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Google's search business is the greatest business model in the history of capitalism.
Here's a qualitative look at Google's search business, along with some common misunderstandings
$GOOG $GOOGL
Google's search business is the greatest business model in the history of capitalism.
Here's a qualitative look at Google's search business, along with some common misunderstandings
$GOOG $GOOGL
Google’s search business isn't protected by economies of scale, network effects, or any typical monopolistic barrier.
Yet, it accounts for nearly 90% of searches. Their moat is their product (search algo). Can't think of another monopoly that exists on a superior product alone.
Yet, it accounts for nearly 90% of searches. Their moat is their product (search algo). Can't think of another monopoly that exists on a superior product alone.
People misconstrue Google’s business as “selling digital ads“. This undervalues Google’s golden goose.
All internet traffic can be categorized into 3 major highways:
#1 People communicating
#2 People looking for information
#3 People wanting to buy something
Google owns #3.
All internet traffic can be categorized into 3 major highways:
#1 People communicating
#2 People looking for information
#3 People wanting to buy something
Google owns #3.
As a result, they charge advertisers a hefty toll for access. They share #3 with Amazon for product-related searches, but for everything else you could possibly spend money on, its Google. Need:
A hotel?
An accountant?
A nearby restaurant?
Software for your business?
Google.
A hotel?
An accountant?
A nearby restaurant?
Software for your business?
Google.
Unlike Facebook (often compared), Google doesn't need personal data to be an effective advertising platform. All they need is your search query.
Both Google and advertisers know exactly which keywords display monetary intent and can target ads accordingly.
Both Google and advertisers know exactly which keywords display monetary intent and can target ads accordingly.
For example, look at the CPC difference between these 2 search queries. They're nearly identical, but one has monetary intent and therefore costs 2x.
Google doesn’t need to know your relationship status or content you liked…in fact, they don’t need to know anything about you.
Google doesn’t need to know your relationship status or content you liked…in fact, they don’t need to know anything about you.
Google’s auction-based bidding platform is nothing short of genius & perhaps the best example of wholesale transfer pricing I've ever seen.
Competing advertisers increase prices on themselves & transfer their profits to Google.
Effortless/automated wholesale transfer pricing.
Competing advertisers increase prices on themselves & transfer their profits to Google.
Effortless/automated wholesale transfer pricing.
For more on why I believe Google's search business is the greatest business model of all time, check out: https://jayvas.com/google-might-be-the-greatest-business-in-the-history-of-capitalism/
