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COMPANY PROFILE

Google Inc.

REFERENCE CODE: 5B199F61-608D-4923-B4A3-F5EE15285ADE PUBLICATION DATE: 5 Mar 2015 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED.

TABLE OF CONTENTS

Company Overview..............................................................................................3

Key Facts...............................................................................................................3

SWOT Analysis.....................................................................................................4

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Google Inc. TABLE OF CONTENTS

COMPANY OVERVIEW

Google Inc. (Google or "the company") is a global technology company that offers search, advertising, operating systems and platforms, enterprise, and hardware products. The company operates in the US, the UK and in several other countries across the world. Google is headquartered in Mountain View, California and employed 47,756 people as of December 31, 2013.

The company recorded revenues of $59,825 million during the financial year ended December 2013 (FY2013), an increase of 19.2% over FY2012. The revenues increased primarily due to an increase in advertising revenues generated by Google websites and Google Network Members' websites. The operating profit of the company was $13,966 million in FY2013, an increase of 9.5% over FY2012. Its net profit was $12,920 million in FY2013, an increase of 20.3% over FY2012.

KEY FACTS

Google Inc.Head Office 1600 Amphitheatre Parkway Mountain View California 94043 USA

1 650 253 0000Phone

1 650 253 0001Fax

http://www.google.com/Web Address

59,825.0Revenue / turnover (USD Mn)

DecemberFinancial Year End

47,756Employees

GOOGNASDAQ Ticker

GOOGLNASDAQ Ticker

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Google Inc. Company Overview

SWOT ANALYSIS

Google Inc. (Google or "the company") is a global technology company that offers search, advertising, operating systems and platforms, enterprise, and hardware products. The company enjoys strong market share and global reach, which provides sustainable advantage as the company's entrenched position in the market enables it to drive revenues. However, intense competition has the potential to impact the market share and growth prospects for the company.

WeaknessesStrengths

Excessive dependence on advertisingGlobal search engine dominance Limited success of Google’s social networksAndroid's success is a growth driver in the

mobile market

ThreatsOpportunities

Intense competitionPositive outlook for smartphone and tablet market PRISM electronic surveillance program

issue highlights the data privacy concerns among users

Display and mobile ad spend are growth drivers

Intellectual property infringement claimsPoised to benefit from growing online video consumption

Strengths

Global search engine dominance

Google enjoys strong market share and global reach. The company's search engine has leading technology which enabled it to gain market share. Google consistently upgrades and enhances its search algorithms to achieve better results. Google's results were recognized as being highly accurate from early on, with the search engine gaining popularity very quickly. In 2001, Google started giving links to major news outlets on the Google search page, which led to the development of Google News. Subsequently, the company released image search capabilities, which were later enhanced to also include search for videos, news stories, and other rich data. In 2010, the company launched Google Instant, which provides results even before the user stops typing. Google also launched voice search and native language search capabilities, which enables users to ask questions and hear answers spoken back. This feature works on the Google Search App for iOS, Android and Chrome browsers for laptops and desktops. As such, the company's competitors have struggled to match the search engine's accuracy and have fallen behind in popularity. However, despite the best efforts of its competitors, Google holds the majority of the share in the global search engine market, and this does not look set to change.

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Google Inc. SWOT Analysis

According to industry estimates, as of March 2014, Google's search engine had a market share of more than 71% measured against global website traffic. Google gained ground in the mobile market as well. Further, the industry estimates indicate that over 90% of the mobile search is conducted through Google search engine. Further, Google's share of overall US core search market was approximately 67.6% in January 2014 compared to 67.3% in December 2013. The company therefore enjoys technology leadership which enabled it to drive growth and gain market share. The technology leadership also provides sustainable advantage as the company's entrenched position in the market enables it to drive revenues.

