The trouble started on May 4, 2004,only days after Google’s celebrated coming- out party. Geico, the giant automobile insurer, filed a lawsuit against the search engine for trademark infringement. The insurer claimed the Google’s advertising system unlawfully profited form trademarks that Geico owned. Since all of Google’s revenue and growth was from advertising, the disclosure of the lawsuit appeared ominous. "We are, and may be in the future, subject to intellectual property right claims, which are costly to defend, could require us to pay damages, and could limit our ability to use certain technologies," Google disclosed in public filing outlining potential risks. Abroad, where Google had promising growth prospects, similar court challenges also arose. "A court in France held us liable for allowing advertisers to select certain trademarked terms as keywords," the company declared. "We have appealed this decision. We were also subject to two lawsuits in Germany on similar matters.
To make matters worse, it turned out that prior to its IPO filing, Google had eased its trademark policy in the U.S., allowing companies to place ads even if they were pegged to terms trademarked and owned by others. That was a significant shift, and one, Google warned could increase the risk of lawsuits against the company. It was also a practice that Yahoo, its search engine rival, did not permit. Google claimed it made the policy change to serve users, but some financial analysts said it appeared designed to pump profits before the IPO.
And there was more. Competition form Yahoo and Microsoft posed a greater challenger to Google following the disclosure about its mammoth profitability. With so much money at stake, the intensity of the competition would heat up. Such competition might be good for computer users searching the Internet, but Google said it posed additional risk for potential shareholders. "If Microsoft or Yahoo are successful in providing similar or better Web search results compared to ours or leverage their platforms to make their Web search services easier to access than ours, we could experience a significant decline in user traffic," the company disclosed. In addition, Google warned that its momentum seemed unsustainable due to competition and "the inevitable decline in growth rates as our revenues increase to a higher level."
The there was the question of Googles’s exclusive reliance on advertising, and one particular type of advertising, for all of its revenue. That was potentially quite one particular type of advertising, for all of its revenue. That was potentially quite problematic. If Yahoo or Microsoft gained ground on search, users could flock to their Web sites, and advertisers could follow, "The reduction in spending by; or loss of, advertisers could seriously harm our business," the company disclosed in its SEC filing.
In the beginning, the firm, earned all of its money from ads triggered by searches on Google.com. But now, most of its growth and half of its sales were coming primarily from the growing network of Web sites that displayed ads Google provided. This self-reinforcing network had a major stake in Google’s successful future. It gave the search engine, operating in the manner of a television network providing ads and programming to network affiliates, a sustainable competitive advantage. But there was a dark side there too, because of the substantial revenue firm a handful of Google partners, notably America Online and the search engine Ask Jeeves. If at any point they left Google and cut a deal with Microsoft or Yahoo, the lost revenue would be immense and difficult to replace. "If one or more of these key relationships is terminated or not renewed, and is not replaced with a comparable relationship, our business would be adversely affected," the company stated.
Google’s small, nonintrusive text ads wee a big hit. But like major television an cable networks, which were hurt by innovations that enabled users to tune out commercials, the company faced the risk that users could simply turn ads off if mew technologies emerged.
Going public also posed a potentially grave risk to Google’s culture. Life at the Googleplex was informal. Larry and Sergey knew many people by their first names and still signed off on many hires. With rapid growth and an initial public offering, more traditional management and systems would have to be implemented. No more off-theshelf software to track revenue on the cheap. Now it was time for audits by major accounting firms. As Google’s head count and sales increased, keeping it running without destroying its culture was CEO Eric Schmidt’s biggest worry.
Google, the NOUN that became a verb, had built a franchise and a strong brand name with global recognition based entirely on word of mouth. Nothing like it had been done before on this scale. The Internet certainly helped. But Google’s profitability would erode if the company were forced to begin spending the customary sums of money on advertising and marketing to maintain the strength of its brand awareness. Marketing guru Peter Sealey said privately that the advice he gave Google to study consumer perception of the Google brand was rejected by the company and that they were unwilling to spend money on marketing.
Common Information Question: 1/4
Which of the following statement is true?
Google’s growing popularity has been a threat to other players operating in that market segment like Yahoo and Ask Jeeves, as Google eroded their market share.
According to Google its decision to considerably relax its industrial design policy in the US was geared to satisfy its clients.
One of the major challenges for Peter Sealey has been to expand the Google Empire while keeping its existing internal work culture intact.
Google’s business potential is likely to be threatened seriously if the accessibility and quality of the Web search offered by its competitors like Microsoft or Yahoo becomes superior than the same offered by it.
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