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CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
I. CASE ABSTRACT
Google was founded in a garage in 1998 by Larry Page and Sergey Brin,
two Stanford computer science graduate students based on ideas generated in
1995. The name “Google” was chosen as a play on “googol,” a mathematical term
for the number one followed by one hundred zeros. It is thought the term was
appealing to the founders as it related to their mission to organize an
exponentially growing web. Founded on $100,000 from Sun Microsystems, Brin
and Page were on their way to creating an internet engine giant. Google
immediately gained the attention of the internet sector for being a better
search engine than its competitors, including Yahoo!.
8-1
Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
Strategic Factors
External Factors
Internal Factors
Performance
Governance
Alternatives
Corporate
& Mission
Strategic
1A 1B 2 3 4 5A 5B 6 7 8
O X X O X O O X X
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
1. This is a high turn on case. The students are very familiar with
Google, and enjoy researching Google.
6. We suggest that you can place this case anywhere in your course,
because of the turn-on value of the case.
• We also discuss how the Weights and Rating were developed and
the Weighted Score for the case under discussion.
• You can use the results to call on students whose score seem
to be out of line with the case.
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
4. Does Google have any core competencies? If yes, what are they?
12. What are the advertising solutions that Google provides its
customers?
I. Current Situation
A. Current Performance
i. History
a. Google started in a garage in 1998 by Larry Page and
Sergey Brin
b. Founded with $100k seed money from Sun Microsystems
c. Released Google Adwords in 2002
d. Went public in 2004
e. Gmail introduced 2006
f. Acquired YouTube in 2006 for $1.6B
g. Acquired DoubleClick in 2008
h. Introduced GoogleDocs in 2009 for educational
applications
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
iii. Accolades
a. By 2000, Google was available in 15 different
languages, and receiving international acclaim as
being a better search engine than Yahoo!.
b. In 2010, Google was recognized as the global leader
in technology that was focused on the ways people
obtained information.
B. Strategic Posture
i. Mission
a. To organize the massive amounts of data on the
internet for users in a practical and meaningful way
and make this information useful to users
ii. Objectives
a. To be the world’s largest provider of organized data
b. Improve the methods people obtained information
c. Change the internet revenue model (2002 Adwords
Release)
d. Increase site traffic and increase the word-of-mouth
marketing of the Google brand
e. To create a high-quality user experience
iii. Strategies
a. Retain top talent in a competitive landscape
a. 10% raises and $1000 bonuses given out in 2010
b. Created an innovative environment where
management was transparent
b. Attract and retain end users in a highly competitive
landscape
c. Attract and retain top content providers
d. Growth through positive word of mouth due to a great
user experience and strategic acquisitions
e. Identifying the needs of end users and putting those
needs first
f. Compete on the relevance and usefulness of search
results
g. Strong brand recognition and brand identity
iv. Policies
a. Identify the needs of the end user and put those
needs first
b. Organize and make data useful for end users
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
B. Top Management
i. Eric Schmidt
a. CEO since 2001
b. Helped grow Google from start-up phase
c. Formerly CTO at Sun Microsystems and President of Sun
Technologies Enterprises
ii. Sergey Brin
a. Co-founder, President of Technology
b. Masters degree in computer science from Stanford
University
c. Bachelors degree with high honors in mathematics and
computer science from University of Maryland at
College Park
iii. Larry Page
a. Co-founder, President of Products
b. Masters degree in computer science from Standford
University
c. Bachelor of Science degree in engineering (computer)
from University of Michigan
iv. 6 additional SVP level executives
a. All bring diverse background of leadership from other
global companies
b. Strive to be communicative; making sure employees are
engaged and knowledgeable of new products
c. Highly skilled leadership with many years of
experience
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
B. Corporate Culture
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
C. Corporate Resources
i. Marketing
a. 7,338 employees
b. Rely heavily on word-of-mouth from quality user
experience
c. International revenues were 51% of corporate revenues
in 2010
d. On average, comprises between 8-9% of revenues each
year
ii. General & Administrative
a. 2,941 employees
iii. Research & Development
a. 7,443 employees
b. Testing new technologies, such as artificial
intelligence
c. On average, comprises between 11-12% of revenues each
year
d. Continually instituting the company culture of
innovative thinking and collaboration
iv. Operations
a. 2,113 employees
v. Finance
a. Revenues consistently increasing, however starting to
level off
b. Large cash balance in 2009 (> $10B) for use in
acquisitions and growth
c. $0 debt
d. See additional Financial Ratios in section X
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
b. Differentiation
a. Pros:
i. More hip user experience than Microsoft &
Yahoo!
