Google: Where to cooperate? Where to compete?

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Summary: Our new Executive Briefing report analysing Google's strategy includes recommendations of how service providers can plan ‘coopetition' with this very important player. NOW AVAILABLE

Members of the Telco 2.0TM Executive Briefing Subscription Service and the Dealing with Disruption Stream can access the full Executive Briefing here. Non-Members, please see here for how to subscribe, or email or call +44 (0) 207 247 5003.


Google is enduringly fascinating as a business model innovator, a service, and in terms of its relationship with and ambitions in the Telecoms industry - and indeed many others. We've written a lot on Google before, including Google Vs The Telcos - The Tale of the Tape, How Google makes money from YouTube, and this week's post on new traffic stats that shows that Google is Outmuscling Tier 1 Telcos in terms of the amount of internet traffic it is carrying.

To be published to subscribers next week (week ending 30th October 2009), this new Executive Briefing examines Google's strategy in depth, and gives Telcos strategic recommendations on where to compete, and where to cooperate with the ubiquitous giant. It will also give strategists in other Telecoms, Media and Technology businesses insight into Google's means, motivation and modus operandi. You can also read an extract of this report here - Google Voice: one of the key battlegrounds for Telcos.

Executive Summary - Extract

Google is not just a search engine, nor is it just a media or a software company. It is, first and foremost, a massive advertising brokerage, which uses two-sided business models to maximise both the creation of ad inventory and the accuracy with which it matches targeted ads to content. 

A major driver of Google's success is its investment in infrastructure - it spends almost twice as much CAPEX as its closest competitor, Yahoo! The combination of two-sidedness and infrastructure has led to the creation of a business with immense market share, stable and sizeable margins, and strong cash flow.


Google's strategy is explored in light of a new framework, introduced in this report, for analysing two-sided business models. 

The frequent criticism that Google is unfocused is dismissed; instead, we argue, many Google investments reflect either its desire to increase the time people spend on Google sites and the total time people spend on the Internet (at the expense of other media), a conscious strategy of experimentation, or a policy of creating capabilities for future development as a deterrent to competitors from entering businesses vital to Google's success. We characterise these as ''submarines''.


A submarine is a quiet but strategically positioned deterrent to potential aggressors 

We see two major areas of conflict between Telcos and Google: communication services and advertising. In particular, Google is probably the largest single strategic threat to operator voice and messaging businesses. Its ability to reinvent its own versions of operators' supposedly "unique" capabilities should not be underestimated. Right now, Telcos' have unrivalled raw data on consumer behaviour, but Google is seeking to build its own direct relationship with consumers as it makes a play for the mobile advertising brokerage business.

Even so, Google is the Telcos' friend in the sense that its portfolio of user-friendly services are driving mobile Internet usage and new sales of mobile data tariffs. 

Conclusion and Recommendations

We conclude that Telcos should adopt a policy of 'co-opetition', and recommend that Telcos should co-operate in a targeted fashion with Google on...

  • Android
  • Google Maps and Street View apps
  • Helping Google to sell more services to consumers

...and compete with Google in these areas:

  • Voice and messaging services Vs Google Voice.
  • The mobile advertising brokerage business
  • Location-based services
  • Networks and billing systems underpinning the nascent mobile payments and mobile banking markets
  • Understanding consumers' behaviour from proprietary data
  • For the time and attention of mobile apps developers

To read the rest of the 25 page Executive Briefing, explaining these conclusions and covering...

  • Recommendations in Full
  • Understanding Google's business
  • Google - the infrastructure company
  • Google: A Classic Two-Sided Business Model
  • Three Strategies for Two-Sided Markets
  • Criticisms of Google's Strategy
  • Social Networking: Has Google missed the boat?
  • What about the dark fibre, Google Checkout, radio spectrum bids?
  • Google Changes Sides?
  • Google versus Telcos: SWOT Analysis
  • Who Knows What About Consumers
  • Location: Searching for an Edge
  • Google's Communication Services
  •   Google Talk
  •   Google Voice
  •   Google Wave
  •   Android
  • Conclusions and Recommendations for Action

...Members of the Telco 2.0TM Executive Briefing Subscription Service and the Dealing with Disruption Stream can access the full Executive Briefing here. Non-Members, please see here for how to subscribe, or email or call +44 (0) 207 247 5003.