Online Advertising Industry Analysis and Co-opetition Strategy of the Leading Firm
Date Issued
2008
Date
2008
Author(s)
Huang, Jiun-Jie
Abstract
With over 20% annual growth rate in five consecutive years, online advertisement business has been one of the fastest growing industries in the twenty first century, especially for the paid search ad which is 76 times growth in market size during the past seven years. In this particular market, Google has maintained market dominance: Google’s market share of queries in U.S. is greater than 60% in 2007; her revenue share in U.S. is over 70% in 2006, and it also got overwhelming superiority in contextual display ad by her AdSense. In contrast, there are diverse kinds of companies in graphic display ad market in the past years. However, as DoubleClick was aquired by Google, her market dominance becomes even strong.ased on five-force analysis proposed by Porter (1980) and value net modol suggested by Brandenburger & Nalebuff (1996), this research provides detailed analyses on paid search, contextual and graphic display ad. We then analyze the value net of Google and DoubleClick, co-opetition strategy of Google, and, finally, the new competitive posture that Google faces now.his research suggests that ad networks will be substituted by tool providers who provide software tools to advertisers and publishers. Hence, tool providers will control the graphic display ad market, and ad networks should shift its business to transactions of a large amount of ad inventory. Besides, Microsoft and Yahoo! have to develop new markets, such as mobile ad, as Google’s becoming the final winner of the industry due to its acquisition of DoubleClick and its superior technology.n addition, this research found that Google attracts new customers and suppliers by its technology advantages, which in turn creates more online ad businesses and finally realizes value. Also, Google develops many platforms which let complementors join and design more complemental products which raise consumers’ value, therefore increases the number of users, and, capitalizing on network effect, finally converts more advertisers to be her customers. Such a virtuous cycle explains why Google will be so successful and able to expand continuously.
Subjects
Value Net
Online Advertising Industry
Co-opetition
Two-sided Market
Type
thesis
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