The article chosen for analysis is titled ‘Google to Fund, Develop Wireless Networks in Emerging Markets’. It is published by the Wall Street Journal on 24th May 2013. From a Managerial Economics point of view, the article throws light on Google’s market expansion in emerging economies. Google is renowned for its innovations in the field of information technology. In recent years, the company has ventured into creating hardware for that would complement and support its popular software applications. Google’s search engine is its flagship product which is very prevalent across the world. On the back of the stupendous success of the search engine, the company has created numerous web applications such as gmail, youtube, google books, etc which are ever gaining in popularity. The company is known for coming up with fresh and interesting ideas that create new niches in the markets related to the web. The article in question talks about one of the preoccupations of the top management, namely, market expansion. Hence, it is quite relevant for students of Managerial Economics.
In the global economy of today, despite the remarkable reach of the Internet, only a minor portion of the world population have access to it. A whopping 87% of Google’s revenues come from advertising carried by its various web platforms. For example, the Adsense advertising program is one of the major streams of revenue for Google. Hence, it makes a lot of business sense to expand access to the Internet to as many potential consumers as possible. For example, “Connecting more people to the Web world-wide creates more potential users of its Web-search engine and other services such as YouTube and its Google Play media and app store. More than half of the world’s population doesn’t use the Web, particularly in developing nations, researchers say.” This is exactly what Google is trying to achieve as per the article in review. But there are quite a few challenges facing this vision. Firstly, the infrastructure in the developing world (where most untapped markets exist) is quite rudimentary and incompatible with the sophisticated tech products and services offered by Google. As a way of overcoming this problem Google is trying to create an independent network system that would function parallel with existing television and telephone broadcast systems. Already this proposition is being experimented with in South Africa, where a local school system is being supported via this new technology.
The challenges facing Google are not only in the realm of technology but also from powerful competing firms. Microsoft, one of the major rivals for Google, is trying out similar technological innovations with a view to installing them in developing nations. The advantages these new network infrastructure offers are two-fold. First, they reduce the burden on the conventional telecom airwaves, whose spectrum allocations are fully saturated. Second, they allow a more portable and localized network infrastructure to emerge, which offer firms like Google flexibility to target particular consumer groups. But as Amir Efrati notes, the path is not easy for Google, as incumbent cable and wireless network operators are fierce in holding onto their monopoly. The incumbents, especially in the US and Europe, “have clashed with Google, believing it is unfairly reaping profits on the back of their networks. Google has long feared such companies would make it harder for its Web services to work properly on the networks”.