Google's Economic Moats

Economic Moat allows the company to keep its competitors at bay from taking its business & profitability.

Google is one of the most successful company will most likely have some advantages to maintain or even grow further its profitability.

 Here are some examples. 

Brand

I am sure at some point in our life we will use this phrase, " I google it". The activity of searching and researching something has become a simple word, 'google'.

How did it happen? To be honest, although Google was created in my lifetime, I can't recall why this phrase happens.

Despite the start of the internet, there were a few search engine websites. I even remembered watching Yahoo! advertisements on television, trying to create an impression on the public.

Yet, it becomes a verb in our language. Thus, Google has become an action word and also the search engine to use.

This makes Google the most visited website in the world. Followed by Youtube, which is also owned by Google. 

Source: https://www.semrush.com/website/top/

Android: Budget smartphones

Apple and Android are sharing the smartphone market share. Apple has a 27% market share while Android has almost 72% market share globally.

 

Source: https://gs.statcounter.com/os-market-share/mobile/worldwide

Despite Apple having a smaller market share, it does have larger revenue. Android, on the other hand, licenses its OS to phone manufacturers globally, which helps them save the time, effort, and cost of developing one. Then these phone manufacturers passed these savings to their customers, making Android phones very affordable for the public.

Google can charge a fee from these phones via Google Play. Google Play provides an easy distribution channel for Android users and app developers.

Thus Google created not only a low-cost moat for phone users, and also a distribution network for app developers to sell their apps.

Data Moat

Thanks to its search engine and YouTube, along with other services. Google can collect an extensive amount of data.

However, being able to collect a lot of data does not create a moat for the company.

A company needs to make sense of the data collected, also known as insight.

And to be able to get such insight, require analytic capability.

The better the analytic capability, the better the insights, and the company will be able to produce a better product.

This new product will bring in new customers & generate, not only new revenue, new data for the company to further improve or make new or better products. And also improving the existing products. This virtuous cycle builds up and repeats itself.

Google can achieve that thanks to the first-mover advantage it has in search engines. It is also able to analyze the data it has able get useful insights so that it can produce new products or improve the products or services it already has. 

Conclusion

Economic moats are a sign of a great company.

Google's economic moats create a virtuous cycle for Google to improve and create wonderful products and services. This makes Google very sticky to its users and customers.

For consumers like me who will keep using Google services like its search engine, YouTube, Google Docs, and Sheets. Not only they are free, but they also make good suggestions. I will most likely keep using them until those services don't work.

Thus, thanks to this ‘stickiness’, business owners will post advertisements on Google, hoping to improve their business income.

For a glance at Google’s profitability, please have a look at this pdf: https://drive.google.com/file/d/1xqJ0A4dxN0cxCIbR22awZIl3baJ4kLpf/view