Search engine industry is built on search and also advertising. It seems like there are only five major competitors in this industry competing with Google. I think the competition is tight because most of them are target the same market and conducting the similar business and technologies. The five major companies are Yahoo!, MSN, Baidu, Ask, and AOL. * Bargaining power of buyers- in both 2007 and 2008, 97% of Google’s revenues came from advertising business. The rest 3% of its revenues were made by other businesses. The advertisement customers have power to bargain …show more content…
Have Google’s business model and strategy proven to be successful? Should investors be impressed with the company’s financial performance? How does the company’s financial performance compare to that of Microsoft and Yahoo? Please conduct a financial analysis to support your position—you may wish to use the financial ratios presented in the Appendix of the text as a guide in doing your financial analysis of the company.
Figure 1: Total Revenue Structure
It’s easy to see the growth of the Google’s total revenue is constant from the above chart. It doesn’t have negative revenues even in the recession which started in 2007.
Figure 2: Cost Structure
From the cost percentage of revenues, we can see that largest costs were at general and administration expense and then R&D. Cost of sales and marketing was the last except for the year 2001. It fits its principle that focus on the users and all else will follow. It believes if it can do its job well, and customers will come to purchase its products naturally. In 2007 when the recession began, Google still invest lots of money in its R&D and the cost of it even higher than the general in the year.
Figure 3: Cash Ratio
Google has better liquidity than Yahoo! since 2004. They both were impacted by the recession starting in 2007 but they both recovered.
Figure 4: Operating Profit Ratio
Figure 5: ROE
Figure 6: Debt Ratio Overall we can see that