Google's growing market share

In October I carried a post discussing the dangers posed by Google's growing market dominance. Recently there was an interesting article in the Australian Financial Review - I cannot give a link - providing more data.

According to the US firm Hitwise, Google's share of the US search market rose from 58.3% in March 2006 to 61.8% in November 2006 to 65.1% in November 2007. Each one per cent shift in market share appears to be worth about $US100 million ($A113.8 million) in extra advertising revenue.

According to Scott Kessler from Standard & Poor's, Google's growth will slow in 2008 because of a maturing search market together with improved service from competitors. Mr Kessler also feels that there is a risk that Google might get distracted by its non-search projects.

I have always been fascinated by the way Google's business model fits together. Yes, Google search is the jewel in the crown, but there is more than that.

Bogspot is a good example.

By providing a free blogging platform, Google has attracted millions of bloggers. I tried to find an actual number, but without success. These provide a platform for Google products such as adsense, search and referral. In parallel, Google blog search provides an increasingly used tool for searching the blogosphere, one that has I think now over-taken Technorati in popularity.

Many of the blogs have very limited traffic, so the actual revenue to Google per blog from its products is low. However, the sheer number of blogs makes for high aggregate numbers. Further, Google does not pay its publishers until their earnings reach $US100. This provides a handy source of working capital.

Google is constantly fine-tuning its services to try to increase revenue from its existing base. This is not always successful - the company is withdrawing support for its referral product in Australia, presumably because of lack of profitability.

Low cost management of large numbers is critical to Google's success. I have not tried to analyse Google's accounts, but successful product management in the blogging environment requires a large base to spread fixed costs with very tight control of variable costs. So the whole system depends upon effective automation.