strategic-management

96 HAMID KAZEROONY
EXHIBIT 6 Search Engine Use Compared
Search Engine Utilization Percent of total
Google 49.2
Yahoo! 23.8
MSN 9.6
AOL 6.3
Ask 2.6
Others 8.5
Source: NetRating for SearchEngineWatch.com
Competition
Yahoo! operates in the Internet products, services, and content markets, which are
characterized by rapid change, converging technologies, and increasing competition.
Yahoo!’s most significant competition, as demonstrated in Exhibit 6, is from Google Inc.,
Microsoft Corporation, and Time Warner Inc.’s America Online business. Each of these
firms offer an integrated variety of Internet products and services. During 2008, Google
had 72 percent of Internet traffic while Yahoo! only possessed 17 percent followed by
MSN at 6 percent and IACI at 4 percent.
Microsoft
Both a friend and foe of Yahoo! in many ways, Microsoft’s $6 billion acquisition of
Quantive Inc., an advertising solutions company, in August 2007 marked an important
change. Microsoft lost out in a bidding war for privately held DoubleClick Inc., a digital
marketing technology and services company, Microsoft recommitted itself to the
category, offering to acquire aQuantive at a massive premium and valuation to ensure
that the deal would be consummated. In October 2007, Microsoft purchased a 2 percent
stake in social networking firm Facebook Inc., valuing the private company at an
astounding $15 billion. Microsoft has an obvious and strong desire to increase its
Internet presence.
Google
In early 2009, Google is in talks with the popular micro-blogging site, Twitter, about a possible
partnership. Google has expanded well beyond search-related functions into areas
such as e-mail (Gmail), mapping (Google Earth and Google Maps), Web-based productivity
applications (Google Apps), video (Google Video and YouTube Inc., which Google
acquired in November 2006), a finance offering (Google Finance), a payment service
(Google Checkout), a personalized portal offering (iGoogle), a mobile Internet software
platform (Android), and browser software (Google Chrome).
Google’s pursuit of mobile Internet opportunities has made it one of the main application
providers for Apple Inc.’s iPhone. Perhaps more importantly, Google has successfully
pushed for more open standards in the mobile space, which will eventually allow
users to choose more easily the carriers and handsets they want. As a result of Google’s
efforts, the Federal Communications Commission (FCC) adopted flexible access rules for
users and wireless resellers in conjunction with the agency’s early 2008 wireless spectrum
auction. As illustrated in Exhibit 7, Google commands a good portion of the revenue in the
industry and is a formidable competitor to Yahoo! in particular. From its first year of operation
as a public company (2004), Google has increased its operating profit to $6.7 billion
from a modest $852 million.
Industry Trends
As broadband prices fall, ISPs are pursuing new business strategies, such as bundling
Internet access with voice and video services. AOL LLC, a division of Time Warner Inc.,
shifted its business model from paid subscriptions to a free, advertiser-based portal that is