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John E. Gamble
University of South Alabama

oogle was the leading Internet search f i r m i n

2012, w i t h a nearly 67 percent market share i n
search f r o m home and work computers and a
95 percent share i n searches performed f r o m mobile
devices. Google's business model allowed advertisers to
bid on search terms that would describe their product or
service on a cost-per-impression (CPI) or cost-per-click
(CPC) basis. Google's search-based ads were displayed
near Google's search results and generated advertising revenues o f more than $36.5 billion i n 2011. The
company also generated revenues o f about $1.4 billion
i n 2010 f r o m licensing fees charged to businesses that
wished to install Google's search appliance on company
intranets and f r o m a variety of new ventures. New ventures were becoming a growing priority w i t h Google
management since the company dominated the market
for search based ads and sought additional opportunities to sustain its extraordinary growth i n revenues,
earnings, and net cash provided by operations.
I n 2012, Google was pursuing a cloud computing initiative that was intended to change the market
for commonly used business productivity applications such as w o r d processing, spreadsheets, and presentation software f r o m the desktop to the Internet.
Information technology analysts believed that the
market for such applicationscollectively called cloud
computingcould grow to $95 billion by 2013. Google
had also entered into alliances w i t h Intel, Sony, D I S H
Network, Logitech, and other firms to develop the
technology and products required to launch Google
TV. Google T V was launched i n the U.S. i n 2011 and
would allow users to search live network and cable
programming; streaming videos f r o m providers such
as Netflix, Amazon Video O n Demand, and YouTube;
and recorded programs on a D V R . The company also
launched its G o o g l e social networking site i n 2011
to capture additional advertising opportunities.

Perhaps the company's most ambitious strategic

initiative i n 2012 was its acquisition o f Motorola
Mobility f o r $12.5 billion, w h i c h put i t i n the hardware segment o f the smartphone and tablet computer
industries. Analysts following the transaction saw the
move to acquire Motorola M o b i l i t y as a direct attempt
to m i m i c Apple's strategy used for the iPhone and iPad
that tightly integrated hardware and software f o r its
most profitable and fastest growing products. Google
had launched its A n d r o i d operating system for mobile
phones i n 2008 and allowed wireless phone manufacturers such as L G , H T C , and Nokia to produce
Internet-enabled phones boasting features similar to
those available on Apple's iPhone. By 2012, A n d r o i d
was the leading smartphone platform w i t h a 50.9 percent market share.
While Google's growth initiatives seemed to take
the company into new industries and thrust i t into
competition w i t h companies ranging f r o m Facebook
to Microsoft to Applet, its CEO, Eric Schmidt, saw the
new ventures as natural extensions o f the company's
mission to "organize the world's information and
make i t universally accessible and useful."
I n A p r i l 2012, he explained the company's wideranging strategic initiatives by commenting " I n some
ways we have r u n the company as to let 1,000 flowers bloom, but once they do bioom you want to put
together a coherent bouquet."
1

COMPANY HISTORY

'

The development of Google's search technology began

i n January 1996 when Stanford University computer
science graduate students Larry Page and Sergey B r i n
collaborated to develop a new search engine. They

Copyright 2012 by John E. Gamble. All rights reserved.

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Part 2 Cases in Crafting and Executing Strategy

bTNIBIi 1
1.

T h e l O Principles of Google's Corporate Philosophy

F o c u s on the u s e r and all e l s e will follow.

From its inception, Google has focused on providing the best user experience possible. While many companies
claim to put their customers first, few are able to resist the temptation to make small sacrifices to increase
shareholder value. Google has steadfastly refused to make any change that does not offer a benefit to the users
who come to the site:
The interface is clear and simple.
Pages load instantly.
Placement in search results is never sold to anyone.
Advertising on the site must offer relevant content and not be a distraction.
By always placing the interests of the user first, Google has built the most loyal audience on the web. And that
growth has come not through TV ad campaigns, but through word of mouth from one satisfied user to another.
2.

It's best to do one thing really, really well.

Google does search. With one of the world's largest research groups focused exclusively on solving search
problems, we know what we do well, and how we could do it better. Through continued iteration on difficult
problems, we've been able to solve complex issues and provide continuous improvements to a service already
considered the best on the web at making finding information a fast and seamless experience for millions of
users. Our dedication to improving search has also allowed us to apply what we've learned to new products,
including Gmail, Google Desktop, and Google Maps.
3.