Android's success is a growth driver in the mobile market

Google entered the mobile operating system market by acquiring Android, which enjoys several unique advantages and has emerged as a leading player in that market. Android operates in the burgeoning market of mobile phones. This market has seen strong growth in recent years, much of which has been driven by a surging demand for smartphones. This provides Android with excellent growth opportunities, translating into growth for the overall company. Android has exploited these opportunities better than its rivals, including Apple, Microsoft and BlackBerry, to establish itself as the clear leader in terms of the number of devices using its operating system (OS). Android belongs to a consortium of companies known as the Open Handset Alliance. This includes handset manufacturers such as HTC, Motorola and Samsung. Consequently, Android is the chosen OS on a range of phones that span a broad pricing spectrum. This gives it a competitive advantage over the likes of Apple and RIM, whose OSs are only available on their own phones. As of September 2013, Android was the leading mobile OS with more than one billion Android devices activated globally. According to industry estimates, Google’s Android platform is the leading smartphone operating system in the world with a market share of approximately 78.9% in 2013 compared to 68.8% in 2012.

Android is the Open Handset Alliance's first joint project and was launched with the explicit goal of being the first open, complete, and free platform created specifically for mobile devices. Android powers several flagship mobile phones of leading players like Samsung and also the handsets of lower priced players. The fact that Android is the operating system powering such a wide range of phones suggests that it has access to every level of the smartphone market in terms of price, and this is where it has a clear advantage over many of its competitors. It has been adopted as the OS of choice by a number of popular handset manufacturers including HTC, LG, Motorola and Samsung. The iPhone has undoubtedly been a phenomenally successful product for Apple and it is credited as the device that kick-started the smartphone revolution. iOS is, however, limited as it is only available on one phone, the iPhone. This is a high-end, expensive product and as there is no cheaper version of the device, Apple does not have access to customers at the lower-cost end of the market in the way that Android does. Android's presence on phones at both the cheap and top ends of the market gives it a much wider potential market, a clear advantage over the likes of Apple. On the other hand, the Microsoft’s Windows Mobile OS has limited market share of 3.6% in 2013. The limited appeal of the Windows Mobile OS has forced a number of Microsoft loyalists, including HP to launch devices based on the Android OS. Moreover, Nokia, which is in the process of being acquired by Microsoft has also launched Android based mobiles in March 2014. These indicate the popularity and appeal enjoyed by Android.

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Google Inc. SWOT Analysis

The increasing popularity of Android is expected to speed up innovation on the mobile front thus ensuring that more users will start browsing the net from their phones. This ensures that more and more traffic is driven to one of Google’s many services, which are embedded in the Android platform, where they serve ads thus enhancing Google’s revenues.

Weaknesses

Excessive dependence on advertising

The company primarily depends on advertisements for a majority of its revenues. For FY2013, FY2012, and FY2011, advertising accounted for 84.3%, 87.1% and 96.4%, respectively, of the company’s total revenues. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions can also have a material negative impact on the demand for advertising and cause its advertisers to reduce the amounts they spend on advertising. The company’s continued dependence on advertisement for a majority of its revenues indicates increased vulnerability to the ad spending patterns.

Limited success of Google’s social networks

Although Google is the leading search engine and its web properties are one of the most popular sites for up-to-date information, its attempt to achieve similar following in the social networks has resulted in only limited success. The company’s tryst with social networking started in 2003, with the acquisition of Pyra Labs, the creator of the Blogger platform, which is currently languishing behind other players, including WordPress, Typepad and Tumblr. The company’s Orkut social network service launched in 2004 was quite popular before the arrival of Facebook. Similarly in 2009, Google launched the Google Wave service, but it was unsuccessful in attracting a large customer base or retaining the people who joined in the initial excitement. Google’s fresh attempts at reviving its social networking position began with the introduction of Google+ in mid-2011 which resulted in limited success. As of October 2013, Google+ had 540 million 30-day active users. In comparison Facebook had 1.2 billion monthly active users (MAU) and 757 million daily active users (DAUs) on average in December 2013. Limited success of Google’s social networks is a competitive disadvantage especially as the social platforms continue to attract higher advertising dollars and are forecasted to grow tremendously. Competing head to head with entrenched players like Facebook for social network user base will be an uphill task for Google.