ii. Incorporate a greater social networking
functionality to the Google experience
iii. Become equally adept at putting
information to use, just as much as
Google is superior in retrieving data
(artificial intelligence)
b. Cons:
i. Could lead Google away from the core
mission
ii. Difficult to differentiate when the 3
major players are pulling the same
internet-based data
8-10
Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
c. Stability
a. Pros:
i. Revenues are continuously growing and
demand is high for the service, which in
turn leads to a pretty stable corporate
environment.
b. Cons:
i. Rapid advances in technology require
Google to stay ahead of the tech curve in
order to maintain perceived leadership.
ii. Internet users are fickle – can and will
change search engines in order to satisfy
personal needs – no switching costs
d. Growth
a. Pros:
i. Massive amounts of cash on hand can
facilitate acquisitions in a tightened
credit environment
ii. Google, as perceived leader in the
industry, will continue to attract the
best and brightest minds in the industry
iii. Continued open and collaborative work
environment will continue to produce
innovative ideas
iv. Combining media and other information
sources to one outlet (Google TV,
smartphones)
v. Acquisition of startups and other small
companies at lower costs during difficult
financial times to continue obtaining
high quality talent and innovative ideas
b. Cons:
i. Many analysts believe Google has matured
and the rapid growth rates they’ve
experience may level off
ii. Slowed growth rates will have an adverse
effect on stock price
iii. Continued legal issues may play a factor
in the growth of Google
iv. Google must become selective in the
companies it courts, as many high profile
companies have rejected Google’s offers –
could be seen as a negative against
Google, such as the brand is getting old
v. Many startups have shunned Google’s
offers for fear of getting lost in
Google’s vastness
8-11
Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
B. Recommended Strategy
i. Growth/Differentiation
a. Continuing to grow will allow Google to obtain a
greater market share with less (perceived) effort
b. Differentiation in terms of interface and user access
will allow Google to maintain its core search engine
information gathering, while providing users a
greater cadre of tools and resources for information
and uses for that information.
c. Google must maintain an entrepreneurial and
collaborative atmosphere, as to not become too
“corporate” and have their perceived image of
“hipness” shattered.
d. Tweaking of the revenue model to have advertising
fees rise and fall based on the seasonal trends of
the Google user.
e. Identify emerging international markets to plant the
Google seed.
