Zoho vs. Google: How Zoho Outperforms Google in Profitability

Started as AdventNet Inc., Zoho Corporation is currently the most profitable and successful

company in India with a staggering amount of $106.8 Mn in profit in the year 2020, a 10% increase from the previous year.

Zoho's profitability was heavily driven by the strong growth in its cloud-based business applications and its subscription-based revenue model.

The most important thing to note is that a bootstrapped company is today India's most profitable company.

Zoho could be one the most profitable company in the world, or atleast if compared to "giants".

Even if you go with the industry giant, Google, for comparison, you will easily see the difference if you look at the numbers.

We know you have a lot of questions in your mind so let's get down to it...

Google's share of profit in its total revenue is about 25%. This means that for every $100 in revenue, Google generates $25 in profit. Whereas, Zoho's share of profit in its total revenue for the fiscal year 2022 was 31.27%. This means that for every $100 of revenue Zoho generated, it kept $31.27 in profit. You can see the difference which shows that Zoho is 6.73% more profitable than Google.

But profits in a business alone will not tell the whole story, it is also important to understand the other aspects of business as well, such as the investments on Research and development and the Expenses.

In 2022, Google's total expenses were $75.3 billion, which is 28.2% of its total revenue of $268.0 billion for that year. Whereas, Zoho's total expenses in the same year were Rs. 3,572 crore (around $300 Mn), which is 18% of its total revenue of Rs. 19,854 crore. Which shows that Zoho has an expenditure of 10.8% less than Google's.

Google used to spend a staggering $39.5 billion on R&D, accounting for 14.6% of its total revenue of $268.0 billion. This is way higher than many other technology companies such as Microsoft (12.2%) and Amazon (11.3%). But still it is far behind Zoho. In 2022, Zoho spent ₹4,100 crore on R&D, which is 21% of its total revenue of ₹19,854 crore, somewhere around $2.3Bn.

"We are pleased to report that Zoho has continued to grow profitably in the fiscal year 2022. Our revenue grew by 28% to ₹6,998.8 crore, and our net profit grew by 43% to ₹2,749 crore. This growth was driven by strong demand for our cloud-based software products and services, as well as by our continued focus on operational efficiency, says Sridhar Vembu, founder and CEO of Zoho Corporation, We are confident that Zoho will continue to grow profitably in the coming years. We have a strong product portfolio, a loyal customer base, and a talented team. We are also committed to investing in our business, which will help us to continue to grow and innovate."

The numbers Zoho brings back to back is also amazing, for instance:

• Zoho's operating margin in FY22 was 39.7%, which is higher than the industry average of 25%.
•Zoho's free cash flow in FY22 was ₹2,356 crore, which is enough to fund its growth for the next few years.
•Zoho also has a strong balance sheet with no debt which makes it even better.

The thing to note is that Zoho has reached this point on his own. Zoho has not taken investment from any external investor even once till date. While Google, which started around the same time as Zoho, has raised a total of $51 million in three rounds so far. It went public later in 2004 but that's a different story

There are a few reasons why Vembu chose to bootstrap Zoho:

• The first reason is that he wanted to maintain complete control over the company. When you take outside investment, you give up some of that control to the investors. Vembu wanted to be able to make the right decisions for the company without having to answer to any outsider.

• Second, Vembu wanted to be able to grow the company at his own pace. When you take outside investment, you are under pressure to grow the company as quickly as possible. This can lead to decisions that are not in the best long-term interests of the company. Vembu wanted to be able to grow Zoho at a sustainable pace so that the company could focus on quality and customer satisfaction.

• Third, Vembu wanted to avoid the distractions of outside investment. When you have investors, you have to spend a lot of time and energy managing their expectations and keeping them updated on the company's progress. Vembu wanted to focus on building Zoho, not on satisfying investors.

Bootstrapping Zoho wasn't easy. It took a lot of hard work and dedication from Vembu and his co-founders. But it did not go in vain. Today Zoho is a successful global company used by millions of businesses around the world. This shows that if you are focused about your work, then you definitely get success, there is no doubt about it.

There is a couple of reasons why Zoho compete with Google. Zoho explained it in the following article-Zoho Blog