Can Advertising On Google Maps Open A New Revenue Stream For The Company ?

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In a recent post on its company blog, Alphabet Inc.’s subsidiary Google (NASDAQ:GOOG)  stated that it is experimenting with “Promoted Pins” on Google Maps, which will allow local businesses to reach consumers with the pin popping up on Maps when the consumer is near the advertiser’s location. The company believes that as online to offline interactions increase, it is the right time to exploit commercial opportunities in this context. While Google has not yet revealed when the ads on Google Maps will start, the company is cautious that they should not impact the user experience.  In 2014, there were 1 billion Google Map users and 41% of internet users worldwide used the app.  As mobile searches increasingly shift towards specific apps, as opposed to the main search platform, Google’s focus on local advertising on maps should enable the company to capture this trend. We believe ads on Google maps will complement other search ads on its platform.  However, they might not create an additional revenue stream for the company in the short term.

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Local Advertising Can Improve Mobile Search Revenues

As consumers increasingly use their smartphones for online activities, Google is working on mobile first solutions to provide a better return on investment to advertisers. Attracting local advertisers to use “promoted pins” on Google maps is part of this strategy. As per our estimates, mobile search ads is the most valuable division for Google, accounting for nearly 30% of its valuation. We expect the company to maintain its 85% market share in the mobile search market over our forecast period.

Introducing advertisements on Google maps can boost the mobile search revenues as consumers searching for a coffee shop or a tyre repair shop on their route will be prompted with these sponsored pins. With a huge base of users of the maps application, the company should not find it difficult to attract advertisers to this platform. According to Google it now has trillions of searches in a year with more than half of them coming from mobile devices. About a third of these mobile searches are tied to a specific location. While some of the regular searches in Google’s search engine will get replaced with location specific searches on maps, the company plans to personalize the promoted pins experience and can potentially use these as display ads. A coffee lover will be able to see the location of the nearest coffee shop such as Starbucks on his route on Google maps.

Google is exploring ways to maximize revenues from its mobile applications and the current focus on local advertisements on maps is aimed in this direction. As the number of searches on its core platform is threatened by other apps such as Amazon which is now being used for product searches, the company is looking at ways to retain users on its platform. We believe that,  while ads on Google maps will add to the revenues of the company, they might not become an additional revenue stream at first.  They will, however, aid in retaining the overall mobile search market share of the company.

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