Google: the World's First Information Utility?
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BISE – STATE OF THE ART Google: The World’s First Information Utility? The idea of information utilities came to naught in the 70s and 80s, but the world wide web, the Internet, mobile access, and a plethora of access devices have now made information utilities within reach. Google’s business model, IT infrastructure, and innovation strategies have created the capabilities needed for Google to become the world’s first global information utility. But, the difficulty of monetizing utility services and concerns about privacy, which could bring government regulation, might stymie Google’s growth plans. DOI 10.1007/s12599-008-0011-6 a national scale (Sackmann and Nie 1970; the number of users to the point where it The Authors Sackman and Boehm 1972). Not to be left is the dominant search player in both the out, the idea was also promoted by the U.S. and the world. This IT-based strategy Rex Chen Computer Usage Development Institute has allowed Google to reach more than Prof. Kenneth L. Kraemer, PhD in Japan, the British Post Office in the UK, $16 billion in annual revenue, a stock price Prakul Sharma and Bell Canada and the Telecommunica- over $600 per share and a market capital- University of California, Irvine tions Board in Canada (Press 1974). ization of nearly $200 billion. Center for Research on Information The idea was so revolutionary at the Over the next decade, Google plans to Technology and Organization (CRITO) time that at least one critic called for a extend its existing services to the wire- 5251 California Ave., Ste. 250 moratorium on the development of infor- less world, to develop new services, and Irvine, CA 92697 mation utilities until the year 2000 so that to expand its computing infrastructure USA research could indicate what the social to support this growth. The new services, [email protected] impacts might be (Press 1974). The fateful combined with its own and partners’ com- year 2000 came and went without men- plementary products, have the potential Authors are listed alphabetically to tion of information utilities, but the year to make Google the world’s first informa- denote equal contribution. 2008 has raised the concept once again as tion utility and bring its ambitious goal of Google appears positioned to become the “organizing the world’s information” a lit- Received: 2008-04-02 first information utility in the world (Carr tle bit closer in time. Accepted: 2008-09-18 2008a) and concern about the potential The information utility was defined by Accepted after 2 revisions by Prof. Dr. social implications is raised once again its originators “as mass communications König. (Maurer 2007). systems in which the consumer interacts This article is also available in Ger- Today, however, Google is mainly directly with a central computer and its man in print and via http://www. known for its unparalleled search engine associated information files from a remote wirtschaftsinformatik.de: Chen R, technology, running on an efficient very terminal at his home, office, or school – Kraemer KL, Sharma P (2008) Google: large scale distributed computer system. in his natural environment – in a man- Das weltweit erste “Information Uti- It has become so successful that the verb ner such that he received the information lity”? WIRTSCHAFTSINFORMATIK. doi: “to Google” has ingrained itself in the at his terminal almost immediately after 10.1007/11576-008-0116-z. vernacular as a synonym for performing requesting it.” The information utility also a web search. The key to Google’s suc- includes contributing physical elements cess has been its strategic and innovative such as “television displays, communi- use of IT. Its search engine enables people cations lines, computers, data stores, and 1 Introduction to search the web for useful information support facilities” (Sackman and Boehm with Google Search, Google Maps, Google 1972, p. 17). In the early 1970s, futurists at the Rand Earth, and other applications, but places At its heart, the concept involves an Corporation and Stanford University advertising related to the user’s search analogy with public utility systems. As proposed the creation of information along side the results. By linking ads to a discussed by Nicholas Carr (2008a) in The utilities – the provision of computing and variety of search-based web applications, Big Switch, private electric systems built information service by a utility in the form and continually improving the relevance and operated by individual companies of a national network where any person of the searches and the ads, Google has were replaced by public utility networks desiring information could gain access been able to monetize its search capabil- whose economies of scale enabled them to – much like gas and electric utilities, but on ity, achieve financial success, and increase operate at a far lower cost and with greater Business & Information Systems Engineering 1 | 2009 BISE – STATE OF THE ART effectiveness. Similarly today, private com- ing sections describe these features, how 2.2 Core products and services puting and information services could be they contribute to Google’s capabilities provided better and cheaper over a com- for an information utility, and how its Google’s business consists of search-based mon computing network rather than future developments will further enable online advertising, which is comprised through the myriad computing shops that the vision. The paper concludes with an of three major components: AdWords, now exist in companies. Not only would analysis of the obstacles it faces in doing AdSense and a long list of complements to companies, governments, and other orga- so, and lessons for other firms. the first two services. AdWords is Google’s nizations benefit from economies of scale, advertising product and AdSense is an ad but so would individuals, as all customers serving program that delivers relevant would pay based only on the computing 2 Google’s business ads to Google’s partner websites. The role and information services they used from of the complements like Gmail or Google the utility. 2.1 Business strategy Earth is to draw users to Google websites The Internet is the global broadband where they can be exposed to advertis- grid network that information utilities Google’s strategy has been to capture ing. can use to deliver services to their custom- revenue from online advertising shown AdWords is the backbone of Google’s ers. Other components of an information along with web-based searches. Its advertising business. It allows advertisers utility are in operation today, although in advertising revenue accounted for 99 % of to create ads, insert them to the AdWords piecemeal fashion. Large scale comput- its total revenue of $16.59 billion in 2007. program, and choose the search keywords ing services that can be accessed over the Approximately 64 % of Google’s revenue is that determine when the ads show up next Internet are offered by IBM, HP, Micro- attributed to ads placed on its own prod- to a Google search query result. AdWords soft, Oracle, and Google. Network-based ucts and services websites (Google Search, allows the advertiser to display a variety of software services are offered to SMEs GMail, Google Earth), whereas the rest is ad formats and to target the ads to specific and even some large companies by ven- derived from its partners (e. g., CNN.com, languages and geographic locations. dors such as SAP (ERP), SalesForce.com nytimes.com, techcrunch.com). AdSense is Google’s ad serving pro- (CRM), and Workday (HR and finance). In order to remain a forefront tech- gram that delivers ads on partner websites Massive storage services are offered by nology leader and innovator, Google has by automatically crawling the content of EMC while thin clients are provided by aggressively acquired start-up companies their web pages and showing ads that are companies such as HP. whose products strengthen the range of relevant to the audience and the site con- Whereas such companies might have complements offered by Google and pro- tent. “AdSense for search” allows a website strong capabilities in one of these compo- vide increased distribution channels for publisher to provide website search to his nents, Google has amassed powerful capa- its advertising business. These acquisi- visitors and to earn money by displaying bilities in all of them, as required for an tions reinforce its expertise in online and Google ads on the search result pages. information utility. Google’s server farms traditional advertising. Going forward, Google’s business model involves mon- hold about one million computers. Its pro- Google’s strategy is to increase revenue by etizing the online advertising delivered prietary software coordinates all the serv- targeting additional customers in online to people who use the Internet everyday ers to form computing clusters in each of advertising. Out of the total $298 billion through Google Search or other services. the company’s data centers strategically spent on advertising in the U.S. in 2007, Revenue from AdWords and AdSense located around the world. Its software only $21.4 billion was spent online with are generated using two different pric- applications such as Google Apps, Google about $8.8 billion attributed to search ing schemes: cost-per-click (CPC) and Maps, and Google Earth provide software advertising (Capps and Ives 2007). Google cost-per-thousand impressions (CPM). as a service. Its Android operating system is also expanding its advertising business Under CPC, the advertisers pay Google enables cell phones, PDAs, and thin clients beyond online marketing to other media, each time a user clicks on the text-based as well as pocket PCs to access services on including radio and print media (Hoover ad that appears online. If the ad appeared the Internet. 2006).