Digital Strategy & Monetization of Alphabet Inc.

Written By Mishal Avichal

■ Introduction

Alphabet Inc. is a multinational conglomerate composed of numerous online, digital, and moonshot companies all independent from one another, yet housed under the Alphabet organizational structure. Headquartered in Mountain View, California, Alphabet Inc. has amassed a presence in over 190 countries with offerings such as Google search, Google play, Android, and Chrome just to name a few. The company boasts 78 offices internationally and a presence in major metropolitan areas throughout the US. With over 85,000 employees Alphabet Inc. is a behemoth when it comes to recruiting and retaining STEM talent. Having reached its twenty-second anniversary, Alphabet has come a long way since being founded in 1996 by a pair of PhD students, CEO Larry Page and President Sergey Brin, while doing a research project at Stanford University. Today, Google is Alphabet’s flagship brand that is headed by former McKinsey consultant and current CEO, Sundar Pichai. (Rothaermel, 2017)

            According to Alphabet Inc.’s organizational structure, the parent company for all subsidiaries is Alphabet Inc., while Google maintains parentage over Search, Chrome, Android, YouTube, Maps, Gmail and Ads. (Rothaermel, 2017) Google’s sister companies include various digital/online, venture, and moonshot businesses: Access, CapitalG, Calico, Deep Mind, Google X, GV, Jigsaw, Nest, Sidewalk Labs, Verily and Waymo (see Exhibit 4). When you navigate to Google.com you will land on a page with a simple search bar under the iconic, multicolored “Google” logo. This is Google Search and it is holds the precedent for handling billions of search queries daily. It uses spiders to map out other websites making them easier to track and lists advertisements first for every query. Google Chrome is the browser that Google developed to be the most efficient and quick browser on the market today, with increased stability and security. Android is the software package on most of touchscreen phones and devices today and it has many users that navigate to apps such as YouTube, Maps, Gmail and Ads from these devices. YouTube is a video content streaming site where users are the publishers of videos and ad revenue is derived from viewership. Maps is utilized for navigation and makes millions of lives easier on the road. Gmail is the email service that is utilized by companies, schools, organizations and individuals throughout the world. Google Ads are composed of AdWords, AdSense, DoubleClick, and AdMob that are all used to display custom tailored ads based on algorithms and published display ads for mobile and web. Besides these strong customer-facing products, Google’s focus on moonshots is also of note for viewers like you. (Rothaermel, 2017)

■ Mission

            Google’s business units mentioned previously supports Alphabet’s mission of “attracting an audience for advertising using consumer products.” (Rothaermel, 2017) In addition, Google’s new CEO, Sundar Pichai, has aligned the company to develop the user experience (UX) ahead of monetization. In the past, their strategy was to build products that solves very specific problems. Today, they are creating solutions utilizing a long-term product cycle that creates value over the life of the brand: more transformational, less incremental change.

            Unlike in the early years of the internet, Alphabet is targeting a more tech-savvy generation than before. As millennials and future generations attain market power, the prevalence of mobile, AI, voice enabled search, and hi-tech advancements will be central in maintaining their market share. In example, AdMob, is utilized by Google to make advertising mobile-friendly but the margins are still not as much as those from desktop browsers. (Rothaermel, 2017) As far as Google Home speaker goes, the company is still in a beta phase in making the UX more adaptive and natural, versus contrived and mechanical. Market share is the main metric of each Google brand for measuring success and when new innovations are developed they must be quick to grab a significant piece of the market before new entrants. Google Search being the flagship business, must constantly look for new internal improvements either through innovation or acquisition while Google Analytics measures each website and advertising campaigns success. (Rothaermel, 2017) Finally, moonshots are what make Alphabet Inc. the most sought-after company by investors and new innovations like self-driving car company, Waymo, make the brand exciting.

■ Audience Metrics

            100 billion monthly searches, half of which are done on mobile- this is incredible by any Fortune 500 company’s standards and makes Google the behemoth of online search and advertising. (Rothaermel, 2017) They also boast over one billion active monthly users in each of their business units. According to Statista.com, “Google generated 63.5 percent of all core search queries in the United States.” (Statista.com, 2018) Also, as a percentage of total referral internet traffic in the US, Google generates 37 percent. (Dunn, 2017) (See figure 1 below)

■ Monetization of Property

Alphabet’s main source of monetization is advertising through Google accounting for more than 90 percent of 2016 revenues, but it maintains diverse sources of revenue through offerings like YouTube video, subscriptions through Google Play, etc. (Rothaermel, 2017) According to Alphabet’s 10-K from 2017 their revenues amounted to $ 110,855 (in millions) of which $ 95,375 (in millions) came from Google advertising revenues. (Alphabet Inc., 2018) This surpasses the estimates provided by Recode which predicted $73.8 billion in digital ad revenue, of which $49.7 billion is attributed to mobile. (Molla, 2017) (See figure 2 below)

Figure 1

Figure 2

Works Cited

  • Alphabet Inc. (2018). Alphabet Inc. Form 10-K For the Fiscal Year Ended December 31, 2017. Retrieved from https://abc.xyz/investor/: https://abc.xyz/investor/pdf/20171231_alphabet_10K.pdf

  • Dunn, J. (2017, May 24). Facebook and Google dominate web traffic, but not the same kind. Retrieved from Business Insider: http://www.businessinsider.com/google-facebook-news-traffic-chart-2017-5

  • Molla, R. (2017, Jul 24). Google leads the world in digital and mobile ad revenue. Retrieved from Recode.net: https://www.recode.net/2017/7/24/16020330/google-digital-mobile-ad-revenue-world-leader-facebook-growth

  • Rothaermel, F. T. (2017, September 27). Alphabet's Google. Retrieved from Harvard Business Publishing: https://hbsp.harvard.edu

Statista.com. (2018, April). Share of search queries handled by leading U.S. search engine providers as of April 2018. Retrieved from Statista.com: https://www.statista.com/statistics/267161/market-share-of-search-engines-in-the-united-states/

Mishal Avichal