Business strategy of Google – The Google Moats

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castle lrg-340-bodiam_castle_surrounded_by_its_wide_moat

Moat: A moat is a deep, broad ditch, either dry or filled with water, that surrounds a castle, building or town, historically to provide it with a preliminary line of defence.

Over the years Google have been the crowned prince of internet. By far the biggest search product internet-kind has seen is Google search, and its so big and successful that it has become everything Google actually is. With such a big castle, every king has to come up with some defense strategy. Google is no different, and they have built deep and unreachable moats.

The far reaching products Android, Chrome and Chrome OS are the actual moats for the Search castle. Some of you might won’t agree with me on that, but actually, this is far true. In an article “The freight train that is Android”, author Gurley complements this strategy as not only does Google build moats around itself, but then it scorches the earth surrounding the moat:

So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.

As you should observe that apparently the default search engine on Chrome and Android is Google. So they are simply just the supply knots that feed into the search itself. And considering that, Google Search would be more vulnerable on mobile phones as the search engine, if Android isn’t there. Similarly, Chrome ensures that Google search is the core of internet users in the worst case if Firefox ever decides to go with Bing.

This is core strategy as they way Google creates its moats and this makes long term aftereffects on the industries it enters because it offers products for free or less than free. As a matter of fact, cell phone manufacturers and wireless phone carriers do receive financial incentives to use Android on mobile devices. Google is basically paying them to adopt it.

To put in a nutshell, I would agree with the author that not to measure the Google’s success of new businesses by how much profit or revenue they directly generate but measure it by how deep they dig the moats and shore up their core search business.