Tuesday, May 16, 2006

Google Inc Vs Yahoo Inc - Strategies : Summary of Case Studies

Yahoo Inc:

Yahoo, an internet portal, operates search, directory and programming services for navigating the increasingly complex environment of the world wide web. Like many internet-related firms, Yahoo makes all its money from advertising revenues. Yahoo’s major competition comes from other search engine firms such as Google. Yahoo’s service philosophy is to minimize the amount of time that users must spend at its site. As a service provider, the firm Yahoo believes that before the new product is released to the outside world, it needs to be more robust than the typical internet software beta. The market risk of broad, public testing is too high; users who try a new service once and have a poor experience with it are unlikely to return. Further it is assumed that once a new service is released, innovative features will be copied by competing firms like Google. These factors made Yahoo to adapt delayed development cycle compared to other competitors as Google.

So, Yahoo’s development/ service process is based upon “slow” release of softwares to users as a new product becomes progressively more robust. Apart from helping to quickly scale services in response to demand fluctuations, the Yahoo setup also has benefit in more effective experimentation. With such a setup, Yahoo also has the flexibility to tailor the customers that first try a new service. Yahoo has high risk of experimentation and external testing as compared to Google.

The competition between Yahoo and Google is Smart Player Vs Smart player.

What makes the game between these two players is

  1. Source of turbulence :Customers , Internet users, Competitors, Technology
  2. Flexibility required in product/service development
  • Time to complete the projects
  • Response time relevant to text and context is small
  1. Sequential product development
  • Concept –design – prepare- produce
  • Experimentation is required
Google Inc:

Google started as a small search company over the web, went adding new features for its users and has evolved into the world's no.1 search engine. It is now on the verge of scaling even more heights with its email service. When Google entered the online search market, Yahoo was the market leader. In a short span of time, Google has become the best search engine by eating into the market share of Yahoo and other players. Since its inception, Google has been successful in giving its competitors a run for their money. Its innovative strategy to generate revenue by placing advertisements on sites which contain information related to those ads has indeed made Google highly profitable. Google's popularity among Internet surfers was mainly because of its superior search technology. Having improved its reputation as the most reliable and useful search engine, Google surprised everyone by announcing the launch of Gmail, its email service, with a massive storage space of 1GB and was quite successful in attracting users of Yahoo and Hotmail.

One of the special features is the speed at which Gmail works. Through Gmail, users can enjoy a faster and more efficient service. A Gmail user need not store the messages in separate folders as all the mails corresponded are grouped into a conversation. This kind of feature is not provided by Yahoo.

Google even came up with search technology for Wireless Application Protocol (WAP) enabled phones and other handheld devices. Google pioneered the concept of Ad Words and Ad Sense, and thus created a sensation in the field of online advertising.

The innovation is major strength, in case of Google. The smart strategies they played right from the start have wondered Yahoo. Apart from searching information and answering queries, Google has been offering various features for its users. Recently, it has partnered with world's top most universities like Harvard, Oxford and some others to digitize their libraries. It has acquired Keyhole Corporation - a map service provider, for Geographical Information System (GIS) applications.

Revenue Model Yahoo Vs Google:

The difference between Google and Yahoo is the revenue factor. Yahoo gets its revenue from Yahoo mail, ads, and some other features where as Google gets almost 85% of its revenue from ads. Google’s technological innovations and focus on user-friendliness to its popularity. Google’s unique business model has made it one of the rare dotcoms to earn profits. While most search engine companies spent a lot of money on marketing to build their brands, Google, focused solely on building a 'better' search engine.

Opportunities for Google are more as compared Yahoo:

Google has been generating enough revenue from its Ad Words, Ad Sense and Gmail service. Its IPO has been successful. Recent reports suggest that Google wants to increase the storage space in Gmail from 2GB to 10GB. Once this happens, its competitors like Yahoo will be left in a quandary, diminishing their power in the market. They are already struggling to keep pace with the fast and vast Gmail. In the years to come, Google can expand its business horizon by developing its own operating system, thus challenging Microsoft's top position in the global software market.

Challenges for Both Yahoo and Google:

Although, Google may seem invincible, it has some challenges ahead. In recent studies, Google topped the "Customer Experience Rankings" list of search engines followed by Yahoo, MSN. Since then, both Yahoo and MSN have brought significant changes in their operations. Yahoo and MSN both made significant gains in several key areas, largely closing the perception gap with Google. So, Google needs to work towards offering better features than its competitors so as not to lose loyal search users to the competitors Yahoo and MSN Search. The storage space of 10GB in Gmail is a definitely a cause of concern for competitors. Nevertheless, Google has to check out if it is technically feasible before promising the same to the users. Even if it is feasible, there is no guarantee that this service will not be charged in the coming years once Google realizes that the users are totally hooked to Gmail and they have no place to go.

Conclusion: Yahoo’s Orientation

As the world is getting more competitive every day, no company can rest assured of its success. Every company, whether it is big or small, has to put continuous efforts to come up with innovative business ideas in-order to achieve the ultimate objective of being profitable. So is the case with Google. Analysts predicted in 2003, that Google would soon compete with Yahoo for the top slot in the online destination turned out to be true. Google came up with many other features on its search engine, many innovative ideas like Blogs, Ad Words, and video search. In-order to move up the ladder, Google has to strike the right chord. What is it that will elevate Google's status further? What's more in the offering from Google? These are the major questions that Yahoo has to look for and they have to orient in the same direction if it wants to be at the top. Yahoo needs to be more innovative, flexible/fast to capture/retain the market.

References:

3 Comments:

Blogger malmo said...

Thanks for that blog. its good and provides clues on how to write case studies. I teach strategic management in my school and often wonder the way harvard is doing it by case studies alone. Do you think thats the best way to teach the course?

1:30 PM  
Blogger Yogeshwar D Suryawanshi said...

Thanks. Case studies help in understanding the real business. It provides insights into how an organization operates from top-to-bottom and how strategies are developed. I suppose its the best way of understanding concepts rather than just theory.

6:19 AM  
Blogger Dhaval Doshi said...

The Google Story is a significant phenomenon. It's commendable for an organization to grow so much with superior technology (Superior Search Engine Technology). But it's not just the technology that will lay the future of its business strategy. It will be innovation I believe. The culture encourages this innovation and the processes that reduce the time for a (project) to be converted into a full-fledged venture is extremely fast. This follows retaining smarter (PHDs) employees.

Comparing Microsoft and Google from the standpoint of comparing 2 technology behemoths would be ideal. Although from the stand point of internet/web companies (not software giants)

10:10 PM  

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