Opportunities

Positive outlook for smartphone and tablet market

The smartphones and tablets market is expected to grow at a robust pace in the medium term. According to industry estimates, the global shipments for smartphones reached 1,004 million units

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Google Inc. SWOT Analysis

in 2013 compared to 725 million units in 2012. Furthermore, smartphone shipments are expected to grow at a compounded annual growth rate (CAGR) of 13.3% between 2013 and 2017. Also smartphones dominate the total handset market with a share of more than 50%. Furthermore, the demand for tablets is also increasing. The shipment of tablet PCs is estimated to grow from 144.5 million units in 2012 to more than 410 million units by 2017, growing at a compound annual growth rate (CAGR) of 23.2% for the same period.

The company’s Android platform is the leading smartphone operating system in the world with a market share of approximately 78.9% in 2013 compared to 68.8% in 2012. Similarly in the tablet market, Android is the leading players with a market share of 62% in 2013 compared to 46% in 2012. Android is estimated to continue to be the market leader in the medium term for both the smartphone and tablet markets. Robust outlook for the smartphone and tablet market will increase the company's number of Android devices in the coming years.

Display and mobile ad spend are growth drivers

Display advertising trends indicate a positive momentum. According to industry estimates, in 2014, the US digital display ad spend is expected to record a strong growth rate of more than 15% compared to 2013. The estimates also indicated that Google is expected to hold a share of 24.6% in 2014 compared to less than 20% share it held in 2013. Advertisers in the US are expected to spend on various display ad formats served to desktops, laptops as well as mobile phones, tablets and other devices. Rising display ad spend will enable the company to boost its revenues, as it generates major portion of its revenues from display advertising.

A key growth area for Google would be mobile advertising space, which is an emerging opportunity and will shape to be a prominent one for the company. According to industry estimates, the global mobile advertising is expected to generate total revenues of $18 billion in 2014 compared to $13.1 billion in 2013. The global revenue is expected to reach approximately $41.9 billion in 2017. The growth in mobile advertising market is primarily due to increased uptake in smartphones and tablets, as well as the merger of consumer behaviors on computers and mobile devices. Google has a strong presence in the mobile ad segment and will benefit from the growth in the segment.

Poised to benefit from growing online video consumption

The demand for online viewing of video content has been rising at a robust pace. According to industry estimates, the global online video market is projected to reach $37 billion by 2017 which includes subscriptions, transactions and advertising. The growth is expected to be driven by proliferation of broadband access and expanding viewership in emerging markets. The US represents the largest market for online videos, which is expected to contribute to over half of all revenues in 2017. The online video market in the US is projected to witness significant growth primarily driven by the increased options for viewing videos among online consumers.

Google has significant presence in the online video market. The company operates YouTube, a video-sharing website which allows users to upload, view and share videos online. According to industry estimates, YouTube held a market share of more than 20.5% in the US video ad market. It

Google Inc. SWOT Analysis

is also estimated that, YouTube’s share of the US video ad market would reach 22.9% by 2015 generating $1.6 billion of net ad revenues. YouTube experienced strong growth in the recent times particularly from mobile viewers and has established key partnerships with content companies to help monetize mobile video. The company's YouTube is well positioned to lead the penetration into the online video market which will enhance top line growth and also facilitates expansion into a high growth market.

Threats

Intense competition

Google's business is rapidly evolving and intensely competitive, and is subject to changing technologies, shifting user needs, and frequent introductions of new products and services. The company faces formidable competition in every aspect of its business, particularly from companies that seek to connect people with information on the web and provide them with relevant advertising. Google faces competition from general purpose search engines, such as Yahoo and Microsoft's Bing; vertical search engines and e-commerce websites, such as Kayak (travel queries), Monster.com (job queries), WebMD (for health queries), and Amazon.com and eBay (e-commerce); and social networks, such as Facebook and Twitter. The company also faces competition from other forms of advertising, such as television, radio, newspapers, magazines, billboards, and yellow pages, for ad dollars; mobile applications on iPhone and Android devices; and providers of online products and services. A number of the company's online products and services, including Gmail, YouTube, and Google Docs, compete directly with new and established companies, which offer communication, information, and entertainment services integrated into their products or media properties.

