Below are key drivers of Google's value that present opportunities for upside or downside to the current Trefis price estimate for Google:
For additional details, select a driver above or select a division from the interactive Trefis split for Google at the top of the page.
Google.com and Google's international sites (e.g. Google.ru, Google.com.br, and others) offer a dedicated platform to conduct searches on the Internet through PCs and wireless devices.
Google makes money from contextual advertising known as keyword advertising that is shown based on the type of search a user conducts. For example, a user searching for "NYC restaurants" would be shown a variety of ads on the right-hand side of Google's search results pertaining to restaurants and food services in New York City.
Advertisers on Google bid for keywords (such as "NYC restaurants ") to display their advertisements on the Google search page. Google AdWords allows these advertisers to display advertisements in Google's search results and the Google Content Network through either a cost-per-click or cost-per-view scheme. The pricing of keywords, the inventory of keywords available, and the frequency of user search, impact how much money Google makes on search.
In addition to advertising on its search engine, Google makes money by placing advertisements on other Google-owned properties such as video sharing site YouTube, email service Google Mail (Gmail), etc. Google also makes money by facilitating the placement of advertising on its "partner" websites (via ad serving platform AdSense) from which it receives a share of the advertising revenue.
Google search on mobile is increasingly gaining importance as more and more users are shifting towards mobile devices like smartphones and tablets for desktop based web browsing. According to our estimates, derived from publicly available sources, tablets and smartphones surpassed PC's in use globally in 2014. As a result, mobile search is increasingly gaining importance for Google, rivaling its PC-based search in contributing towards Google's stock.
We believe Google Search Ads is much more valuable than Ad Partnerships for Search & Content, YouTube, Gmail and other divisions due to the following reasons:
Google's flagship search business continues to dominate globally. Competitors like Yahoo and Microsoft have been consistently pushed back as Google retains market shares of around 65% and 90% in PC and mobile devices respectively. The company's superior algorithms and brand recognition have clearly found favor with users, and till date the search engine market has not boasted of a better search tool. Given the current trends, Google's dominance is expected to continue, although one cannot discount future technologies such as Apple's Siri as possible future threats.
As web penetration increases across emerging markets like India, users are expected to increasingly become more familiar and comfortable with using web search as the flagship tool to look for information. In addition to this, web browser development has increasingly made it easier to promptly do a web search. For example, Google Chrome obviates the need to actually open the Google homepage to do a search. These above factors should contribute significantly in growing web searches for every PC device globally.
The mobile revolution would have a big role to play in the way Google search is utilized. Smartphone and tablet capabilities are improving by leaps and bounds. This includes personal usage like finding restaurants and utilizing maps and GPS (Global Positioning System), as well as professional uses such as sending/receiving e-mails and making presentations. As bandwidths increase in emerging markets, mobile device functionality is expected to come at par with PCs in the coming years. This should lead to a substantial increase in the number of mobile devices in use globally.
We estimate Google's revenue per 1,000 searches (RPS) on mobile devices to be around $7.1 in 2014 and expected to remain stable at these levels going forward. Advertisers are increasingly recognizing that users spend a lot of time on their smartphones/tablets, with activities including music, watching videos and social networking. As a result, monetization of search on mobile devices should increase, closing in on RPS levels for PC-searches.
We expect increasing adoption of Internet search capable mobile phones, higher mobile Internet speeds, and increasing partnerships between search engines and mobile phone manufacturers (for e.g. think Google search on iPhone). According to a report by eMarketer, global mobile ad spending is expected to grow to $64 billion in 2015, an increase of 60% over 2014 numbers. Google's open source mobile OS, the Android, should greatly benefit from this, as it uses Google search as the default search option. The Android also has the advantage of being used by multiple manufacturers, including Samsung, LG HTC and most of the Chinese vendors.
In contrast to search, which is more functional and commercial in nature, online video and social networking are more entertainment-focused, where ads are generally seen as a distraction. Currently, ads displayed on such platforms are graphical and static in nature, which do not drive the same recall as a moving video (e.g. television ads). As YouTube and other video sharing sites figure out better ways of displaying ads which are not intrusive and do not interfere much with the user experience, advertisers will be willing to pay more for such ads, driving up overall video advertising monetization.
Google and its Android-OEM partners like Samsung continue be plagued by patent infringement lawsuits from arch rivals like Apple and Microsoft. In some regions like Germany, Apple has successfully ensured that certain Android-powered devices are banned from imports. On the other end, Microsoft has acquired Nokia's phone unit in 2014 to ensure that its Windows Phone platform continues to thrive in the smartphone industry. Given the cut-throat competition that prevails in the smartphone and tablet sector, patent wars are expected to rage on in the coming years as well, threatening Android's market share in the mobile OS market. For now, Google continues to have its own patent moat by through Motorola's patent portfolio that it continues to hold onto.
With the advent of smartphone, application development has taken center stage. Most smartphone users now use specific apps to search for products and services. Foe example, users tend to use Amazon's app to search for products they want to buy, and Yelp's app to search for services (Resturant, Taxi's etc). As a result, Google's search engine is circumvented completely. This can lead to loss in revenues and market share for the company.
Penetration of Adblock software, which restricts websites from displaying ads on websites, is increasing. There are 198 million active adblock users around the world. This number is expected to cost publishers nearly $22 billion during 2015. This trend is especially detrimental to Google's business as the company heavily relies on Ads for its revenues.