Fast is better than slow.

Google believes in instant gratification. You want answers and you want them right now. Who are we to argue?
Google may be the only company in the world whose stated goal is to have users leave its website as quickly
as possible. By fanatically obsessing on shaving every excess bit and byte from our pages and increasing the
efficiency of our serving environment, Google has broken its own speed records time and again.
4.

Democracy on the web works.

Google works because it relies on the millions of individuals posting websites to determine which other sites
offer content of value. Instead of relying on a group of editors or solely on the frequency with which certain terms
appear, Google ranks every web page using a breakthrough technique called PageRank. PageRank evaluates
all of the sites linking to a web page and assigns them a value, based in part on the sites linking to them. By
analyzing the full structure of the web, Google is able to determine which sites have been 'Voted" the best
sources of information by those most interested in the information they offer.
5.

You don't need to be at your d e s k to need a n answer.

The world is increasingly mobile and unwilling to be constrained to a fixed location. Whether it's through their
PDAs, their wireless phones or even their automobiles, people want information to come to them.
6.

You c a n make money without doing evil.

Google is a business. The revenue the company generates is derived from offering its search technology to
companies and from the sale of advertising displayed on Google and on other sites across the web. However,
you may have never seen an ad on Google. That's because Google does not allow ads to be displayed on our
results pages unless they're relevant to the results page on which they're shown. So, only certain searches
produce sponsored links above or to the right of the results. Google firmly believes that ads can provide useful
information If, and only if, they are relevant to what you wish to find.
Advertising on Google is always clearly identified as a "Sponsored Link." It is a core value for Google that there
be no compromising of the integrity of our results. We never manipulate rankings to put our partners higher in
our search results. No one can buy better PageRank. Our users trust Google's objectivity and no short-term gain
could ever justify breaching that trust.
7.

T h e r e ' s always more Information out there.

Once Google had indexed more of the HTML pages on the Internet than any other search service, our engineers
turned their attention to information that was not as readily accessible. Sometimes it was just a matter of integrating
new databases, such as adding a phone number and address lookup and a business directory. Other efforts
required a bit more creativity, like adding the ability to search billions of images and a way to view pages that
were originally created as PDF files. The popularity of PDF results led us to expand the list of file types searched
to include documents produced in a dozen formats such as Microsoft Word, Excel and PowerPoint. For wireless
users, Google developed a unique way to translate HTML formatted files into a format that could be read by
mobile devices. The list is not likely to end there as Google's researchers continue looking into ways to bring all
the world's information to users seeking answers.
(Continued)

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C-172

E X H I B I T

Part 2 Cases in Crafting and Executing Strategy

Performance of Google's Stock Price, August

19, 2 0 0 4 ,

to June 2 0 1 2

(a) Trend in G o o g l e Inc.'s C o m m o n Stock Price

700

~i
05

06

07

08

09

10

11

r -100
12

Year
(b) Performance of Google Inc.'s Stock Price v e r s u s the S & P 500 Index

+450%
+400%

-50%
05

06

~07~

08

09

^to~

11

12

Year

translation feature that accommodated 51 languages.

The company also released services for mobile phone
uses such as Mobile Web Search, Blogger Mobile,
Gmail, Google News, and Maps for Mobile. A complete
list of Google services and tools for computers and
mobile phones i n 2012 is presented i n Exhibit 3.

G O O G L E ' S BUSINESS M O D E L
Google's business model had evolved since the company's inception to include revenue beyond the

licensing fees charged to corporations needing search

capabilities on company intranets or websites. The
2000 development o f keyword-targeted advertising expanded its business model to include revenues
f r o m the placement of highly targeted text-only sponsor ads adjacent to its search results. Google was able
to target its ads to specific users based on the user's
browsing history. The addition o f advertising-based
revenue allowed Google to increase annual revenues
f r o m $220,000 i n 1999 to more than $86 m i l l i o n i n
2001. A summary o f Google's financial performance

A ] MM in

\v r -onal c o p ,

C-174

Part 2 Cases in Crafting and Executing Strategy

E X H I B I T

(Continued)

Product Search
Search for stuff to buy
> J

Scholar
Search scholarly papers

*- *

Toolbar
Add a search box to your browser
Trends

*"*
*
^
\_

Explore past and present search trends

Videos
Search for videos on the Web
Web Search
Search billions of Web pages

WVtl

Code

"

Developer tools, APIs and resources

Labs
Explore Google's technology playground
Blogger
Share your life online with a blogit's fast, easy, and free

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jp.

