Google vs Yahoo

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This document contains information regarding the similarities and differences with two companies in the Internet and Information Providers industry. Google and yahoo are two large, well-known web portals. They are not just a standard search engine but provide other services as well. The intentions of this paper will be to address the differences in e-business models, strategies, financial history, and competitive advantage’s between Google and Yahoo. As well as identifying other strategies that one of these companies should pursue.

Industry Overview

The Internet and Information Provider Industry gives the ability to consumers and businesses to quickly transmit information over long distances . It has become a way of life for today’s society. The internet has changed the world and how we process data, communicate, work, shop, live and learn (Bureau of Labor Statistics). Web portals are one of the many backbones of the internet which help process getting “online” smoothly (Bureau of Labor Statistics).

Portals search the world wide web and create databases of web pages with their internet addresses (Bureau of Labor Statistics). The portal then allows you to enter in key words or phrases which then sorts through large databases to provide the user with results of their search (Bureau of Labor Statistics). The internet is constantly expanding and many industries now provide internet services. Since technology is constantly evolving, companies often need to upgrade existing services and need to attract and retain low cost services (Bureau of Labor Statistics).

Google Strategy and Business Model

Google is about innovation of the business model (Cusumano, 2004). They have the innovation and ability to associate with the users. Google is different from the rest because they don’t try to keep customers on their page or lure them with news and entertainment like the old portals use to do (Mallaby, 2005). They offer no news or entertainment and the website is not cluttered (Mallaby, 2005). It is actually designed to transfer customers to other sites as fast as possible (Mallaby, 2005). They are not concerned about how long a customer sits on there site because there is not an add banner trying to catch their eye (Mallaby, 2005). Instead Google uses the information you searched on to figure out which ad to display according to your interest at the time (Mallaby, 2005). They make the ads useful to the customer instead of an annoyance.

They do not just rely on payments from ad banners or advertisers, they thought up a great scheme to have advertisers pay for being listed alongside search results as sponsored links and they get paid regardless if users use those sponsored links or not (Cusumano, 2004). Those advertisers have to bid for those spots. Google also provides advertisers who will pay for listings to some of its partners like EarthLink and AOL which generates more revenue for them (Cusumano, 2004). They have what is called “network externalities with positive feedback looks as well as increasing returns (Cusumano, 2004). The more users they receive, the more advertisers come, the better the sponsored links and the more revenue it generates and the more will be invested in comprehensive searches (Cusumano, 2004).

Google is about the value of technological innovation to both the users and the investors (Cusumano, 2004). The Google founders use page rank algorithms to interpret links to web pages as votes of importance (Cusumano, 2004). They also use algorithms, which is just advanced math, to review hypertext links to focal sites instead of just using key words to search so that the user is provided with better results when doing a search (Cusumano, 2004). Because the world wide web is so big, advanced math is used to create automatic gathering of data instead of entering in each site manually.

Google also has a wide variety of products and services which account for half their revenue (A discussion about Google, 2001). They have affiliated sites such as AOL that have embedded the Google search technology (A discussion about Google, 2001). They also offer searchable email programs, short-messaging service for mobile wireless devices, a print service to search online books, index of web images, chat groups, and a catalog service that translates catalogs into printed forms and Froogle that does price comparisons on the web (Technology strategy and management). They have also developed a Google desktop search which will even be released in windows (technology strategy and management).

Google hired Eric Schmidt from Novell to help run the show (Olsen, 2005). Eric was hired due to his experience in strategic planning, management and technology development (Olsen, 2005). He was hired to focus on corporate infrastructure to maintain Google’s rapid growth as a company.

When it comes to acquisitions Google does not spend big, instead they spend their time acquiring new startups that no one saw coming such as advertising companies, search projects and blogging software (Olsen, 2005). Google spends a lot of money in their development budget (Olsen, 2005). Google relies on technology for its money where as other companies within the industry relies on personal relationships(Olsen, 2005).

Google just released an operating system for net books called Google Chrome OS. It will be included in the second half of 2010 on net books from certain manufacturers (Shankland, 2009). Linux will cover the source but the application will run in the web itself (Shankland, 2009). The new software is being created for people who spend most of their time on the web (Shankland, 2009). The OS will run on any platform including windows, ma cans Linux giving it the ability to be the largest user base of any platform (Shankland, 2009). As far as current competition, Google docs competes with Microsoft office, Gmail competes with yahoo mail and Microsoft hotmail, Google books plans to digitalize the publishing industry and the operating system will make smart phones cheap a thing from the past (Shankland, 2009).

