Secret to Success

Although it was its innovation that made Google the number one search engine, the company did not make a dime until they started auctioning ads that appear alongside the search results.  Today, advertising accounts for 99% of the companies revenue whose market capitalization now tops $100 billion.

Research is now say that Google’s auction method, which was invented internally, was key to their success.  In fact the AdWords became so successful that some of its key feature were quickly adopted by top competitor Yahoo!, the then search-ad leader; they give the top spot in its search results page to the advertiser who pays the most per click.  However, Google maximizes the revenue it gets from the “real estate” by giving the best position to the advertiser who is likely to pay google the most in total, based on price per click multiplied by Google’s estimate of the likelihood that someone will actually click on the ad. As a result, it is estimated that Google earns about 30% more revenue per ad impression that Yahoo does.  

What makes Google’s auction so different? Normally, bidders always have the incentive to tell the truth.  However in Google’s auction, they don’t.  By understanding the top price, they are willing to pay, advertisers could get a slightly lower position on the search page for a lot less money.  They concluded that naive advertisers who told the truth could overbid.  The system also has pluses for advertisers too. I’m not sure it gets more innovative then this.

 

http://www.businessweek.com/magazine/content/06_10/b3974071.htm

Google is Consumer’s First Choice

Its hard to remember life without Google. But when we realize that Google was created in our life time, it dawned on us that we have lived without Google.  However, nowadays, you don’t find many people who can live with out it.  We walked around Tulane University asking students their favorite search engine?  Of the 30 people that were asked, 30 responded with one word: Google.  Further more, we decided to see Google’s standing in the rest of the world. Below are some of the results we found:

 

It became clear that Tulane students were not alone with the choice of Google.  This 13 year old search engine dominates over 3/4 of the market share.

Google: Financial Status

Google announced its financial results for the first three months of 2012. Its results were typically extraordinary, and demonstrate—if more demonstration is needed—a truism of our time: this is a golden age for capital. 

Having fallen short of elevated expectations at the end of 2011, Google surpassed them this time, with revenue of more than $10 billion and a profit just shy of $3 billion. Revenue increased 24 percent from last year at the same time; earnings were up more than 50 percent. More than half of Google’s revenue came from outside the United States.

Google is not a small company; it employs more than 33,000 people around the world. But those 33,000 generate more revenue than nearly 100 countries in the United Nations, and if Google were an independent state, its more than $40 billion in annual income would place it between Turkmenistan and Luxembourg. 

In the past two years, as the developed worlds of the U.S., Europe, and Japan have each struggled to maintain minimal growth, and as even the growth engines of Brazil, India, and China have slowed, global corporations have seen their profits soar. In 2011, when the U.S. as a whole grew 1.7 percent, corporate profits grew 7.9 percent; in 2010, when the U.S. grew 3 percent, corporate profits grew an astonishing 32 percent. In dollar terms, in 2010, U.S. corporate profits were $1.8 trillion. In 2011, they were $1.95 trillion. If all U.S. corporations were a sovereign entity, they would be one of the largest countries in the world.

The profitability is simply amazing as evidenced by the stats below. 

Working at Google..

I have always wondered what it would be like to work at Google- the number one search engine.  After researching online, I gained somewhat of an insight to life as a Google employee.  A Google employee of 11 months posted an interesting article about her 10 favorite perks from working at Google.  Food, company culture, and the brand all made top ten.

11 Months of Working at Google

As a graduating senior, interviewing for jobs is an intimidating process.  This video takes a closer look at some of the most difficult interview questions.

Google’s Stock Slips and They Decide to Split

Today, April 13, Google Inc.’s stock suffered its biggest one-day drop in nearly three months after the its surge in earnings was offset by the worrisome trend in its ad prices.  Shares of Google shed 4.1% to close at $624.60, sliding back into the red for year to date.  The stock has fallen 3.3% since January 1.  These results underscored a current problem: more users are clicking on ads, but the price paid for each click continues to slip.   To preserve the company’s long-term interests, Google has announced plans to issue a new class stock to existing shareholders, thus effectively splitting shares 2 to 1.  Here’s a break down of the plan:

Q. Why is Google doing this?

A. With the current stock structure, voting power heavily concentrated among the company’s founders, Larry Page and Sergey Brun and Executive Chairman Eric Schmidt.  Google is afraid of diluting that power as it issues shares to employees and to companies that it acquires through stock purchases.  While there is no immediate danger of that happening, the founder see no need to wait.  But it is important to remember that this proposal will only have an effect on governance over the very long term.

Q. What does this mean for existing shareholders?

A. Investors typically have Class A stock now.  They will be given equal number of Class C shares which will not have any voting power.  The value of the Class A stock will be split between the two, so if the stock is trading at $600 when this occurs, a Class A share will be worth $300 and a Class C will be worth $300.  Investors will now have twice the number of share they held before, but the total voting power and stock value will not change.  The investors will be free to buy and sell their shares in either class independently and the new class will get its own ticker symbol.

Q. Is this a new strategy for Google?

A. No.  Since Google went public in 2004, the founders have emphasized the need for long-term governance.  They believe they need to retain the voting power to do that.  The stock structure had been designed from the start to leave the power with those who currently have it (Page, Brin and Schmidt).

Page and Bring believe that Google will be more successful if it concentrates on the long term, even the the short-term stumbles a bit.  They harp on that note that it took three years for the first phone based on Google’s Android operating system to come out and another three years for the system to reach critical mass.  Therefore, they do not want investors voting with short-term interests in mind.

Q. So is this a split or a dividend?

A. The stock is being split, as the value of each share will be cut in half.  This split allows smaller investors to buy shares.  However, the move is driven more by the desire to retain control.  It can be considered a dividend, but instead of getting cash, the investors will get stock.

Q. Is this decision final?

A. Existing shareholder must approve the plan at the annual stockholder meeting on June 21.  But because Page, Brin and Schmidt control the majority of the votes, it is expected to pass.

 

Fun Facts

1. The Google Doodle

 

 

 

Google is known for the homepage “doodles” to mark an event or anniversary.  The first doodle was originally designed as a kind of “out of the office” message.  In 1998, the two co-founders of the company went away for the weekend.  They designed this Burning Man doodle (pictured above) as a way to let their users know they were out of the office and we not able to fix technical issues until they returned.

 

2. Interesting Figures from Google’s IPO

 

 

 

The initial price for Google’s stock back in August of 2004 was $85 per share.  Today, the stock price has soared $624 making GOOG a rather nice investment for many.

3.  Google Rents Goats

 

 

 

 

 

 

Yup, you read that correctly, Google rents goats.  As aport of their low-carbon approach to maintaining their property, the company rents goats to cut down on the amount of weeds and brush at the Google HQ.  Not only are the much more eco-friendly, they are ” a lot cuter to watch than a lawn mower.”

4.  Googler vs. Noogler

In order to distinguish between a recent google employee and a old one, the company decided to put a name on it.  Google employees are referred to as Googlers, while new employees are referred to as Nooglers.  To really distinguish between the two Nooglers were required to wear a hat (pictured above) but rumor has it that those hats are a thing of the past and are not required anymore. Phew!

 

5. Google Logo was off centered until 2001

 

 

 

 

 

 

 

The Google logo was not centered on the sparse Google homepage until March 31, 2001.  The homepage used to have a bais to the left-hand side.