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April 14, 2020

Google Business Model Canvas

Google is Search!

Facebook is social media. Google is Search!

Last time, I said Facebook has proven the theory of platform business models right (it states
that exponential growth would be possible due to the indirect network effects). Google has
proven it even more (and a few years prior to Facebook).

Have you wondered how today’s world (ok, let’s say the internet) would look like without
Google? The early homepages for millions of internet users were portal (or tabloid)-type pages,
where search was only one of the features often buried among a lot of clutter. Other prominent
pages also adopted the portal-style design (here Yahoo 1994, and 1997), or just look at the
current AOL.com.

When Google emerged, their pages looked very bare. They focussed only on one value
proposition: search results and reduced all search and transaction costs involved (it is said that
this was due to the fact that they did not know enough about webpage design but seems it
was to their advantage).
 Prior to Google, most people had their ISP’s home page as their start page. These are gatekeeper-type pages
channeling traffic along lanes of their choice

Portal-type pages are gatekeepers that channel traffic in desired directions through “internet
traffic lanes” consisting of a system of links. A good search engine that is not prone to
manipulation or bias can still be seen as a gatekeeper but is much less so than a portal-page.
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Prior to the internet, buyers had to contact Yellow Pages or search offline for local or small
businesses. Economic theory says by reducing search time, cost and efforts, Google unlocked
new demand. The free search services provide value to businesses and users by matching
them. Advertising then piggy-backs on this service but typically presents search-related results
and constitutes most of Google’s revenue (>80%).

“Our mission is to organise the world’s information and make it universally accessible
and useful.” Google

Our focus will largely be on Google Search and the many tools closely related to it. The main
exclusions are Google Cloud (see my article on Amazon Web Services to understand Cloud)
and the related Internet of Things gadgets (see my Amazon Alexa personal assistant and IoT
article on the topic).

About this article

This article is an extract from my premium in-depth report on Google. The in-depth report
contains more details more advanced concepts.

Revenue
Revenue by type (segment)
Though Google has a lot of products that generate revenue, they only split those out that start
making some notable revenues (in some cases, they delay reporting on individual products to
keep it as a trade secret). The bar for reporting revenues separately is high.

Google’s total revenues as of December 31 2019 are $161.9b. Major revenues are as shown
below. Note, that the parent company is Alphabet but as you can see below, most revenues are
generated by Google (who also own YouTube).
Google Search & other ads $98,115 m

YouTube ads $15,149 m

Google Network Members’ properties $21,547 m

Google Cloud $8,918 m

Google other * $17,014 m

Other Bets revenues $659 m

* Includes YouTube non-advertising revenues

Revenue by geography
Revenue by geography is determined by the address of the (advertising) customer.
Geographically, Google (Alphabet) reports user metrics and revenue for:

Global
US
Europe, Middle East, Africa (EMEA)
Asia-Pacific (APAC)
Other Americas

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Value proposition
Platform business models need to think about the value proposition to all sides of the multi-
sided platform. You hear me say always that platform business models are about positive
network effects as well as search and transaction cost reduction. Google is certainly the best
example of the concept of search cost (as in search effort) reduction.

On a high level, the value proposition to users are (based on their own words):
 1. Organise (the world’s) information: through crawling and indexing and then matching
with search queries
2. Make information accessible: this includes making accessible things: search news
archives, patents, academic journals, billions of images and millions of books (through
scanning)
3. Accessing information in most life situations: including on the go on their mobile
(mobile-friendly pages will rank higher)
4. Fast pace of search (and search result pages): millions of search results found within
milliseconds. Their Chrome browser and tools are typically the fastest among peers
including on mobile. Their desire for pace is uncompromising (compare MS tools that
never get faster even if the underlying HW has exponentially gotten faster according to
the old saying: “What Intel giveth, Microsoft taketh”)
5. Clarity & simplicity: What may have started due to lack of HTML skills has become one
of their biggest value proposition, clarity and simplicity of the start page and search
results. Laser focus on usefulness
6. User search experience: Fast, simple, clear, best ranking of search results without
preference for ads which are marked as Ads
7. Focus, esp no distraction through ads: Many search results don’t display any ads
simply because no relevant ads are in the inventory. Ad quality scores aim to ensure
display ads are relevant to the search
8. Continued iteration and improvement: on various levels (see key activities)
9. Democracy: “We assess the importance of every web page using more than 200 signals
and a variety of techniques, including our patented PageRank™ algorithm, which analyzes
which sites have been “voted” to be the best sources of information by other pages
across the web” Google

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Key partners
Google is a multi-sided platform with a large ecosystem of partners. Listed below are the
“sides” of the multi-sided platform followed by the partners. The main focus is on the Google
Search platform.

