In Adding The Ability To Install Apps From Search Results, Google Can Increase Mobile Search Volumes

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Alphabet‘s (NASDAQ:GOOG)  subsidiary Google is testing a feature which allows smartphone users to download an app directly from its search app, bypassing Google Play. [1] While this feature has been rolled out to a limited number of smartphone users, it is not yet clear whether it will become a permanent feature for Google’s search app. However, this feature appears to be part of Google’s strategy to make its mobile search easier and more relevant for users in an app dominated mobile world.  And it has the potential to impact Facebook’s ad revenues from mobile app install ads.  Providing the ability to download apps directly from the search engine should enable Google to maintain its leading market share in the mobile search market, as an increasing number of people become more reliant on apps for their online transactions.

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Mobile App Install Advertising Revenue Is Growing

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According to BI Intelligence, mobile app install advertising is gaining popularity and revenues from this source will increase from $4.6 billion in 2015 to $6.8 billion in 2019. [2] According to eMarketer,  while mobile app install ad spending in the U.S.  was only 10% of the total mobile ad spending, it grew by 80% compared to the previous year.

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While Facebook is the most popular site for mobile app install ads, Google’s new feature appears to be targeted towards grabbing a bigger share in this market. Though this market is not very large, the new feature will also allow Google to retain its lead in the mobile search space. As an increasing number of users depend on mobile apps for their online activities, Google needs innovation to make mobile search more relevant. The option to download an app directly from the search engine should drive more search traffic towards Google.  According to our estimates, mobile search ads account for more than 40% of Google’s valuation and we expect it to retain its market share of around 85% in this space over our forecast period.

As Google looks to maintain its dominant position in the mobile search space, making mobile search easier and more relevant to users is its top priority.  A feature which lets users download apps from the search engine appears to be aimed more towards providing convenience to users and increase mobile search traffic rather than targeting mobile install app ads, which could be an additional benefit.

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Notes:
  1. Google Tests App Download Shortcut in Search App, Wall Street Journal, January 19, 2016 []
  2. The Mobile App-Install Ad Is Driving A Boom In Mobile Ad Spend –And Not Just Among Game Makers, Business Insider, January 2015 []