Google’s $1 Trillion Business Strategy that made it Successful
We all are witnesses to the magical effect google has on our lives. What was once just a plain white web page has now become such an integral part of our lives that imagining life without it is scary and hard to comprehend. As a result, Google has emerged as one of the most successful companies on the planet. With its stock price skyrocketing by 5,000% and a market cap of one trillion dollars. But the most surprising fact is that back in the day neither was google the first search engine of the market as Yahoo and Gotocom dominated the market. In fact, by 1998 Google was bleeding money by being just a small startup in the sector of web search engines. But the question is, from having no business model and competing against these big giants who were making millions in revenue through search ads, how did Google become a trillion-dollar business?
This is a story that dates back to September 1998, when Larry and Sergy created google through an algorithm called Page Rank in Stanford. At that time Yahoo was making millions of dollars by projecting ads on its search engine as banner ads. The founders of Google rejected the business model as they believed that it would ruin the user experience. The Founders turned to Gotocom to dissect and learn from their business model. Gotocom had introduced a game-changing business model of paid search called the cost per click pricing model. This revolutionary idea gave the advertisers confidence of conversion and the uncertainty of wasting money in the marketing was eliminated. After Larry and Sergy dissected the business model of Gotocom they found two major problems. Firstly since the business model was based on who paid more, a large company could easily abuse a smaller company by buying all the search keywords of other companies of its competition. Secondly, the small companies were discouraged from placing their ads merely because the price cap was elevated by the larger companies. The founders of Google worked day in and day out to come out with two major improvements that made google into a trillion-dollar company.
They came out with an improvement of Quality score that would filter out the content and the ranking will be based not just based on who paid what but based on the relevance of the ad with the search. So, if you are searching Honda, Tesla cannot sabotage its place, displace it and present itself on top of the search.
Google came out with the idea of using a unique auction model called the Vickery auction model. This was an auction model that ensured the highest bid of the auction was not just some very large ignorant amount of money but only the amount quoted by the second-highest bidder of the auction. This way advertisers don’t have to overpay for the keyword, and they also get insights into the competitive prices in the market which in turn helps them optimize their future bids.
These two features of Google's business model turned Google into a revolutionary business model that was far superior to the rest of the competition. Because it not only has the amazing feature of goto-dotcom but also saved advertisers tons of money due to the second price auction method. Most importantly, due to the quality score, Google also provided even the small businesses with an opportunity and a platform to grow and be heard without the larger companies overshadowing them even if they were the highest bidders.
So the lesson to learn from this journey of Google is that you should never be discouraged by the competition of your market. You should look at it as an opportunity to grow and learn. To get rid of the mistakes that were made by your predecessors and the existing companies of the market. And secondly, as a leader, if you want your company to achieve greatness and success you have to build a culture of learning and failing. Such that, you have to build a foundation for failure, so the employees and members are not just working to make the ends meet and on complete objectives of the job but also work towards innovation and greatness within!