Calendar
Organize your schedule and share events with friends
Docs
Create and share your online documents, presentations, and
spreadsheets
Google Mail
Fast, searchable email with less spam

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Groups
Create mailing lists and discussion groups

Knol
Share what you know

Offcut

Qrkut
Meet new people and stay in touch with friends
Picasa
Find, edit and share your photos
(Continued)

EXHIBIT 4

Financial Summary for Google,

2001, 2 0 0 5 - 2 0 H

($ millions, except per share amounts)

<3

Revenues

Costs and expenses:

Cost of revenues
Research and development
Sales and marketing
General and administrative
Contribution to Google Foundation
Charge related to the resolution of
Department of Justice investigation
Total costs and expenses
Income (loss) from Operations
Impairment of equity Investments
Interest income (expense) and other, net
Income (loss) before income taxes
Provision for income taxes
Net income (loss)
Net income (loss) per share:
Basic
Diluted
Number of shares used in per
share calculations:
Basic
Diluted
Net cash provided by operating activities
Cash, cash equivalents, and marketable
securities
Total assets
Total long-term liabilities
Total stockholders' equity

$37,905

$29,321

$23,651

$21,796

$16,594

$10,605

$6,139

$86

13,188
5,162
4,589
2,724

10,417
3,762
2,799
1,962

8,844
2,843
1,984
1,667

8,622
2,793
1,946
1,803

6,649
2,120
1,461
1,279

4,225
1,229
850
76

2,577
600
468
387
90

14
17
20
25

500
26,163
11,742

584
12,326
2,589
$ 9,737

10,381

415
10,796
2,291
$ 8,505

15,338
8,312

69
8,381
1,861
$ 6,520

15,164
6,632
(1,095)
316
5,854
1,627
$ 4,227

11,510
5,084

590
5,674
1,470
$ 4,204

7,055
3,550

461
4,011
934
$ 3,077

4,121
2,017

124
2,142
676
$1,465

75
11

_LD
10
3
$ 7

$30.62
$29.76

$26.69
$26.31

$20.62
$20.41

$13.46
$13.31

$13.53
$13.29

$10.21
$9.94

$5.31
$5.02

$0.07
$0.04

323
396
$14,565
44,626

319
323
$11,081
34,975

316
319
$ 9,316
24,485

314
318
$ 7,853
15,846

311
316
$ 5,775
14,219

301
310
$ 3,581
11,244

276
292
$2,459
8,034

95
187
N/A
N/A

72,574
5,516
58,145

57,851
1,614
46,241

40,497
1,745
36,004

31,768
1,227
28,239

25,336
611
22,690

18,473
129
17,040

10,272
107
9,419

N/A
N/A
N/A

8.9-13

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SB
3
P.

M
X

Source: Google, Form S - 1 , filed April 2 9 , 2 0 0 4 ; Google, 2009,2010, and 2011 10-K reports.

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C-178

Part 2 Cases in Crafting and Executing Strategy

that tracked the effectiveness o f each ad. Google also

offered a keyword targeting program that suggested
synonyms f o r keywords entered by advertisers, a
traffic estimator that helped potential advertisers
anticipate charges, and multiple payment options
that included charges to credit cards, debit cards, and
m o n t h l y invoicing.
Larger advertisers were offered additional
services to help r u n large, dynamic advertising
campaigns. Such assistance included the availability o f specialists w i t h expertise i n various industries
to offer suggestions f o r targeting potential customers
and identifying relevant keywords. Google's advertising specialists helped develop ads for customers
that would increase click-through rates and purchase
rates. Google also offered its large advertising customers bulk posting services that helped launch and
manage campaigns including ads using hundreds or
thousands of keywords.
Google's search-based ads were priced using an
auction system that allowed advertisers to bid on keywords that would describe their product or service.
Bids could be made on a cost-per-impression (CPI) or
cost-per-click (CPC) basis. Most Google advertisers
placed bids based on CPC frequency rather than how
many times an ad was displayed by Google. Google's
auction pricing model assigned each bidder a Quality Score, which was determined by the advertiser's
past keyword click-through rate and the relevance o f
the ad text. Advertisers w i t h high Quality Scores were
offered lower m i n i m u m bids than advertisers w i t h
poor quality scores.
Google allowed users to pay a CPC rate lower
than their bid price i f their bid was considerably more
than the next highest bid. For example, an advertiser

