Google Adwords
It’s Official - Google Is A Cannibal!
(No Ratings Yet)Filed under: Google Adwords by Mark @ 5:37 pm
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Cannibalisation (as a business strategy!) has many success stories. Nestle cannibalised sales of their original Kit Kat chocolate bars when they launched Kit Kat Chunky. Gillette cannibalised an entire range of shaving products when they launched the Mach 3 brand. Starbucks, McDonalds, Burger King, Subway and many more all cannibalise their own franchises when they open a new outlet within 100 metres of an existing one.
So why are so many multinational corporations fine young cannibals? Surely 1 fast food restaurant or coffee house would be more cost effective than 2 every 100m. Why buy twice as much land in expensive urban areas? And why buy twice as much machinery and hire twice as many staff? Chief Executes haven’t gone mad. Under the umbrella of one company name, new brands/franchises eat into the revenues of old brands/franchises, knowing that overall – and ‘overall’ is the key word here – sales will increase.
For example, out of 100 loyal Kit Kat customers, 50 people prefer to eat a Kit Kat Chunky. By itself, Kit Kat Chunky sells 100 bars. Although 50 fewer old Kit Kats were sold, Nestle sold 150 chocolate bars overall – 50 more than if the original Kit Kat had been the only item on sale.
So how is Google feasting on the flesh of its own? You may have seen the Ask (formerly Ask Jeeves) adverts on television recently. Ask is a rival search engine to Google, so you may ask (no pun intended) two questions: (1) Why is Ask part of Google’s search network at all? (2) Why is Google spending millions promoting Ask on TV?
Again, the answer lies with the Kit Kat maths. Let’s say Google has a 65% market share for all online searches. After its expensive ad campaign, Ask steals 5% of this, but commands 10% of the market in total. This gives Google and Ask combined 75% of the market. By itself, Google would have only had 65%. Its official – Google is a cannibal!
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This entry was posted on Thursday, November 29th, 2007 at 5:37 pm. You can follow any responses to this entry through the RSS feed.
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