Google vs Baidu.com (A) Google's Business Model



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Code :BSM0042

Year :
2008

Industry : Internet and e-commerce

Region : US China

Teaching Note:Available

Structured Assignment :Available

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Introduction:In April 2007, US-based search engine company Google acquired DoubleClick an online ad-network specialising in serving graphical banners for $3.1 billion. This acquisition would provide Google with a resource for online display advertising, characterised by the banner ads seen on many websites. As yet Google had avoided banner advertising, serving mostly text-based ads.

Google, with over $16.5 billion in revenues in 2007, was the most lucrative search engine. Through its technology and its AdWords advertising program, it became the preferred search engine not only in its home country, US, but also worldwide. Its international success was evident from overseas contribution to its revenues, which in 2007 was 48% of its total revenues.

Google's acquisition of DoubleClick triggered a spate of purchases by rivals Yahoo!and Microsoft. Microsoft bought a Quantive for $6 billion and Yahoo!, 80% of RightMedia that it did not own for $680 million. Consolidation rose because of search becoming a multi-billion dollar industry. Price water house Coopers'Global Entertainment and Media Outlook: 20072011 report estimated that Internet advertising would be the fastest growing media and with a projected Compound Annual Growth Rate(CAGR) of 18.3%, it would reach $73 billion in2011. A Piper Jaffray(leading, international middle-market investment bank and institutional securities firm) report estimated online ad-spending to reach $81.1 billion in 2011 at a CAGR of 21%.

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