EXHIBIT

who bid $0.75 per click for a particular keyword would

be charged only $0.51 per click i f the next highest bid
was only $0.50. The AdWords discounter ensured that
advertisers paid only 1 cent more than the next highest bid, regardless o f the actual amount o f their bid,

AdSense
Google's AdSense program allowed web publishers
to share i n the advertising revenues generated by
Google's text ads. The AdSense program served content-relevant Google text ads to pages on Google Network websites. For example, an Internet user reading
an article about the state o f the economy at Reuters,
corn would see Google text ads by investment magazines and companies specializing i n home business
opportunities. Google Network members shared i n
the advertising revenue whenever a site visitor clicked
a Google ad displayed on their sites. The more than
1 million Google Network members did not pay a
fee to participate i n the program and received about
60 percent o f advertising dollars generated f r o m the
ads. Google's AdSense program also allowed mobile
phone operators to share i n Google revenues i f text
and image ads were displayed on mobile handsets.
Owners o f dormant domain names, web-based game
sites, video sites, and news feed services could also
participate i n the AdSense program. The breakdown
of Google's revenues by source for 2005 through 2011
is presented i n Exhibit 6.

O t h e r Revenue Sources
The company's 2006 acquisition o f YouTube allowed
it to receive advertising revenues f o r ads displayed
d u r i n g Internet videos, while its 2008 acquisition

Google's Revenues by Source,

Advertising revenues:
Google websites
Google Network
websites
Total advertising
revenues
Licensing and other
revenues
Net revenues

2 0 0 4 - 2 0 1 0

($ millions)

$26,145

$19,444

$15,722

$14,414

$10,625

$ 6,333

$3,377

10,386

8,792

7,166

6,715

5,788

4,160

2,688

36,531

28,236

22,889

21,129

16,413

10,493

6,065

1,374
$37,905

1,085
$29,321

762
$23,651

667
$21,796

181
$16,594

112
$10,605

74
$6,139

Source: Google, 2007,2009,2010, and 2011 10-K reports.

A|a Watt-ins peron.il i py

Part 2 Cases in Crafting and Executing Strategy

C-180

hX!

f7

Google's Revenues and Long-Lived Assets by Geographic Region,

2 0 0 7 - 2 0 1 1 (in millions)

United States
United Kingdom
Rest of the wodd
Total revenues

$17,560
4,057
16,288
$37,905

$14,056
3,329
11,936
$29,321

$11,194
2,986
9,471
$23,651

$10,636
3,038
8,122
$21,796

$8,698
2,531
5,365
$16,594

United States
Rest of the world
Total long-lived assets

$15,963
3,853
$19,816

$ 9,432
1,898
$11,330

$ 9,783
1,807
$11,589

$ 7,335
712
$ 8,047

$ 5,071
363
$ 5,434

Source: Google, 2007,2009, and 2011 10-K reports.

Mobile Search and Google's

Emerging Rivalry with Apple
in Smartphones and Tablet
Computers
I n 2011, more than 5 billion people worldwide and 234
m i l l i o n Americans ages 13 and older owned and used
mobile phones. More than 35 percent o f Americans
and a growing percentage worldwide accessed the
Internet f r o m mobile devices, and a rapidly growing
number of mobile phone users were exchanging basic
mobile phones for smartphones. Smartphones like
Apple's iPhone could connect to the networks of wireless carriers to make phone calls, access the Internet,
or r u n various Internet applications. Between March
2011 and June 2011, the number o f smartphone
users i n the U.S. had grown by 10 percent to reach
82.2 million.
Apple Inc. built its early reputation i n the 1980s
and 1990s on its innovative Mac computer lines, but
i n 2010, only $17.5 billion o f its net sales o f $65.2
billion came f r o m the sale of computers. I n 2011, Apple
was the world's largest seller of smartphones, tablet
computers, and personal media players w i t h market
shares of 19.1 percent, 85 percent, and 73 percent,
respectively. I n 2011, the iPhone accounted for $47.1
billion of its total sales o f $108.2 billion. The iPad contributed revenues of $20.3 billion and iPod and related

