SWOT analysis of Alphabet (Google) (5 Key Strengths in 2020)

Company Background

Key Facts

Name	Alphabet Inc.
Founded	October 2, 2015 (Google founded in September 4, 1998)
Logo
Industries served	Internet Computer software Consumer electronics Venture Capital Healthcare
Geographic areas served	Worldwide (more than 100 countries)
Headquarters	Mountain View, California, U.S.
Current CEO	Larry Page
Revenue (US$)	110.855 billion (2017) 22.8% increase over 90.272 billion (2016)
Profit (US$)	12.662 billion (2017) 35% increase over 19.478 billion (2016)
Employees	80,110 (2018)
Main Competitors	Amazon.com, Inc., Apple Inc., Facebook Inc., Microsoft Corporation, Samsung Electronics Co., Ltd., International Business Machines Corporation and many other Internet, computer software and consumer electronics companies.

Alphabet Inc. business overview from the company’s financial report:

“Alphabet is a collection of businesses -- the largest of which, of course, is Google. It also includes businesses that are generally pretty far afield of our main Internet products such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, and X. We report all non-Google businesses collectively as Other Bets. Our Alphabet structure is about helping each of our businesses prosper through strong leaders and independence.

Google's core products such as Search, Android, Maps, Chrome, YouTube, Google Play, and Gmail each have over one billion monthly active users. But most important, we believe we are just beginning to scratch the surface. Our vision is to remain a place of incredible creativity and innovation that uses our technical expertise to tackle big problems.

We generate revenues primarily by delivering both performance advertising and brand advertising.

Across the company, machine learning and artificial intelligence (AI) are increasingly driving many of our latest innovations. Within Google, our investments in machine learning over a decade have enabled us to build products that are smarter and more useful -- it's what allows you to use your voice to ask the Google Assistant for information, to translate the web from one language to another, to see better YouTube recommendations, and to search for people and events in Google Photos.

We face formidable competition in every aspect of our business, particularly from companies that seek to connect people with online information and provide them with relevant advertising. We face competition from:

• General purpose search engines and information services, such as Baidu, Microsoft's Bing, Naver, Seznam, Verizon's Yahoo, and Yandex.
• Vertical search engines and e-commerce websites, such as Amazon and eBay (e-commerce), Kayak (travel queries), LinkedIn (job queries), and WebMD (health queries).
• Social networks, such as Facebook, Snap, and Twitter. Some users increasingly rely on social networks for product or service referrals, rather than seeking information through traditional search engines.
• Providers of digital video services, such as Amazon, Facebook, Hulu, and Netflix.
• Providers of enterprise cloud services, including Alibaba, Amazon and Microsoft.
• Digital assistant providers, such as Amazon, Apple, and Microsoft.”^[1]

You can find more information about the business in Alphabet's official website or Wikipedia’s article.

Alphabet (Google) SWOT analysis

Strengths

1. Dominance in web search, video content sharing, online advertising, mobile OS, browser usage and many other markets.

Alphabet’s Google is an Internet company that primarily competes in the web search and online advertising markets. However, the company’s product portfolio is very diverse and includes both related and unrelated hardware and software products and services. Google dominates most of the markets it operates within, including:

• Online advertising. Google’s main source of revenue is its advertising business. In 2017, advertising generated US$95.375 billion or 87% of Google’s total revenue and 86% of the total Alphabets’ revenue.

  According to eMarketer,^[2] Google earned more than 42% of the U.S. digital advertising revenue in 2017, twice as much as the next largest earner, Facebook. Worldwide, Google earned more than 32% of the digital advertising revenue in 2016.

  The company dominates the digital advertising market through many different channels, including its own AdWords advertising program, AdSense, YouTube and the Android OS.

  By dominating the online advertising market Google can better understand current advertising trends, collect an enormous amount of information about online users’ shopping habits, and enhance their related services by improving targeted advertisements.

  Figure 1. Net digital advertising revenue share in the U.S. in 2017

  

  Source: eMarketer^[2]

• Web search. Google Search is the company’s search engine that people use to find information online. It’s the most widely used search engine in the world with a 73.73% desktop market share and 92.9% share of the mobile segment as of March 2018.^[4]

  Google’s search engine domination is especially prominent in Europe with the company having more than 90% market share in both the desktop and mobile market segments.

• Android mobile operating system. Google’s recent increase in its advertising and other revenue sources has been fueled by the huge adoption of its Android mobile OS.

  Android OS is the number one mobile OS in the world, being used by some of the largest smartphone vendors such as Samsung, Huawei, Xiaomi, OPPO, Lenovo, LG and Huawei. In 2018 March, Google’s Android had 74.2% of the worldwide smartphone OS market share.

  Figure 2. Worldwide smartphone OS market share (in percentages)

  

  Source: Stat Counter^[5]

  Android’s rising market share has led to the increased popularity of other Google products, such as Google Play, Google Play Music, the Chrome browser and Google Search, further strengthening company’s position in these markets.

How does Google’s leadership position in these markets help the company to gain competitive advantage?

• Massive amount of information. Google receives an enormous amount of information about its users and their habits through Google Search, Google Analytics, YouTube, Android OS, Chrome and its other products and services. This information provides Google with a key competitive advantage.

  Google can target advertisements or adapt its products to its users’ needs better than any competitor, because it has both smarter algorithms and much more information about its users.^[5]

• Growing brand awareness. Market leadership provides Google with a lot of publicity, attention, and more users via strong brand recognition.

• Power over customers, competitors and suppliers. To some extent, Google can use its dominant market share as a source of power over its customers, competitors and suppliers.

2. Excellent acquisition capabilities

Since 2012, Alphabet (Google until 2015) has acquired 118 companies. From 2012 to 2017, the company has averaged 1.6 acquisitions per month, which is one of the highest business acquisition rates in the world.^[7]

Source: CB Insights^[7][8] and Crunch base^[9][10] (*acquisitions were made by Google from 2012 to 2015)

Acquisitions are a key strategy in Alphabet’s gaining of competitive advantage.

Through buying other companies, Alphabet acquires new skills, technologies, patents and improves its own products and services, allowing the company to grow faster with less effort. Often, the company acquires already finished products that grow into successful businesses, like YouTube.

Alphabet is like many other technology companies in the sense that without such acquisitions, they would have to invest heavily in R&D to either improve their products or create new ones. Alphabet has proven its capabilities in terms of mergers, acquisitions and successfully integrating businesses into the company.