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. ...More
Alphabet (NADDAQ:GOOG,GOOGL) announced fourth quarter results on February 1st, for the first time breaking out both core Google's results and its "Moonshot" business as separate businesses. In toto, the company reported 18% year-on-year growth in revenues to $21.2 billion, in line with our expectation. On a constant-currency basis, revenues grew 24%. ...More
Alphabet (NASDAQ:GOOG) is set to release Google's Q4 2015 earnings on Monday, February 1st. In Q3, the company reported that its revenues grew by over 13% year over year to $18.7 billion. However, cost-per-click (CPC), which has been declining for the past two years, continued to negatively impact growth. ...More
Reports suggest that Alphabet's (NASDAQ:GOOG) subsidiary Google is forming its own dedicated division for virtual reality computing and a key executive has been appointed to run this division. ...More
Alphabet's (NASDAQ:GOOG) Google is replacing Oracle's Java application programming interface (APIs) in Android with OpenJDK (also an Oracle initiative) in order to steer clear of copyright lawsuits brought upon it by Oracle in 2010. Google's Android N will rely solely on OpenJDK rather than Android’s own implementation of the Java APIs. ...More
For a country that accounts for approximately 1% of its revenues, ((Google Alphabet India reports 35% increase in yearly revenue, The Economic Times, December 14, 2015, Google SEC Filings)) Alphabet's (NASDAQ:GOOG) subsidiary Google recently an... ...More
Alphabet's (NASDAQ:GOOG) subsidiary Google recently announced that it was open-sourcing its latest machine learning engine engine called TensorFlow. ...More
Alphabet (NASDAQ: GOOG) and Apple (NASDAQ:AAPL) seem set to enter the auto industry. In a previous article, we talked about Apple’s motivation in building a car and in this one we will talk about Alphabet’s ambitions related to cars. ...More
Google's (NASDAQ:GOOG) flagship search business continues to dominate the search engine market globally. We expect that its superior algorithms and brand recognition will enable the company to retain its market share of around 65% for PC search and 90% for mobile search. ...More
Broadly, there are two vectors along which we can trace the recent evolutionary path of cars, hardware and software. In the first article in this series, we discussed in brief the shift from the internal combustion engine powered cars to all electric battery powered vehicles. ...More
Alphabet (NADDAQ:GOOG,GOOGL) announced Google’s results on October 22nd and the company reported 13% year-on-year growth in revenues to $18.7 billion, in line with our expectation. On a constant-currency basis, revenues grew 21%. However, pricing pressure on online ads resulted in a 11% year-over-year decline in aggregate cost-per-click (CPC). ...More
Alphabet (NASDAQ:GOOG) is set to release Google's Q3 2015 earnings on Thursday, October 22nd. In Q3, the company reported that its revenues grew by over 11% year over year to $17.72 billion. However, cost-per-click (CPC), which has been declining for the past two years, continued to negatively impact growth. ...More
A recent report from comScore shows that the number of users on mobile has outnumbered that on desktops. Going forward, advertisers will focus more on mobile marketing strategies as mobile searches have exceeded PC searches, according to a recent report by ... ...More
Online video market has moved to the fore front of advertising over the past five years. Recently, mobile video viewing has further added impetus to this segment, primarily due to advent of mobile technology and the widespread adoption of Smart Phones and Tablets. ...More
In the first part of this article, we explored the trends that are shaping the global advertising industry. To summarize the first article, advertisers are increasingly allocating more of their budgets for online ads at the expense of TV and print media. ...More
Search Engines' Gains Are OTAs' Loss Google (NASDAQ:GOOG) has recently launched a new commission-based advertising program for hotels, which might place it as a direct rival for the OTAs (Online Travel Agencies) such as Priceline (NASDAQ: PCLN) and ... ...More
The $600 billion advertising industry, which is growing at 5% rate annually, is undergoing a rapid transition. ((Advertisers Will Spend Nearly $600 Billion Worldwide in 2015, December 10 2014)) While TV ads continue to rule the roost with over 40% share, digital ads that include online desktop and mobile ads have taken the center stage ... ...More
So it appears that Apple (NASDAQ:AAPL) is really serious about making an electric car. The Wall Street Journal reports, citing people familiar with the matter, that Apple intends to significantly ramp-up the size of the team working on its automotive project, targeting a "shipment date" as early as 2019. ...More
Porsche unveiled a new concept car at the Frankfurt Auto Show. The car is called Mission E and improves on everybody’s favorite electric car, Tesla’s Model S, in some respects. The Mission E can reach 60 Miles per hour in 3. ...More
By Greg Miller, Senior Technology Analyst By Greg Miller, Senior Technology AnalystAs my colleague Louis Basenese mentioned on Wednesday, Apple’s (AAPL) product launch event last week contained the usual buzz and hype over new gadgets. But one thing was conspicuously absent from CEO Tim Cook’s two-hour?Read More The post Smartwatch War: Can Anyone Challenge Apple? appeared first on Wall Street Daily. By Greg Miller Related Posts Apple Watch Set to Crush the CompetitionGoogle’s New “Big Bang” Will Change the FutureTech Blitz: The Dumbest Decision of the WeekThis Stock Just Won Our Highest Ever Rating ...More
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