music products accounted for sales o f more than

$13 billion i n 2011. The company's hefty profit margins
on its electronic devices allowed it to record a net
income o f almost $26 billion i n 2011. Apple's performance accelerated i n 2012, w i t h the company setting
revenue and profit records during the second quarter
of 2012. The record sales and earnings were driven
largely by the iPhone, which saw a year-over-year revenue increase of 88 percent and iPad, which increased
by 151 percent f r o m the same period i n 2011. The
company's strong performance allowed its stock price
to increase so much that it became the most valuable
company i n the w o r l d i n 2011, as measured by market
capitalization. Apple's market capitalization h i t $600
billion i n A p r i l 2012a m a r k only achieved by one
other company i n history: Microsoft, i n 1999, when its
valuation reached $619. Microsoft's market capitalization i n A p r i l 2012 stood at $260 billion. A summary of
Apple's financial performance between 2007 and 2011
is presented i n Exhibit 8.
Google's introduction o f its A n d r o i d operating
system for smartphones i n 2008 allowed i t to increase
its share o f mobile searches f r o m about 60 percent
to approximately 95 percent i n 2012, A n d r o i d was
not a phone but an operating system that Google
made available free of charge to any phone manufacturer wishing to market mobile devices w i t h Internet
capability. Android's core applications matched most

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Part 2 Cases in Crafting and Executing Strategy

could grow to a $95 billion market by 2013. M o v i n g

software applications to the cloud offered many possible benefits to corporate users, including lower
software acquisition costs, lower computing support costs, and easier collaboration among employees i n different locations. The beta version o f Google
Apps was launched i n 2006 as a free word processing and spreadsheet package f o r individuals, but was
relaunched i n 2008 as a competing product to M i c r o soft Office. Google Apps was hosted on computers i n
Google's data centers and included Gmail, a calendar,
instant messaging, word processing, spreadsheets,
presentation software, and file storage space. Google
Apps could be licensed by corporate customers at $50
per user per year. The licensing fee for the M i c r o soft Office and Outlook package was typically $350
per user per year. Industry analysts estimated Google
Apps users at about 25 m i l l i o n and paid subscribers at
about 1.5 m i l l i o n i n 2010. Microsoft estimated M i c r o soft Office users at about 500 m i l l i o n i n 2010. Even
though Google Apps had not yet recorded any meani n g f u l revenues as o f 2012, Microsoft had launched its
own cloud-based productivity package called Office
365 to defend against Google's entry into the productivity software market.
Google's Chrome browser, which was launched
i n September 2008, and Chrome operating system
(OS) launched i n July 2009 were developed specifically to accommodate cloud computing applications.
The bare-bones Chrome browser was built on a m u l tiprocessor design that would allow users to operate
spreadsheets, word processing, video editing, and
other applications on separate tabs that could be r u n
simultaneously. Each tab operated independently so
that i f one tab crashed, other applications running
f r o m Google's data centers were not affected. The
Chrome browser also provided Google w i t h a defense
against moves by Microsoft to make it more difficult
for Google to deliver relevant search-based ads to
Internet users. Microsoft's Internet Explorer 8 allowed
users to hide their Internet address and viewing history, which prevented Google f r o m collecting userspecific information needed for ad targeting. Mozilla's
Firefox browser employed a similar feature that prevented third parties f r o m tracking a user's viewing
habits. The clean-running Chrome OS was an opensource operating system specifically designed as a platf o r m for cloud computing applications. Google had
entered into agreements w i t h Acer, Hewlett-Packard,
and Lenovo to begin producing netbooks that would
use the Chrome OS and Chrome browser to access

E X H I B I T 10 Worldwide Browser Market

Share Rankings, Selected
Periods, September
2008-June 2012

Internet Explorer
Chrome
Firefox
Safari
Opera
Others
Total

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67%
1
26
3
2
1
100%

42%
53%
22
9
31
28
4
5
2
2
1
1
100% 100%

32%
32
25
7
2
2
100%

Source: g s . s t a t c o u n t e r . c o m .

the cloud-based Google Apps productivity software.

Worldwide market share statistics for the leading
browsers for selected periods between September
2008 and June 2012 are presented i n Exhibit 10.