Technology is disruptive and sustainable competitive advantages are not assured. If Facebook is more cost effective for advertisers, they might eventually find a way to reach audience through these sources. Similarly, other companies have been gaining ground in Google's forte of search advertising. Furthermore, its closest competitors, Yahoo! and Microsoft have launched several initiatives to capture share in these markets. Yahoo!'s strategy involves connecting all of its online services, such as its search engine, maps, and so on. Meanwhile, Microsoft is attempting to integrate its internet searching and desktop so that its search engine will be embedded in all of its software, in the hope that there will no longer be a need for Google. Additionally, applications like Siri for iPhone have introduced the users to a reality without Google search.

In addition, the company faces a fierce competition in the mobile markets. Google's significant competitors in mobile operating systems market include Microsoft, BlackBerry, and Apple. Also the growing consolidation in the industry will put pressure on the company's growth. For instance, Microsoft's acquisition of Nokia's devices and services business is expected to further strengthen Microsoft’s market position which will compete more strongly with Android devices. The intensifying competition has the potential to impact the market share and growth prospects for Google.

PRISM electronic surveillance program issue highlights the data privacy concerns among users

Google Inc. SWOT Analysis

Recent revelations about the extent to which the US National Security Agency (NSA) obtains electronic data from third-parties is likely to have an immediate and lasting impact on the company. PRISM is NSA's electronic surveillance data mining program which allows officials to gain access from nine internet companies to a range of digital information, including e-mails and stored data, on foreign targets operating outside the US. Allegedly, the NSA has direct access to the servers of these companies, including Microsoft, Google, Yahoo, Facebook, PalTalk, Skype, YouTube, and Apple. Further Google is said to have received millions of dollars to cover the costs as part of this program.

The company has been facing scrutiny from various governments for allegedly violating data privacy laws due to its involvement in the PRISM project. For instance, Sweden's data privacy watchdog banned the use of Google applications including Gmail, for government workers in the city of Salem. Similarly, France and Spain led a Europe-wide push to get Google change its policies on collecting user data after it was revealed that the company was part of the PRISM project. Google was found guilty of breaking French laws and was given three months to change its privacy policies or risk a fine. Spanish Data Protection Agency is reportedly planning to penalize the company for its alleged violation of data privacy laws.

Such allegations of Google's involvement in the PRISM project will impact the company's brand image and market share. Users have been becoming very weary of the websites such as Google capturing their data. The company's alleged involvement in the PRISM project is likely to impact the usage of its websites and other applications amidst concerns over data privacy. Increasing scrutiny will also result in investigations from various governments. In addition, such allegation will restrict users' activities, which in turn will impact the company's topline growth.

Intellectual property infringement claims

The company is subject to a number of intellectual property infringement claims. Internet, technology, media, and other companies own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, patent holding companies may continue to seek to monetize patents they have purchased or otherwise obtained. As Google has grown, the intellectual property rights claims against it have increased and may continue to increase as it develops new products, services, and technologies.

A number of patent, copyright, and trademark infringement lawsuits have been filed against Google claiming that certain of its products, services, and technologies, including Android, Google Search, Google AdWords, Google AdSense, Google Maps, Google Books, Google News, Google Image Search, Google Chrome, Google Talk, Google Voice, and YouTube, among others, infringe the intellectual property rights of others. Third parties have also sought broad injunctive relief against the company by filing claims in the US and international courts and the US International Trade Commission (ITC) for exclusion and cease and desist orders, which could limit its ability to sell products or services in the US. Adverse results in any of these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing it from offering certain features, functionalities, products, or services, and may also cause Google to change

Google Inc. SWOT Analysis

its business practices, and require development of non-infringing products or technologies, which could result in loss of revenues.

In addition, many of Google’s agreements with its customers and partners, including certain suppliers, require it to indemnify them for certain intellectual property infringement claims against them, which could increase Google’s operating costs as a result of defending such claims. Such customers and partners may also discontinue the use of Google products, services, and technologies, as a result of injunctions, which could result in loss of revenues and adversely impact its business. Regardless of the merits of the claims, intellectual property claims are often time consuming, expensive to litigate or settle, and cause significant diversion of management attention. Any adverse decision may have an adverse effect on the company’s business, consolidated financial position and results of operations.

Google Inc. SWOT Analysis

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