Sides of the multi-sided platform

1. Users: The majority of users are searching and consuming content. A lot of users also
use some or many of Google’s tools, such as GMail (1b users), Maps, the Android OS
(2.5b users), etc
2. Websites/blogs: Website owners create/curate content that Google crawls, indexes and
presents as search results. Some sites stand out, such as Wikipedia who often get a
featured box if Google thinks the user is looking for knowledge-type information. Other
search-intents also lead to a tailored presentation of search results with some sort of
content curation from relevant sites
3. Brands: Large brands as such may not stand out as they do on social media. Their
search results may appear higher in the search result if relevant, but there is no logo or
anything. Exceptions are of course search-specific results presentation, think of
shopping results if this anticipated as the search intent
4. Businesses: Businesses – especially if registered in Google My Business – will be
presented in a map
5. Advertisers: Google presents ads up the top, provided it is considered relevant enough
for the search. Ads on Google remain native, that also means they are very simple –
often a simple text snippet. Advertisers can also add so-called ad extensions/call-outs
(these can be additional links to relevant subpages, their phone number or other relevant
information and more)
6. Influencers, VIPs: influencers, VIPs, etc don’t as such get a lot of additional featuring. In
some cases, you may find Tweetboxes being shown within the search results if this
seems relevant to the search
7. Media/News: News results also play an important role in the search platform. This
becomes clear if you look at the search result autocomplete feature which can often
feature keywords of breaking news. News has its own section with results often from the
big media outlets or online magazines
8. Creators / publishers: YouTube has a lot of creators who can make money from ads. On
 the Search platform, videos have their own section (it does not only show YouTube video
in those results)

I see the above as relevant enough to call them a separate side. You can call them a key partner
but I think a “side” of a multi-sided platform is actually a bit more than that.

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 Check out our related articles on platform business models:

Google
Facebook
Twitter
Snapchat
Pinterest
Yelp

Partners
Here are what we would more ordinarily understand as key partners:

1. Customer service partners: Google partners provide services for the various aspects of
marketing, some examples are (there is certainly an overlap with SEO partners):
Search Advertising
Video Advertising
Display Advertising
Shopping Advertising

2. SEO partners: There is a large industry of Search Engine Optimisation partners that
support website creators to attract more and better traffic. The industry is poised to
reach $80b in 2020
3. Developers: Google is highly revered among developers. They offer many ways for
developers to get in touch:
Thousands of communities directed towards students, professionals,
entrepreneurs, women. Examples are: local Google Developer Group (GDG)
chapters, Developer Student Clubs (also hundreds of them globally, Launchpad:
global accelerator programs
Groups organised around technologies (or consoles): Google API, Google Cloud,
Google Play, Firebase, Chrome and more
Roughly a dozen events per years centred around a technology

4. Research partners: Google has an entire research portal with about two dozen research
areas that they are interested in (which is a lot). A few examples are:
 Algorithms & theory
Robotics
Speech processing and natural language processing
Quantum computing
Security, privacy and abuse prevention
Health and bioscience
And a lot more

5. Quality raters: Google has thousands of trained globally distributed third-party Search
Quality Raters who help to evaluate the results of improvements to search algorithm
upgrades using an extensive quality assessment guide (pdf here)
6. News partners: Google has started the Google News Initiative , a network of partners to
collaborate on digital news, industry-wide challenges (this includes fake news and fact-
checking) and innovative programs. Google states: “Google cares deeply about
journalism. We believe in spreading knowledge to make life better for everyone. It’s at the
heart of Google’s mission. It’s the mission of publishers and journalists. Put simply, our
futures are tied together.” They are also partnering with the International Fact Checking
Network

Google News Initiative collaborates with industry players to present facts

Business model canvas

So, here is Google’s Business Model Canvas:

The advanced stuff covers all the details. And details make masters. Don’t just download this image and let is wither
on your hard- or cloud-drive. Take the time to study the details.

Key activities
The most important activities for platform business models are to enhance positive network
effects and reduce negative ones. Google has significant positive network effects for its users
but needs to constantly manage and improve these. Positive network effects come from good
matching-making of search queries with search results.

Negative externalities can come from poor search results (e.g. due to inaccurate algorithms
and manipulation).

