Comparing Google with Vodafone

I've been comparing Google and Vodafone recently - it's interesting to contrast the strategies of two major players - one in the internet and media space, and one in the telecoms space. There is a symbiotic relationship between the internet and telecoms companies - it's the telcos that carry the traffic for the internet companies - and the telcos have a lot of influence over default settings for mobile customers - they can drive traffic from their portals and handsets to brands. Let's look at some headline stats

Q4 08	Vodafone	Google
Revenue	£10.4bn	£4.0bn
Operating margin	29%	32%
Market capitalisation	£72bn	£83bn

Now, not withstanding there are some key differences in the market environments:

• Vodafone operates in licensed, regulated markets with significant capital expenditure on network build out
• Google operates in unlicensed, unregulated markets with minimal capital expenditure required to reach new consumers

There are interesting parallels

• Google derives its revenue from selling advertising to people who want to get their message to other people (business to consumer)
• Vodafone derives its revenue from selling network access to people who want to reach other people (consumer to business or consumer to consumer)

Looking at the financial performance and the relative valuations the market clearly expects greater growth from Google than from Vodafone. So how do Google go about this?

Google need to

• Drive more & higher quality web traffic - connecting people to the businesses they want
• Deliver better targetted advertising - connecting businesses to the people they want

Vodafone need to

• Drive more connections between people and businesses
• Drive more connections between people and other people

Google do a great job of this - they offer superb tools like Google Analytics to help people optimise their websites and drive more, better traffic.

What about Vodafone? How do they help me as a consumer connect with people? They provide me with a phone number. That's about it - they don't provide me with tools to connect with people, they don't enhance my experience, as a business they don't provide me with information to help me understand more about the people who are calling me. They don't seem to do much of anything short of provide the network.

Let's imagine a world where the management of Google were installed in Vodafone, what sort of services might be provided?

• The ability to install "analytics" on your phone number to get details of when, and where people call you from
• "Analytics" for your website to see where mobile customers on Vodafone's network are and when they access your site
• Information to show you when people you are sending an email are available to call - so that you can swap a low revenue email for a high value phone call

Overall Google seem to have spent much more time and effort understanding what drives the organic growth of their business - Vodafone seem content with geographic expansion and defensively maintaining market share in europe.