Is Google Ready to Tango With Apple, Facebook in Digital Music Biz?

With Apple’s (NASDAQ:AAPL) iTunes and Facebook’s music services to compete with, Google’s (NASDAQ:GOOG) music downloading service would have an uphill task ahead. The search giant needs an effective strategy to combat the incumbent iTunes which has been in the digital music business since 2003. Below we look at some key advantages and challenges Google Music faces in the near future.

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Scale and Traffic Are Not a Problem

Google continues to be one the web’s biggest brands with over 180 million monthly unique visitors in the U.S. alone. ^[1] Unlike relatively smaller players such as Spotify and Rdio, Google Music would have instant access to high web traffic. Additionally, much like Google+, initial user adoption rates should be high as avid users would want to try out the service.

Mobile and Social Integration a Must to Counter Apple

Apple’s iTunes crossed 15 billion song downloads this year since its inception in 2003. ^[2] This number itself reflects how synonymous iTunes has become with digital music itself. Additionally, as an incumbent in the industry, iTunes has already forged strong partnerships with big music labels and artists globally. Google has already flexed its muscles in response, roping in 3 of the biggest labels in music, namely EMI, Universal and Sony Music. ^[3]

The challenge ahead, however, would be to achieve the seamless integration that Apple has achieved with all its devices including the iPhone, iPad and Macbooks. In this regard, Google has a big advantage in mobile reach, namely the Android, which just crossed the 50% global market share in smartphone OS market. ^[4] Much like Apple, a user would prefer easy and seamless usage if he/she migrates from one device to the other. In other words, the cloud-based music service should be easily accessible and operable on PC’s, mobile phones and tablets. It would be hence be expected that Google Music is adequately supported on both Android phones and tablets.

Google might also enjoy a distinct advantage through Google+. The social networking site has already crossed 40 million users, and can provide a good platform to “spread the word”. For instance, sharing a purchased song download with a “Circle” on Google+ certainly increases the potential user base for the service.

Better Late Than Never

Though Google might be late in entering the digital music space, it has enough scale at hand to make Google Music a reality. The task would be to devise a simple, easy-to-use and mobile-compatible downloading platform (much like iTunes). Meanwhile, competition is expected to rise continuously, with e-content giants Amazon (NASDAQ:AMZN) also expanding their music offerings through the Kindle Fire.

We currently have a price estimate near $628 for Google’s stock, which is around 2% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. comScore Media Metrix Ranks Top 50 U.S. Web properties for September 2011 [↩]
2. iTunes app total downloads overtook song downloads [↩]
3. Bloomberg: Google’s Music Store Chases Apple’s iTunes [↩]
4. Bloomberg Businessweek: Google Android Passes 50% of Smartphone Sales, Gartner Says [↩]