1. Crawl & index (organise information): The search process starts well before any users
types a search query and it never stops. Google’s algorithms constantly crawl the
internet by following links. Each page is being indexed for the words it contains (like the
index of a book but for all words), analysed for numerous (>200) signals and organised
in a search index. While far more complex, we can still imagine this a little bit like a good
old library (if you still remember what that is)
2. Search & match: The key activity that Google performs is to match what it considers to
be the best result to any given search. This is a big feat due to the billions of pages
(estimated ~8b, on around 1.6-1.9b web sites with 400m active ones, FYI: here is also
the first web page ever!) available online and trillions of searches per year and the
permutations across both. It happens through a “whole bunch of algorithms” (Google).
Have a look at the infographics that explain the 5 steps involved (on a high level) at the
end of this section
3. Rank & present: As mentioned previously, Google is working on the best ways to present
the search results. For starters, it ranks the results with what it considers to be the most
relevant result at the top (here the original work of the founders on PageRank). As we
have seen, they are now delivering different presentation elements that align with the
search intent. I believe there are still many opportunities on the presentation side. It will
also help them to achieve higher user engagement results (however, pushing this too far
could put them at odds with website owners who at the end want the right users to come
to their sites rather than reading a small snippet of their content on the search results
page). You have seen some of the elements in the key activities section
4. Organise knowledge (build knowledge graph): Google takes things beyond indexing by
organising information and knowledge in graphs. This helps them in the presentation of
results. The knowledge panel (a type of summary view) that (currently) is presented on
the right hand side (when using a large screen) brings together information from various
sources around the user’s search. But the ambition is much broader “This is a critical
first step towards building the next generation of search, which taps into the collective
intelligence of the web and understands the world a bit more like people do.”
5. Improve value proposition: Ongoing innovation on their core value proposition is
essential for any platform. For example, the first step of the search process is to
 understand what the user actually means. They state that it took them 5 years to develop
search intent understanding which “involves steps as seemingly simple as interpreting
spelling mistakes, and extends to trying to understand the type of query you’ve entered
by applying some of the latest research on natural language understanding. ” Their
conclusion is that it significantly improved results in over 30% of searches. It has
essentially helped to try to decipher what strings of words should be looked up in the
index. Aside from the big innovations such as natural language understanding, the
knowledge graph and similarly large improvements, there are of course the ongoing
smaller improvements
6. Build ecosystems of tools: Google develops ecosystems of tools. These can align more
or less with the mission of organising the world’s knowledge. Many of their tools are
covering devices and formats that people use for search or more broadly to access
information. Android OS (in the supported GMS version), pre-installs Google’s core tools
including the Chrome browser as the default browser. Or take Youtube which has the
value proposition to provide knowledge in video format (rather than text plus image)
7. Incorporate relevant ads: Ads can exert significant negative externalities when done
poorly. Google has never allowed “loud” or overly interruptive ads from the very
beginning. Initially, only text ads were allowed. But even therein they never allowed things
like fully capitalised words, exclamation marks (“FREE!!!”), etc. Of course, they have long
moved on from text-only ads But they have pretty clear rules around all types of ads,
including display ads. If you compare Google or GDN-sourced display ads, you will
certainly notice that there is significantly less clickbait-type stuff (compare to Snapchat
who we have covered recently)
8. Prevent low-quality search results, this includes deliberate misinformation, spam,
clickbait and more. It is very important and I am covering it in more depth under the
customer relationship section. Google manages this in the “Quality of content” step in
their search algorithms
9. Engaging users is mission-critical for any platform business. But this can mean a lot of
things. Social media apps engage users through the news feed, another way are active
prods such as notifications, messages from friends, active statuses of friends, etc. With
Google things are a bit different. They provide tools for free. The Chrome browser opens
to Google Search. It integrates the search function in the URL field. This was not the case
in the early days of the internet. They are giving away the Android OS, GMail, Maps, etc
for free. Another way is to make the search results page more engaging through the
various rich results that we talked about
10. Influence content creation on the web: Google has quite an influence over certain
elements of content creation that is largely hidden to users. For many websites, Google
is the largest source of traffic. And website owners follow the rules/recommendations
on how to structure webpages. Good Search Engine Optimisation (“white hat” SEO)
 means to structure the site and content in a way that it increases the quantity and
quality of traffic to the site (Google has their own SEO guides)
11. Innovate: More broadly, innovation involves:
Major innovations on existing core products, tools or algorithms such as the
introduction of the knowledge graph. Important examples are “Hummingbird”,
“Panda”, Penguin”
The moon shots – they call out YouTube, Android and Chrome; add Waymo (the
autonomous cars) and a lot of other projects underway
Acquisitions and integration thereof into their portfolio
Long-term research fields as shown before
Continuous improvements on apps, websites, tools, hardware, algorithms, etc
And more

12. Marketing: sales and marketing make 12% of their revenues and thus a large item in
their cost structure (and similar to Facebook with 14%)

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 Google interprets search intention and present results accordingly

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Customer relationships
(We are looking at this from the lens of the underlying needs, how they are served and the
things that affect customer relationships. There is a natural overlap with the value proposition)

If you are a regular follower of my blog, you know that this is one of the most important
categories for platform business models (in the long run). You can check out my previous
articles on Facebook, Twitter, Snapchat on more introductory details and facets on this topic.

