Internet Information Providers

—Ever since Al Gore invented the internet, entrepreneurs & investors have been trying to find ways to profit from it 😉

—Executive Summary:

  • Background ~ Google and IIP
  • Internet Information Providers Industry:
    • –Yahoo!
    • –Baidu
    • –Bing

Google – The IIP Model

  • —Founded in 1998 by two Stanford graduate students
  • —Mission: “to organize the world’s information and make it universally accessible and useful”
  • —2004: IPO-$1.6 B   2008: $21.8 B in Revenue
  • —Margin machine relying on advertising, reinvest money to enhance website and improve content delivery
  • ◦Adwords: sponsored links
  • ◦Adsense: directed to third-parties
  • —Other consumer based internet tools, Maps, Finance, Mail
  • —85% global market share

—Internet Information Provider: mass consumer based web site that supply “neutral” information without selling a proprietary product

—Examples: WebMD, Travelzoo,, eDiets

  • —Basic Principles (as borrowed from Google):
    • Best to do 1 thing really, really well
    • Fast is better than slow
    • Democracy on the web works
    • There’s always more information out there
    • The need for information crosses all borders

Financials: Internet Info Providers

—Technology Sector

  • —Market Cap: $347 Billion
  • ¼ IT Services and ½ Business Software
  • —Return on Equity Percentage: 14.70 %
  • Same as IT services and Business Software = 11.50%
  • —Debt to Equity: 9.13
  • —Roughly 15% revenue generated on investment in conjunction with low debt on equity
  • Low overhead
  • Unlimited consumer base – brand recognition
  • Simply profit model

Example: Yahoo!

  • Spend roughly $0.60 to capture 10 minutes of viewer time to run the network
  • Sell that same time for $1.00 for advertising fee
  • Profit = $0.40

Timeline of Events

Late 1980’s: World Wide Web is Born.  Invented by British physics and communication expert.

Early 1990’s: First Mouse Based Browser developed.  Netscape went public and became first available web browser

1994: Yahoo! Was Born, 100,000 accesses within 10 days. Developed by Stanford Ph.D Students as a hobby.

Late 1990’s: Over 40 Million users Connected to the internet. People started using the internet for searching, shopping, learning and trading.

Early 2000’s: DSL and Cable modems enable exchange of large   amounts of data through the internet.

2004: Google goes public and paves the way for future Internet Information Providers

Present Day: Global Industry and Universal network connecting people around the world through a widespread information infrastructure

Five Forces Framework

Barriers to Entry

  • Product Diversity
  • Competing with Giants
  • Low Startup Cost

Bargaining Power of Suppliers

  • Create Unique Service
  • Degree of Differentiation
  • Supplier Competition

 Bargaining Power of Buyers

  • So Many Providers
  • Little/No Switching Cost
  • Can use Multiple sources

Threat of Substitute Products

  • Price
  • Quality
  • Buyer Switching Cost


  • Shopping Sites
  • Advertising
  • Software and Servers

All of this equals…

Rivalry Among Established Firms

  • Google
  • Low prices and increasing Buyer Power
  • A lot of Substitutes

Strategy Among Providers

market reach per product offerings


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