VII. Implementation
A. Programs
i. Continue to promote constant communication throughout the
organization, to facilitate innovate thinking to maintain
industry leader status
ii. Integrating the Google culture seamlessly into future
acquisitions to allow the acquired companies to become
contributing factors to the overall Google success
iii. Be adept at identifying emerging technological trends and
being the first company to capitalize on these trends
iv. Continuing to fund R&D to create new technologies to
maintain competitive advantage
v. Help fund IT infrastructure in the emerging international
markets to implant the Google brand in these markets
B. Feasibility and Timetables
i. With Google’s massive amount of cash on hand and no debt
load, it appears as if these programs are financially
feasible
ii. Budgeting is near impossible due to the speed of changing
technology and the necessity to react quickly to these
changes
C. Google needs to continue with operations as they are currently
implemented
8-12
Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
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CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
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Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
X. FINANCIAL ANALYSIS
A. FINANCIAL RATIOS
YEARS
1. Liquidity Ratios 2009 2008 2007 2006 2005 2004
Current Ratio 10.62 8.77 8.49 10.00 12.08 7.91
Quick (Acid Test) Ratio N/A N/A N/A N/A N/A N/A
Inventory to Net Working Capital N/A N/A N/A N/A N/A N/A
Cash Ratio 3.71 3.76 2.99 2.72 5.20 1.25
2. Profitability Ratios
Net Profit Margin 27.57% 19.39% 25.33% 29.02% 23.87% 12.51%
Gross Profit Margin 35.15% 30.43% 30.64% 33.48% 32.86% 20.07%
Return on Investment (ROI) 16.10% 13.31% 16.59% 16.66% 14.27% 12.05%
Return on Equity (ROE) 18.11% 14.97% 18.53% 18.06% 15.56% 13.63%
Earnings Per Share - diluted 20.41 13.31 13.29 9.94 5.02 1.46
3. Activity Ratios
Inventory Turnover N/A N/A N/A N/A N/A N/A
Days of Inventory N/A N/A N/A N/A N/A N/A
Net Working Capital Turnover 0.90 1.22 1.09 0.90 0.74 1.36
Asset Turnover 0.58 0.69 0.65 0.57 0.60 0.96
Fixed Asset Turnover 4.88 4.16 4.11 4.43 6.38 8.42
Average Collection Period 49.05 44.25 47.57 45.51 40.91 35.69
Accounts Receivable Turnover 7.44 8.25 7.67 8.02 8.92 10.23
Accounts Payable Period N/A N/A N/A N/A N/A N/A
Days of Cash 157.38 144.97 133.77 122.00 230.54 48.85
4. Leverage Ratios
Debt to Asset Ratio 11.09% 11.11% 10.44% 7.76% 8.30% 11.60%
Debt to Equity Ratio 12.48% 12.50% 11.66% 8.41% 9.05% 13.12%
Long-term Debt to Capital Structure N/A N/A N/A N/A N/A N/A
Times Interest Earned N/A N/A N/A N/A N/A N/A
Coverage of Fixed Charges N/A N/A N/A N/A N/A N/A
Current Liabilities to Equity 7.63% 8.15% 8.97% 7.66% 7.91% 11.62%
5. Other Ratios
Price/Earnings Ratio 30.38 23.11 52.03 46.33 82.64 132.05
Dividend Payout Ratio N/A N/A N/A N/A N/A N/A
Dividend Yield on Common Stock N/A N/A N/A N/A N/A N/A
8-17
Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
Income Statement
For the year ending 2009 2008 2007 2006 2005 2004
Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Costs and expenses: 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Cost of revenues 37.39% 39.56% 40.07% 40.07% 41.98% 46.06%
Research and development 12.02% 12.82% 12.78% 12.78% 9.77% 12.39%
Sales and marketing 8.39% 8.93% 8.81% 8.81% 7.63% 9.27%
General and administrative 7.05% 8.27% 7.71% 7.71% 6.30% 5.90%
Contribution to Google
0.00% 0.00% 0.00% 0.00% 1.47% 0.00%
Foundation
Non-recurring portion of
settlement of disputes with
Yahoo 0.00% 0.00% 0.00% 0.00% 0.00% 6.30%
Total costs and expenses 64.85% 69.57% 69.36% 69.36% 67.14% 79.93%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Income from operations 35.15% 30.43% 30.64% 30.64% 32.86% 20.07%
Interest income and other, net 0.29% 1.45% 3.55% 3.55% 2.03% 0.31%
Impairment of equity
0.00% -5.02% 0.00% 0.00% 0.00% 0.00%
investments
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Income before income taxes 35.44% 26.86% 34.19% 34.19% 34.89% 20.39%
Provision for income taxes 7.87% 7.46% 8.86% 8.86% 11.02% 7.87%
Net income 27.57% 19.39% 25.33% 25.33% 23.87% 12.51%
Balance Sheet
For the year ending 2009 2008 2007 2006 2005 2004
Assets
Current assets:
Cash and cash equivalents 25.18% 27.25% 24.00% 24.00% 37.75% 12.88%
Marketable securities 35.28% 22.63% 32.12% 32.12% 40.47% 51.47%
Accounts receivable 7.85% 8.32% 8.54% 8.54% 6.70% 9.41%
Deferred income taxes, net 1.59% 0.90% 0.27% 0.27% 0.48% 0.59%
Income taxes receivable 0.06% 0.00% 0.57% 0.57% 0.00% 2.13%
Prepaid revenue share, expenses and
2.06% 4.42% 2.74% 2.74% 2.23% 4.81%
other assets
Total current assets 72.02% 63.52% 68.24% 68.24% 87.63% 81.29%
Prepaid revenue share, expenses and other
1.03% 1.37% 0.67% 0.67% 0.30% 1.07%
assets, non-current
Deferred income taxes, net, non-current 0.65% 0.00% 0.13% 0.13% 0.00% 0.35%
8-18
Copyright © 2015 Pearson Education, Inc.
