming video content. Google TV is in a position to do this. Currently, shows and movies are offered online through services such as NetFlix or Hulu. Many people have already opted to ditch cable television and use an antenna to get local stations and use NetFlix to watch all their favorite TV shows and movies. Google’s YouTube service offers many television shows and movies and with some work and acquisitions, Google could easily offer everything that the likes of NetFlix or Hulu does. To make it more attractive, these services could be streamed using Google’s Fiber Optic network, which would essentially replicate the expensive service offered by the likes of Comcast. Americans pay a fortune to get access to television shows and movies. Accessing all of these things via online channels is the future and Google has the tools to be a very profitable leader in the broadcasting industry.
Threats
Threats:
Lawsuits: Quite possibly the biggest threat to Google is the considerable amount of money it must spend in defending itself in court. In 2010, Google spent almost two billion dollars (almost 7 percent of revenues) on legal related services. The outcome of these costly litigation processes is typically an equally costly settlement or ruling that royalties must be paid.
Patent lawsuits in Silicon Valley are quickly becoming a booming business. One of the most notable suits against Google right now cuts deep into their Android operating system and open source software in general. Oracle announced in August of 2010 that they had hired David Boies, the “Most Hired Attorney of Corporate America” according to CNN Money, to sue Google for patent and copyright infringement.
Oracle claims “In developing Android, Google knowingly, directly and repeatedly infringed Oracle’s Java-related intellectual property.” Oracle is seeking drastic relief: permanent injunctions on Android development, destruction of all copies of Android that violate copyrights, triple damages, and legal costs.
The threat of losing this case would mean huge losses for Google’s top line and the treat of having to settle this case would mean huge losses for Google’s bottom line, because their 2 options are cross-licensing and cash settlement. The cash settlement option takes further deeper degree of risk because it could open the door to Oracle going after all other companies that have sold Android devices or built phones with Android devices. This could create a new wave of lawsuits against Google from these companies.
Competition: Competition is always a threat, but in Google’s case, intense competition comes from new sources each day. And the costs of remaining competitive could add up quickly. Google is targeted by competition in its search business, social networking business and application business by the biggest names in technology; Oracle, Microsoft, Facebook and Apple. Additionally, smaller, emerging start-ups could innovate quicker and provide services quicker than Google.
Economic Downturn: Economic downturn particularly affects Google due to highly discretionary sources of revenue. Google’s largest source of revenue and its fastest growing source of revenue would be negatively affected by a decrease in consumer spending. Approximately 96% of Google’s revenue comes from companies who use Google to advertise. In the event of a severe downturn, advertising budgets could be cut and the loss of cash flow would destroy Google’s ability to aggressively invest in research and development.
Political Risk: The technology sector is rapidly changing and new regulations are frequently being created. Compliance with these rules could present large costs. Additionally, if Google is forced to comply with new strict privacy laws, the services it offers could be less useful to its users, which would hurt revenues, increase costs, and require a change in business practices and strategy. An uncertain regulatory environment makes research and development spending more risky.
Mobile Search: The increase in mobile devices and decrease in personal computers could negatively affect search revenues. Smaller screen resolution can create problems in viewing advertisements. If Google cannot provide an attractive environment for advertisements, the value of their services could decline. Additionally, voice activated search could present problems. Apple’s Siri and similar programs in the future have the potential to eliminate the need for internet browser based search; this could negatively affect the pillar of Google’s revenues. Google must expand into new businesses.
Human Resources: The ability to grow and provide innovative services depends directly on the ability to hire and retain employees with the ability create these services. The loss of key personnel could hinder the management of Google’s technology, culture, or strategic direction.
Lawsuits: Quite possibly the biggest threat to Google is the considerable amount of money it must spend in defending itself in court. In 2010, Google spent almost two billion dollars (almost 7 percent of revenues) on legal related services. The outcome of these costly litigation processes is typically an equally costly settlement or ruling that royalties must be paid.
Patent lawsuits in Silicon Valley are quickly becoming a booming business. One of the most notable suits against Google right now cuts deep into their Android operating system and open source software in general. Oracle announced in August of 2010 that they had hired David Boies, the “Most Hired Attorney of Corporate America” according to CNN Money, to sue Google for patent and copyright infringement.
Oracle claims “In developing Android, Google knowingly, directly and repeatedly infringed Oracle’s Java-related intellectual property.” Oracle is seeking drastic relief: permanent injunctions on Android development, destruction of all copies of Android that violate copyrights, triple damages, and legal costs.
The threat of losing this case would mean huge losses for Google’s top line and the treat of having to settle this case would mean huge losses for Google’s bottom line, because their 2 options are cross-licensing and cash settlement. The cash settlement option takes further deeper degree of risk because it could open the door to Oracle going after all other companies that have sold Android devices or built phones with Android devices. This could create a new wave of lawsuits against Google from these companies.
Competition: Competition is always a threat, but in Google’s case, intense competition comes from new sources each day. And the costs of remaining competitive could add up quickly. Google is targeted by competition in its search business, social networking business and application business by the biggest names in technology; Oracle, Microsoft, Facebook and Apple. Additionally, smaller, emerging start-ups could innovate quicker and provide services quicker than Google.
Economic Downturn: Economic downturn particularly affects Google due to highly discretionary sources of revenue. Google’s largest source of revenue and its fastest growing source of revenue would be negatively affected by a decrease in consumer spending. Approximately 96% of Google’s revenue comes from companies who use Google to advertise. In the event of a severe downturn, advertising budgets could be cut and the loss of cash flow would destroy Google’s ability to aggressively invest in research and development.
Political Risk: The technology sector is rapidly changing and new regulations are frequently being created. Compliance with these rules could present large costs. Additionally, if Google is forced to comply with new strict privacy laws, the services it offers could be less useful to its users, which would hurt revenues, increase costs, and require a change in business practices and strategy. An uncertain regulatory environment makes research and development spending more risky.
Mobile Search: The increase in mobile devices and decrease in personal computers could negatively affect search revenues. Smaller screen resolution can create problems in viewing advertisements. If Google cannot provide an attractive environment for advertisements, the value of their services could decline. Additionally, voice activated search could present problems. Apple’s Siri and similar programs in the future have the potential to eliminate the need for internet browser based search; this could negatively affect the pillar of Google’s revenues. Google must expand into new businesses.
Human Resources: The ability to grow and provide innovative services depends directly on the ability to hire and retain employees with the ability create these services. The loss of key personnel could hinder the management of Google’s technology, culture, or strategic direction.
Conclusion
As success in the online media industry is heavily reliant on
competitive forces at play, a penetrating SWOT analysis of the ever-changing
industry in which Google operates is the most effective means to that
end. As globalization becomes the rule more than the exception in future
markets, so too is the ability to focus on emerging markets. Finding a
competitive edge involves assessing what has happened so as to apply
what has been learned.
Rebekah Howe reported from Atlanta. Alex Harrison, Sheila Khanna, and Nathan Duke contributed reporting.
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