Google's Initiatives to Expand

Search to Television
I n mid-2010, Google entered into an alliance w i t h
Intel, Sony, Logitech, Best Buy, D I S H Network, and
Adobe to develop Google TV. Google T V would be
built on the A n d r o i d platform and would r u n the
Chrome browser software to search live network and
cable programming; streaming videos f r o m providers such as Netflix, Amazon Video O n Demand, and
YouTube; and recorded programs on a D V R . Google
T V users would also be able to use their televisions
to browse the Web and r u n cloud-based applications such as Google Apps. D I S H Network satellite
service customers could use Google TV's features
w i t h the addition o f a Logitech set-top box or Sony
Internet TV.
Google acquired On2 Technologies, which was
the leading developer of video compression technology, i n February 2010 i n a $124 m i l l i o n stock and cash
transaction. The acquisition o f On2 was expected to
improve the video streaming capabilities o f Google
TV. Google also lobbied the Obama administration
for Federal Communications Commission "Net neutrality" rules that would require Internet providers
to manage traffic i n a manner that would not restrict

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Part

2 Cases in Crafting and Executing Strategy

EX I if 131 i 1 2 Financial Summary for Microsoft Corporation and Microsoft's Online

Services Business Unit, 2 0 0 7 - 2 0 1 1 ($ millions)

Revenue
Operating income
Net income
Cash, cash equivalents, and short-term investments
Total assets
Long-term obligations
Stockholders' equity

$69,943
27,161
23,150
$52,772
108,704
22,847
57,083

$62,484
24,098
18,760
$36,788
86,113
13,791
46,175

$58,437
20,363
14,569
$31,447
77,888
11,296
39,558

$60,420
22,492
17,681
$23,662
72,793
6,621
36,286

$51,112
18,524
14,065
$23,411
63,171
8,320
31,097

Revenue
Operating income (loss)

$ 2,528
(2,557)

$ 2,201
(2,337)

$ 2,121
(1,641)

$ 3,214
(1,233)

$ 2,441
(617)

Source: Microsoft, 2007, 2009,2011, and 2012 annual reports.

Semantic search technology offered the opportunity to surpass the relevancy o f Google's search
results since semantic search evaluated the meaning
of a word or phrase and considered its context when
returning search results. Even though semantic search
had the capability to answer questions stated i n comm o n language, semantic search processing time took
several seconds to return results. The amount o f time
necessary to conduct a search had caused Microsoft
to l i m i t Powerset's search index to only articles listed
i n Wikipedia. Microsoft's developers were focused on
increasing the speed of its semantic search capabilities
so that its search index could be expanded to a greater
number o f Internet pages. The company's developers
also incorporated some o f Powerset's capabilities into
its latest-generation search engine, Bing, which was
launched i n June 2009. Banner ads comprised the bulk
of Microsoft's online advertising revenues, since its
Bing search engine accounted for only 14.4 percent o f
online searches i n July 2011. Even though the market
for display ads was only about one-half the size o f the
search ad market i n 2009, the advertising spending on
banner ads was expected to double by 2012 to reach
$15 billion.
Microsoft was also moving forward w i t h its own
approach to cloud computing. The company's W i n dows Live service allowed Internet users to store
files online at its password-protected SkyDrive site.
SkyDrive's online file storage allowed users to access
and edit files f r o m multiple locations, share files w i t h

co-workers who might need editing privileges, or

make files available i n a public folder for wide distribution. Azure was Microsoft's most ambitious cloud
computing initiative and was intended to allow businesses to reduce computing costs by allowing M i c r o soft to host its operating programs and data files. I n
addition to reducing capital expenditures for software
upgrades and added server capacity, Azure's offsite
hosting provided data security i n the event o f natural
disasters such as fires or hurricanes.

Yahoo
Yahoo was founded i n 1994 and was the third-mostvisited Internet destination worldwide i n 2012, w i t h
nearly 500 m i l l i o n unique visitors each month. Facebook was the second-most-visited website, w i t h more
than 700 million unique visitors each m o n t h i n 2012.
Almost any information available on the Internet
could be accessed through Yahoo's web portal. Visitors could access content categorized by Yahoo or set
up an account w i t h Yahoo to maintain a personal calendar and e-mail account, check the latest news, check
local weather, obtain maps, check T V listings, watch a
movie trailer, track a stock portfolio, maintain a golf
handicap, keep an online photo album, or search personal ads or job listings.
Yahoo also hosted websites for small businesses
and Internet retailers and had entered into strategic
partnerships w i t h 20 mobile phone operators i n the

