Alphabet (Google) SWOT analysis 2018

| January 20, 2018

Company Background

Key Facts
Name Alphabet Inc.
Industries served Internet (Google Search, Google AdWords, Gmail)
Computer software (Chrome OS, Picasa, Google Earth)
Consumer electronics (Chromebook, Nexus, Google TV)
Venture Capital (CapitalG, GV)
Healthcare (Verily, Calico)
Geographic areas served Worldwide (more than 100 countries)
Headquarters Mountain View, California, U.S.
Current CEO Larry Page
Revenue (US$) 90.272 billion (2016) 20.4% increase over 74.989 billion (2015)
Profit (US$) 19.478 billion (2016) 19.1% increase over 16.348 billion (2015)
Employees 72,053 (2017)
Main Competitors, 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.

Alphabet’s Other Bets are early-stage businesses, which come with considerable uncertainty, but they are already making important strides in their industries. Our goal is for them to become thriving, successful businesses in the medium to long term.

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 Microsoft's Bing, Yahoo, Yandex, Baidu, Naver, and Seznam.
  • 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 and Twitter. Some users are increasingly relying on social networks for product or service referrals, rather than seeking information through traditional search engines.
  • Providers of digital video services, such as Facebook, Netflix, Amazon, and Hulu.
  • Providers of enterprise cloud services, including Amazon and Microsoft.
  • Digital assistant providers, such as Apple, Amazon, Facebook, and Microsoft.”[1]

Alphabet (Google) SWOT 2018 Factors


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 2016, advertising generated US$79.383 billion or 88.7% of Google’s total revenue and 87.9% of the total Alphabets’ revenue. According to eMarketer, [2] Google earns more than 30% of the world’s digital advertising revenue, twice as much as the next largest earner, Facebook. 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 worldwide in 2016

    Pie chart showing a worldwide share of digital advertising by company. Google earns 32.4%, Facebook 13.3%, Alibaba 4.6%, Baidu 4.6% and other companies 45.1% of total earnings from digital advertising.

    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 80.49% desktop market share and 95.37% share of the mobile segment.[3] 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 rising 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, Lenovo, LG, Huawei, HTC, Motorola. In Q3 2016, Google’s Android had 86.8% of the worldwide smartphone OS market share.

    Figure 2. Worldwide smartphone OS market share (in percentages)
    Period Android iOS Windows Phone Others
    2016 Q1 83.4 15.4 0.8 0.4
    2016 Q2 87.6 11.7 0.4 0.3
    2016 Q3 86.8 12.5 0.3 0.4
    2016 Q4 81.4 18.2 0.2 0.2
    2017 Q1 85.0 14.7 0.1 0.1

    Source: International Data Corporation (IDC)[4]

    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 more than 103 companies. From 2012 to 2016, the company has averaged 1.7 acquisitions per month, which is one of the highest business acquisition rates in the world.[6]

Figure 3. Number of acquisitions and mergers by Alphabet and its competitors
Company 2012 2013 2014 2015 2016 Total since 2012
Alphabet* 16 19 35 16 17 103
Microsoft 8 7 12 20 11 58
Facebook 14 10 9 5 6 49
Apple 6 13 10 13 8 50

Source: CB Insights[6][7] and Crunch base[8][9] (*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.

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Published: January 20, 2018
Format: PDF
Pages: 26
Price: USD $19

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