What is Google’s strategy?

Google has an adaptive strategy as described by Beinhocker. It started with a powerful search algorithm, which made its success. This american company has been for a long time an advertising agency disguised as a search platform. The only other very successful tool developed by Google itself is Gmail. With a net income of more than USD 12 billions in 2013, this company has too much cash and does not know what to do with it. Moreover, they are afraid that start-ups could emerge and eat them like Google has outmatched the giants of that time such as Yahoo.

This is why they organize their strategy as an evolutionary search, following the fitness landscape by going on two different paths: developing as many ideas as possible, and buying any start-up that could become a strong IT giant.

During almost 10 years, there was a page called Google Labs where all the new applications were listed and tested. It allowed users to try prototypes and giving feedback to the engineers. If products seemed viable, they were moved out of the labs and officially released.

Although Google Labs has been discontinued, Google follows the same kind of procedures. For instance, they have developed a new application called Google Inbox, which is a new way to organize and read emails. The only way to access it is by being invited. It also helps to promote the product and make it viral.

The other part of Google’s strategy is to buy start-ups, with already more than 170 mergers and acquisitions. Some of them such as YouTube and Android were extremely successful thereafter. Sometimes the only reason Google is buying is to avoid that someone else buys the company before. It might also be to get the users base of new companies, in order to keep people using Google products.

The Israeli mapping service Waze was bought by Google for USD 1.3 billion in 2013 for four reasons:

  • Waze’s user engagement is extremely high
  • Avoiding Waze (its technology and users) to be acquired by another tech giant
  • It adds features to Google Maps
  • It is an alternative to Google Maps, so people unhappy with Google Maps will go to another product that is still a Google one

All of the above shows that Google is “betting on every horse in the race”. It is all about creating as many opportunities as possible, and if one seems to be successful, resources will be devoted to it.

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REFERENCES

Beinhocker, E. D. (1999) On the origin of strategies. The McKinsey Quarterly. n/a, 47-57

Cohan, P. (2013) Four Reasons Google Bought Waze. Forbes. [Online] Available from: http://www.forbes.com/sites/petercohan/2013/06/11/four-reasons-for-google-to-buy-waze/ [Accessed 28th January 2015]

Nasdaq. (2015) GOOG Company Financials. [Online] Available from: http://www.nasdaq.com/symbol/goog/financials?query=cash-flow [Accessed 28th January 2015]

Wikipedia. (n/a) List of mergers and acquisitions by Google. [Online] Available from: http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google [Accessed 28th January 2015]

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