CASE 8
GOOGLE, Inc.(2010): The Future of the Internet Search Engine
8-19
Copyright © 2015 Pearson Education, Inc.
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Osviittoa ottamassa;
Pian mahti maahan joutu, 110
Kulki kylästä kylyhän,
Pitäjästä pitkin ensin
Rautalammin rannikoita.
Wiipymättä Wiitasaari,
Kuuluja kalapitäjäs, 115
Saapi siitä selvän tieon;
Pian joutu Pielaveille,
Kohta Karttulan karille,
Suonenjoille sukkelasti.
Min' en tieä miss' on laita 120
Tämän kuulon kulkemassa;
Tilan tieän, kuss'on alku,
Kosk' on Koivulan pajassa
Rauta kiinni kiehutettu,
Rakennettu ankkuriksi, 125
Sakari Lyytisen sanalla,
Juuri Jussi Häyriseltä;
Se oli pitäjän seppä,
Konstin oppinut osaava.
Kaikki nuoret nuottamiehet 130
Wiipymättä viinaryyppy
Laittakaate Lyytiselle!
Ei se paljo palkinnoksi.
Mahti maksapi enemmin.
taikka:
Herralle Maanmiehelle.
kauniisa täss, S'ä Sielun luondoa tutkit, Näytät sen seleväst, ett'
Sielum alati pysy. Hän ei tyhjäxi meist' taid' tull', eik' loppua saada.
Tain hänell' sinä sitt' osotat ratk' suurexi lahjax, Ett' tämä tutkindo
paljon meill' onnea tuotta, Perään cose' ajatteleman sijn' samasa
saatta: Cuing' häll' sitten käy, cosc' aica loppunut ombi? Wiel' tätä
paits ei taid' myös Wallat seisovatolla; Hyvä sijtt' paljon canss' saa
caik' caikisa säädyis, Cose' tämä totuus ain juur selväsä muistosa
pysy Nyt olis avara mull tila kyll, Toveritsani, kijltä Sun avujas, ja
cuing' caunist olet viettänyt aicas; Mutt ei tarvita tät' sill' Työs sen
sanoa taita. Toivotan ainoastans Sull' aicomuxisas onne! Tiedän
myös vissist', ett' nijncuin Wiisaus ennen Palveliains palcan runsast
on maxanut aina; Nijn ei Sinuacan suingan hän unhoda poies.
Maan
miesten
puolest,
hätäise
st selitti
mielens
Abraha
mus
Tackou.
Sinun
Ystäväs aina
C.G.
***
*****
Tosiaanki taitais tarvita olla vahvat korvat, jos vaan kerran olisivat
kuulleet greikalaisen runon ääntä, ja eivät heti tuskautuisi
tämmöisistä suomalaisista, kun nämät kaksi jälkimmäistä.
