Introduction
Presented in this paper is the comparison of the business and revenue models of Google and Alexa particularly in the aspects of network externalities and threat of entry. Is Google more proportionally profitable with the “subsidiary” Alexa? Who has the best business model to obtain the customer base level advantageous to network effect? Is this effectiveness short-run or long-run motivated? Contingencies are available, but who has the best models to implement them when the negative effects of network externality emerges?
The Business and Revenue Models of Google and Alexa
For the information to be effective, it should be gathered from a vast pool of available resources, ideally, international in scope. For them to be efficient, however, requires the intervention of technology through web-based information. In this view, search engines emerged such as Google, which means one followed by one hundred zeros to portray the strength of its database, to ensure speed, accuracy, objectivity and ease of use of the available information gathered in any part of the earth. The information, however, collated by Google is so enormous that classification of data which is sensible to the user is undermined. As such, web-portal like Alexa caters to specific niche of web users to segregate the most relevant data from others to avoid jumping to websites that could be “time risky” for the user. Although it is debatable that Google’s technology assures accurate search, web-portals post in the interface the exact needs of the busy user that can range from local news to product information.
In internet parlance, network externality is a network effect when the consumer of the service is affected, either positively or otherwise, by the changes in customer base purchases of the same service. Google has greater dependence to network externality, therefore, give more importance to market share rather than profitability while the reverse is true to Alexa. The search engine Google is a general and raw platform for all kinds of information that can cater to all types of users with simple classification in search results like academic and advertising page contents. Vertically-integrated, this model also serve as system for the income generating activities of the company like AdWord and AdSense. As a result, it maintains its reputation that entices the market share to go its way and give Google the network externality advantage.
In contrast, Alexa caters to a specific niche of customers who want to obtain searches in reliable and popular websites through their statistics services that gives the user the option to select from the vast number of web links based on web-traffic, user reviews and other site statistics. As a common feature of the web portal, Alexa provides its customers a personalized interface wherein the quantity and quality of information are filtered to suit their needs. To maintain its position, Alexa obtains partnership with Google (for search services) and Amazon.com (for other essential services cannot be provided by Google). As a result, efficiency and scalability advantages from Google are enjoyed by Alexa while providing subscribers the “advance search” lacking in Google.
As observed, Alexa has lower dependence to network externalities and the risk of loosing the customers is passed to Google. When the time comes that a more efficient search engine emerged in the market, Alexa will be relatively in safer mode than Google. The large customer base of Google will shift to the new better technology, in effect, exhaustion of all the users could ensue. As network externality highly relies in the critical mass, where the value of the service is greater or equal to the price being paid, the replacement of the new technology against Google will weaken the value of service of the latter. On the other hand, Alexa is flexible, as it can divert its resources and change market due to lower and well-defined customer base, wherein it can easily withdraw partnership with Google and transfer to the new technology.
With regards to threat of entry, web-portals could be possible competitors to their servers as long as they have the large, competent and valuable workforce to operate its research and development facilities. Since Google’s search technology such as PageRank and Hypertext Matching Analysis is protected by patents, even if Alexia arrives on those discoveries, it is required to refine the research and aim for an original version of its own. On the other hand, Google is continuously working on efficiency at both ends of the search service which is faster response and larger scalability at lower costs. They even out-matched Yahoo when it emphasized on silent research rather than advertisement.
Further, Alexa and other web-portals whose search engines are powered by Google are in marketing and advertising jeopardy as their interfaces plug the Google brand itself (even though some resorted to minimized the font of mentioning “powered by Google”). There entry to the business of search engine giants requires their companies to get-out from the risk-averse stance and plunge to the complex and growing sophistication of technology and customers. The move calls for getting out of customization that protects web-portals customers and inferior technology from any unpredicted discovery boom from big competitors like Yahoo, MSN and Google itself.
Conclusion
Shouldering the greatest amount of industry risks, Google is the gallant driver of the information vehicle wherein world-wide and assorted internet users are dependent on them to operate their governments, business, religion, education and all aspects of life. In its part, Alexa is the conservative hitcher to Google’s vehicle to be able to enjoy the returns the latter is receiving from the huge customer base, at least a part of it. In addition, Alexa also wants to protect its business life from the time the driver Google is stripped with the license to deliver customer data as a better and more efficient driver has emerged. The former would not want to join Google from the time customers started to throw the adverse effects of network externalities into the latter. It is sensitive that it situates itself to select customers and provide only customized data. However, this tactics of Alexa also gives it limited customer base that makes it emphasize profitability over market share. As a drawback, it cannot have long-term gain due to minute demand scale and could create a technological breakthrough with least customer impact. Thus, the dream of being a search engine will forever becomes a dream.
Bibliography
Electronic Sources
Internet (2006). Alexa Homepage. Retrieved March 22, 2006, from www.alexa.com.
Internet (2006). Managing the Digital Enterprise. Retrieved March 22, 2006, from
http://digitalenterprise.org/index.html.
Internet (2006). Wikipedia: The Free Encyclopedia. Retrieved March 22, 2006, 2006, from www.wikipedia.org.
Credit:ivythesis.typepad.com
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