Google is a company that has its hands in a lot of pots. When it comes to advertising, social media, and search, they’re already a market leader. But behind closed doors, they’ve been snapping up promising companies and getting themselves a foothold in a lot of surprising markets. Their latest target? The finance industry.
How Google Optimizes Industries
When Google enters a market, what do they bring to the table? It’s not about the content or the formula, but about their ability to connect people. They build infrastructure. When they purchased Nest Labs, they took the companies smart, connected hardware and tied it into an entire smart home ecosystem. They can take existing concepts and bring them into the 21st century through communication.
The Opportunity
Right now, the finance market relies heavily on intermediaries. Finance is a simple transaction. Investors want to make a return on their investment, and borrowers are willing to pay a little interest in exchange for a loan. When Google purchased LendUp, on online loan company, they put themselves in between investors and borrowers, cutting out the banks. This business model is called peer-to-peer lending, and it presents a unique opportunity. LendUp, just like the banks, is designed to connect two groups of people. Google already has access to a huge number of investors through its venture capital business Google Ventures, and borrowers through its search and marketing platform. This allows Google to control every side of the market, presenting them with the opportunity to get into a number of large financial markets. Secured loans and reverse mortgages would be the natural progression for their main investment, but with time they could become a premier provider of mortgages, business capital, and equity loans.
Acquisitions
Googles parent company, Alphabet, is one of the largest in the world. They are poised to enter any market they want by acquiring up-and-coming market leaders. In fact, Google spent more money than 5 of its biggest competitors combined. Their high liquidity combined with their access to marketing puts them in a unique position to become a monopoly in almost any industry.
Why This Purchase is Different
With them investing in so many industries, what makes this one unique? Historically, Google hasn’t leveraged its control over a large portion of the online advertising market for the benefit of their business. But recently, Google banned certain types of lenders from using their AdWords marketing platform – specifically the ones they were competing with.
Why this industry? One online lender may seem like a pretty small drop in the pond, but the finance industry comprised 50% of the United States non-farm profits. In 1947, it was only 10%. As one of the largest industries in the country, it’s clear that this could be the start of a major play.
What This Means for Businesses
For business, this could actually be a good thing. Almost every product Google releases is heavily customer-centric. For business-oriented financial products, this could mean a larger access to capital and a drastic reduction in interest expense.