(Lisää toiste).
(Kuoleelle lapselle itkee emo). "Kun uutsi, mie lapsi, uutsi. Kai on
olovinah aikojani. Kantamieni lapsi, armahani aikaseni,
mieliarmahieni. Woi olevinah armasie laatimieni! kun viihittömie
virkoja viisastelet. Ollahko hyvävirkasie, eikö olla kiirimättä? Ollahko
armasvirkasie, eikö olla aikomatta, aian ankeutta, aimollisuutta? Eikö
olla antamatta, eikö olla siittimättä; siliet mielaloset, mielaloja
akkiloitset. Eikö kantamatta olla, eikö kuuromatta, eikö läpi kuurnan
kulkovie — — —" Kuilla ilmoilla kylvettämäsini? Saatoilmoilla
saajastaseni, satalaatuseni sankojen vesien kera. Et kyennyt koko
kylän nuorisossa ikiaikusessa. Mintä kallehilla ilmoilla kasvattaja
kantajaseni? Mintä siitoilmoilla siittiäseni? Mintä armahilla ilmoilla
asettajahe aikojaseni? Mintä ankehuilla ilmoilla akkeloitsia armas
hyväseni? Mintä ankehut'aioilla, aijin vähissä aikasissa? Mintä
uutotskoaioilla, urhailla ajoilla, aijin vähissä oikasissa? Mintä
viihittömillä aioilla — — Eikö leipomatta oltais lehtometsissä leukevie
lehosvierilöitä löyettävie? Eikö kantamatta oltais katajametsissä
kasvanuisie katajakankahie kaaettavie? Intomatta oltais
hyväinnollisie, ottamatta hyväopastullisie, aikomatta hyväaimollisie
———
Waan kuitenki, jos ollee tosi, mitä ainaki olen naisten kehuvan
kuullut, näitä outo sanasia, ikivanhoja itkuvirsiä löytyvän monesta
laadusta ja pian äärettömästi, niin, ehkä näyttävätki joutavilta loruilta,
niitä ei pitäisi silleen heittää. Taitaispa, kun enemmin olisi kerättynä,
niistä, kun muistaki tarinoista, lähteä joita kuita ennisajan tietoja ja
jotai hyvää kielentutkioillenki. Niinpä ennisaikaan koskeva on
muutamasta toisesta nähtävä, hevosilla luultun kuolleita Tuonelaan
vietäviksi. Sanat ovat: "Tulkaa ottamahe orihepoloilla, valkein
vahatuohuksuien (vaksikynttiläin) kera. Kattoote (peittäkää)
hyväsesti, ettei vesi, vihma vuotaisi jne". Waan näitä ja vanhoja
satuja varten, joita myös paljon Wenäjen Karjalassa löytyy, pitäis
hyväaikanen, erityinen kerääjä lähteä, sillä ennen kun niitä oikein
selvään kootuksi saisi, tarvitsisi tarkemmin heidän puhe'laatunsa
tuntea, kun sitä vähällä ajalla voi tuntemaan oppia.
Satuja.
1. Lampaat ja Koira.
2. Mehiläinen ja Kyyhkynen.
Mehiläinen kaihilan lehdellä istuen joi joen rannalla. Wahingosta
pyörähti veteen ja oli hukkua polonen. Sen nähden kyyhkynen
tempasi varvun puusta, jossa istu, ja vei sen mehiläiselle hengen
pelasteeksi. Ei aikoja jälkeen tuli jousimies ja viritti jousensa
kyyhkysen varalle. Mehiläinen vanhan auttajansa hengen vaarassa
havaten, lensi, pisti luaastessa jousimiestä käteen, jotta nuoli hairahti
muunne ja kyyhkynen jäi henkiin. Niin kosti hyvän hyvällä.
3. Sääski ja Härkä.
MEHILÄINEN W. 1836.
Marraskuulta.
Kummia.
Huotarin Naimisista.