Platform manipulation
Imagine a web page that is deceptive but ranks really well on Google. It could get a lot of traffic
on their pages and do bad stuff (e.g. misrepresent what they sell or just have a ton of low-
quality high-ranking content and tons of ads in-between). And now imagine that this happened
a lot because some users had figured out how to rank high on Google. Well, the aim of “black
hat SEO” was just that: rank high without adhering to the intention of Google’s guides. There
are/were many tactics. Google’s reputation and customer relationships depend a great deal on
their ability to keep this at bay.

And then there are the difficult cases where improving the value proposition may come at the
cost deteriorating customer relationships. Many platforms face this problem when it comes to
personalisation vs privacy.

Personalisation vs privacy
Let’s look at this important example. Reduction of search and transaction costs are some of
the biggest value propositions for platform businesses. While a lot of factors can fall under this,
in the case of Google search results, the term “search cost” can be taken literally. But as a
regular reader, you also know that I am always pointing out the post-transaction results. These
are often negative effects that users could incur after a transaction is finished. Violation of
privacy needs (which are highly subjective) can be an important post-transaction cost.
There are many wonderful sites on innovation and business management. Our pages focus on
innovation knowledge, especially the platform business model. I am covering these topics from
a business management perspective.

Channels
Basically, all channels, esp to users, are through the websites and apps. Most transactions are
automated and self-serving. But the list can be very long, depending, of course, how many
Google tools and services one uses.

Google seems to be using the same architecture and principles for user interaction across their
~200 products. This speaks for their unmatched software architectural prowess.

1. Key interaction channels are:

The URL field in most (if not all) browsers directly triggers a search unless a valid
URL has been entered. This was not the case in the early days
Being the default search engine: For most people and browsers, Google is the
default search engine. In combination with the above (the URL field), it triggers
trillions of searches annually
Android OS, Chrome OS / browser, Maps, etc: Google gives users many free
tools which trigger search activities (and data capture) or have Google Search set
as default (e.g. Android/Chrome OS)
Notifications: A number of Google tools have notifications, this includes GMail,
News, their communication tools, the Search app among others. Many
notifications are also sent to the user’s GMail account. Some notifications are
based on subscription-notification features – most prominently YouTube
Recommendations: A number of Google’s tools have recommendations, such as
YouTube, PlayStore, PlayMusic and other in particular media related tools/apps

2. And more – you know where.

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Customer segments
Who is using search engines and what are the details of the customer segments? The answer
to the first part is easy: almost every internet user (though not everybody is one – more in a
second). The question regarding the segments is a bit more difficult. Unlike social media,
Google Search is only poised in limited ways to find out the demographic aspects (language
and location: yes; other aspects such as age, gender, education, income and interests:
depending on user data share, online behaviours and privacy settings).

Determination of demographic profiles via search data is less desirable because it (a) is less
reliable and (b) fraud with privacy concerns compared to data that users volunteer on social
media.

User segments
There are more internet and search engine users among: younger, more educated and higher
income users. These are segments for the US but also likely to be true more widely.

The sensitivity of daily active users to income and education were particularly strong. However,
this was also likely an outcome of the innovation adoption curve, with the gap likely having
closed somewhat by now.

Cost structure
Google’s cost structure consists of:

1. Cost of revenues
2. R&D expenses
3. Sales and marketing
4. General and administrative

The diagram show the cost structure on a high level as percentage of revenue. You can see that
costs have inched up over the years (well, you would have heard this many times over).
 Note: I have added costs of $2,736m, $5,071m and $1,697m associated with EU-fines into the G&A costs of 2017,
2018 and 2019 respectively (and $500m, DoJ, 2011). Hence, showing G&A slightly higher for those years than
Google’s annual report will show, e.g. 1% in 2019

Thank you for spending your precious time to read the entire article!

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Article by Dr Murat Uenlue / Business Model Canvas, PBM in-depth examples, Platform business model / Google

About Dr Murat Uenlue

Murat Uenlue, PhD (Engineering), Program Management Professional
(PgMP), Project Management Professional (PMP). Project managing the
most significant strategic innovation project for our company >$1 billion.
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