Ajii V.'iithii

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Part

2 Cases in Crafting and Executing Strategy

strong competitor to Facebook, pushing forward w i t h

its plans to become the dominant provider o f cloud
computing solutions, increasing search advertising
revenues f r o m markets outside the United States, and
extending search to television. Some analysts believed
the company's priorities should also include the development o f semantic search capabilities, while others
were concerned that the company had strayed f r o m its
10 Principlesspecifically, Principle 6, "You can make
money without doing evil."
The company agreed to a $500 m i l l i o n legal settlement with the U.S. JusticeDepartmenttoavoid prosecution on charges that i t accepted hundreds of millions of
dollars i n illegal ads f r o m unlicensed online Canadian
pharmacies selling controlled substances i n the U.S.
A m o n g the most disturbing aspects o f the case against
Google related to the Justice Department's assertion
that Larry Page knew of the practice and had allowed
it for years, I n commenting about the case, Rhode
Island U.S. Attorney Peter Neronha stated "We simply k n o w i t f r o m the documents we reviewed, the witnesses that we interviewed, that Larry Page knew what
was going on."
10

The company agreed to a $22.5 m i l l i o n fine levied

by the FTC for bypassing Apple Safari web browser
privacy settings to place tracking files on users of
Apple computers, iPhones, and iPads. Also, the company was under investigation by authorities i n Canada,
Australia, Germany, Italy, the United Kingdom, and
Spain over its Street View data collection practices
between 2008 and 2010. Data collected f r o m home
W i - F i signals by Google included e-mails, usernames,
passwords, and other private data. I n 2010, Google
co-founder Sergey B r i n said the company "screwed
up" by collecting personal data through wireless networks i n an attempt to improve its mapping system.
11

' G00Ql6, WWW.googfe.com/corporate/,

accessed July 13, 2010.

As quoted In Brad Stone, 'The Education of
Larry Page," Bloomberg Businessweek, April
15, 2012, pp. 12-14.
Quoted in Google's Corporate Information,

www,goo g ! . c o m / c o r p o r a t / H U t o r y . h t m I.
4

Google, "Our Philosophy," www.googte.com/

corporate/tQnthfngs.htmS.
5

"For Some Who Passed on Google Long

Ago, Wistful Thinking," The Wall Street Journal
Online, August 23,2004.

I n 2012, the FCC concluded that Google d i d not

violate U.S. wiretapping laws, but that i t did obstruct
the investigation, and so was fined $25,000.
Also, the company's lobbying efforts to encourage
the FCC to institute policies to promote Net neutrality
had drawn the scrutiny o f the U.S. House Oversight
Committee. The p r i m a i y concern of the House Oversight Committee involved communications between
the company and its former head o f public policy
and government affairs, Andrew McLaughlin, who
had been appointed to the position o f White House
Deputy Chief Technology Officer. Ethics rules created by an executive order signed by President Obama
barred all White House officials f r o m communicating w i t h lobbyists or a company potentially affected
by pending policy matters. A Freedom o f Information
Act (FOIA) request by a consumer group f o u n d that
McLaughlin regularly communicated w i t h Google
executives to discuss the administration's push to have
the Internet regulated by the Federal Communications
Commission to promote Net neutrality. McLaughlin's e-mails could be obtained under the FOIA since
all White House e-mail accounts were required to
be archived under federal law. The House Oversight
Committee was particularly disturbed by McLaughlin's alleged use o f a personal Gmail account to avoid
having his communications w i t h Google executives
archived and subject to FOIA requests.
Some analysts believed that pressure to achieve
the revenue and earnings growth necessary to maintain Google's lofty stock price may have caused
Google management to make decisions that pushed
the bounds o f its corporate philosophy. I t remained
to be determined i f Google's strategies could sustain
its growth and stock performance i n a manner that
would adhere to the company founders' early beliefs.

Quoted in "Gates vs. Google," Fortune, April

18, 2005.
Ibid.
Quoted In "With Google Gone, WIII Microsoft
Come Back to Yahoo?" Fortune, November
5,2008.
As quoted In "Google Announces First
Quarter 2012 Results and Proposal for New
Class of Stock," Google Press Release, April
12, 2012.
Quoted In "New Heat for Google CEO," The
Wall Street Journal Online, August 27,2011.

" Quoted In "Google Faces European Probes

on Wi-Fi Data "The Wall Street Journal Online,
May 20,2010; and "Google Loses Bid to Dismiss Street View Suit Over Privacy-Violation
Claims," Bloomberg Online, June 30, 2011.

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