Google came into the market late and learned the do’s and don’ts of the business by looking into what yahoo and the rest of them had done and found better ways and better logarithms that has led them to 100 million searches every day as well as 1.3 billion web pages that doubles every year (A discussion about Google, 2001). This is what helped make Google such a successful company.

Yahoo Strategy and Business Model

Yahoo was started in 1994 by David Filo and Jerry Yang and started out just as a hobby (Yahoo press room). It turned into a leading global brand that gave people more ways to communicate with each other, conduct transactions, share and create information (Yahoo press room).

When it comes to innovation, Yahoo and Google are in close comparison. They both have collaborations, acquisitions and new products that are released every year. Yahoo has new text search solutions and leads Google into new collaborations and are happy to do it (creativity and innovation driving business-innovation index). Yahoo has also taken an early lead on the mobile platform since they are expecting that in the future this is where games will be played. Yahoo is different from Google because it tries to keep its customers on their page. They offer news, entertainment, and financial data to try and keep the user from surfing to another page. This is why they have their ad content directly on the yahoo site.

Yahoo continues to expand their horizon by providing searches on the web, email accounts, financial information, greeting cards, maps, driving directions, and stock quotes (Shafer, Smith & Linder, 2005). Their search engine is now embedded into applications as a vertical line of business (A conversation with yahoo founder Jerry Yang, 2005). Yahoo learns your habits to make it more of a personalized experience (A conversation with yahoo founder Jerry Yang, 2005). Global competition has stepped up as foreign economy is working its way up to provide their own new innovations (A conversation with yahoo founder Jerry Yang, 2005). Yahoo has part in the broadband search spaces and provides internet mainstream medium (A conversation with yahoo founder Jerry Yang, 2005). They are working on future efforts to provide voice recognition (A conversation with yahoo founder Jerry Yang, 2005).

Yahoo makes it revenue by providing extra features such as mail plus, advertising that is paid by the amount of visits to a page. They also have their service embedded into mobile devices (Olsen, 2005).

Yahoo has come up with a way of generating new innovation directly from its employees by creating a program called the “Idea Factory” (Olsen, 2005). Employees are able to submit ideas to either improve the campus or the business (Olsen, 2005). Down the road at Google, engineers are expected to take one day each week and spend it on a project of personal interest (Olsen, 2005). This is how Google news and the social networking site Orkut came about (Olsen, 2005).

The approaches that both these companies use to gain the market are quite different. Yahoo brought in Semel as a Chief Executive whom brought Hollywood experience with him (Olsen, 2005). Semel brought in Dan Rosensweig from CNET. Together they made individuals accountable for the profitability of their divisions (Olsen, 2005). Even with that said they still bought acquisitions such as Inktomi and hotjobs as well as commercial search pioneer overture services (Olsen, 2005).

Yahoo is also trying to gain more customer loyalty and have just launched a free fantasy football league on its yahoo sports channel (Hu & Oeler, 1998). This is part of the partnership with Sandbox Entertainment (Hu & Oeler, 1998). Yahoo’s service will be free while the others charge fees for each team (Hu & Oeler, 1998). Yahoo expects to gain more branding while customers will be visiting their site multiple times a day (Hu & Oeler, 1998).

Yahoo came into the market before Google and helped teach them the do’s and don’ts of the business. Today Yahoo is one of the world’s largest global online networks of integrated services and has more than 500 million users worldwide.

Internet and Information Providers Market Capital and Revenue

It appears that there is direct correlation between each company’s e-business strategy and financial performance. Yahoo is working on branding to gain customer loyalty. Since their market capital is much lower then Google’s they hope to bring those numbers up but they are certainly not suffering financially. At the three year mark Yahoo is at 12.36 where as Google is only at 3.58. Google has a large market capital and that is due to all their new innovations. They will continue new innovations to gain more of the financial aspect of the game since they are already branded well. We have two companies working two different approaches to cover any weaknesses while gaining as much of the market as possible. See following chart.

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