Google’s Disruptive Business Model

From Ed Bangeman and Sadagopan

Google has filed its Form 10-K for the fiscal year ending 2006, and there are some interesting tidbits in there.

    • Revenue Growth from $400 million plus in 2002 to $10.6 billion in four years
    • Cash & Short term investments from $2.1 billion in 2004 to $11.2 billion now
    • 99% revenue comes from online advertising
    • Traffic acquisition costs are 31.5% of the revenue
    • Cost of sales at Google is at 8%
      • Eric claims Microsoft at 22%, Yahoo at 20% and Apple is 22%
    • Cash on Hand for Google is at $11.2 billion
      • Apple has $12 billion, Yahoo has $1.6 billion, Microsoft has $34 billion in cash.

Google’s competitors don’t have the ability to compete directly in Google’s existing core areas given Google’s cost structures and the topline lead. The Google engine keeps running faster and generating cash at increasing rates. Google has been adding cash to its reserve at a faster rate in the last three years.  The excess cash enables them to keep investing in their core business and focus on innovation and acquisition in new areas.

Googles_war_chest source: Ars, 10-K

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