Google (GOOG)
Related: AKAM , AOL , BIDU

New model
Download: Report
Select a component to explore
Below is a select list of key drivers for the model.


Below are key drivers of Google's value that present opportunities for upside or downside to the current Trefis price estimate for Google:

Google Search Ads

  • Google Search Market Share: Google's global PC search market share has stayed at dominant levels, from 66.8% in 2009 to around 65% in 2013. At the same time, Google has remained virtually monopolistic in the mobile search market, with an estimated market share of 90% in 2013. However, Microsoft has started to take aggressive measures to take share from Google. It partnered with Yahoo and Facebook in 2010 to expand Bing market share. Google also faces a potential threat from Apple's Siri, which has enjoyed immense favor with users of iPhone 4S. There could be a downside of 10% to the Trefis price estimate if Google's PC market share declines to levels of 57%-58% and its mobile search market share declines to around 80%. On the other hand, if Google continues to bring innovation like Google Instant, it could continue to gain market share. There could be an upside of 10% to the Trefis price estimate if its PC and mobile market shares increase to 80% and 95% respectively by the end of Trefis forecast period.
  • Google PC Search EBITDA Margin: We currently forecast Google's PC Search EBITDA margin to decrease from about 57% in 2013 to about 53% by the end of the Trefis forecast period. Historically, Google's main operating cost component has been traffic acquisition costs. We think that if Google can further can limit the growth rate of TAC and employee compensation relative to revenues its margins can stabilize and even improve to historical levels. There could be an upside of 10% to the Trefis price estimate for Google if Google's PC Search EBITDA margin were to remain flat at 52% over the forecast period instead of declining to 41% as we currently forecast.

For additional details, select a driver above or select a division from the interactive Trefis split for Google at the top of the page.

BUSINESS SUMMARY and Google's international sites (e.g.,, 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, social networking site Orkut, email service Google Mail (Gmail), etc. Google also makes money by facilitating the placement of advertising on its "partner" websites (via ad serving application 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 web browsing. According to our estimates derived from publicly available sources, tablets and smartphones are expected to surpass PC's in use globally by around 2015. As a result, mobile search would increasingly gain 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, Orkut and other divisions due to the following reasons:

Google Dominates Web Search on a Global Scale

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.

Growing Internet Searches per PC in Use

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.

Smartphone and Tablet Usage on the Rise

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.

High Search Monetization on Mobile

We estimate Google's revenue per 1,000 searches (RPS) on mobile devices to be around $6.5 in 2013 and expected to reach close to $8.4 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.


Growing Mobile Search

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 RBC Capital Markets, global mobile searches were around 20% of total searches in 2013. 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 and HTC.

Increasing Video Advertising

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 (like Revision3's in-video interactive clickable ads), advertisers will be willing to pay more for such ads, driving up overall video advertising monetization.

Patent Lawsuits Threaten Android

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 made sure that it extracts a licensing fee from every Samsung Galaxy S-IV smartphone that is sold. 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 has tried to build its own patent moat by acquiring Motorola Mobility in August 2011, raising its patent portfolio from less than 1,000 to over 17,000.

Voice-enabled search can threaten traditional search

Apple's voice-enabled search tool Siri has found a lot of favor with users, as it provides an even simpler and hands-free approach towards web search. While still not a credible threat, Siri could be paving the way for voice-enabled search becoming the norm, and Google might need to follow suit with its own version.

NOTE: Google announced its $12.5 billion acquisition of Motorola Mobility on 15th August 2011. However, the company has sold off all the hardware divisions of Motorola by 2013, and we have updated our model by removing Motorola Mobility from Google's operating division.

Recent Trefis Articles

Google Wallet’s Deal With SoftCard Can Boost Its Market Share In Mobile Payment

Google (NASDAQ:GOOG) introduced Wallet services in 2011 and a prepaid debit card linked to its Wallet services in November 2013. ((Google to Unveil the Google Wallet Debit Card, 20 November, 2013)) However, despite this significant push by Google, Wallet’s original NFC (Near Fiel... ...More

January Roundup For Internet Companies

Internet stocks traded down for the month of January, in conjunction with the broader market NASDAQ Internet Index (NASDAQ:QNET), which ended with a decline of 2.2%. ...More

Google Earnings: Strong Mobile Performance Backed By Programmatic Platform Boosts Revenues

Google (NASDAQ:GOOG) posted its fourth quarter results on January 29th. The company reported 15% year-on-year growth in revenues to $18.10 billion, which was in line with our expectations as stated in the note published earlier. However, it’s operating income from continuing operations declined marginally to $4. ...More

Google Earnings Preview: Ad Volume Growth To Offset Decline In CPC

Google (NASDAQ:GOOG) is set to release its Q4 2014 earnings on Thursday, January 29th. In Q3, the company reported that its revenues grew by over 20% year over year to $16.52 billion. However, the result failed to enthuse investors who were expecting far better growth in both the top line and the bottom line. ...More

Uncovering Green Alternative Energy Mutual Funds

Submitted by Harris Roen as part of our contributors program. Uncovering Green Alternative Energy Mutual Funds by Harris Roen, Editor Roen Financial Report January 19, 2015 Not all alternative energy mutual funds are created equal. ...More

Google In 2014

Google’s (NASDAQ:GOOG) stock underperformed the market in 2014 as the stock declined by 3% compared to 16% return on NASDAQ composite index. During the year, the company increased its focus on growing penetration in the hardware space aggressively as it looked to diversify its revenue streams. ...More

Rationale For Google’s Spending On Data Centers

Google (NASDAQ:GOOG) is a household name due to the popularity of its search engine. However, the company realizes that the robust growth it witnessed in online ads market in the last decade might not be sustainable in the future, partly due to the limits to the total addressable market (TAM) in the existing market and the rising competition from in mobile app data. ...More

Japan’s Recession a Bad Sign for U.S. Investors

Submitted by William Briat as part of our contributors program. Japan's Recession a Bad Sign for U.S. Investors The U.S. economy has been showing some positive growth that has helped to propel the stock market higher, but be careful: there appears to be some cracks forming in the global economy to which the U.S. economy will not be immune. ...More

Google Earnings: Profitability Disappoints Even As Revenue Grows

Google (NASDAQ:GOOG) posted its third quarter results on October 16. The company reported 20% year-on-year growth in revenues to $16.52 billion, which was in line with our expectations. Furthermore, it’s operating income from continuing operations declined by approximately 1% to $3.72 billion, primarily due to increased investment in research and development. ...More

Google Earnings Preview: Cost-Per-Click, Mobile And Video Ad Revenues In Focus

Google (NASDAQ:GOOG) is set to release its Q3 2014 earnings on Thursday, October 16. In Q2, the company reported that its revenues grew by over 22% year over year. However, the result failed to enthuse investors who were expecting far better growth in both the top line and the bottom line. ...More

Week In Review: AOL, Google, Yahoo

Internet stocks traded down for the week, in conjunction with the broader market, which has been more volatile. As a result, the NASDAQ Internet Index (NASDAQ:QNET) is giving back some of this year's advances, as investors capture gains on some of their best performing shares. ...More

Week In Review: Google, Yahoo, AOL, Yelp

Internet stocks traded down for the week, in conjunction with the broader market that declined from the recent highs. As a result, the NASDAQ Internet Index (NASDAQ:QNET) is giving back some of this year's advances, as investors capture gains on some of their best performing shares. ...More

Week In Review: Google, Yahoo, AOL, Yelp

Internet stocks were off a bit on the first day of the trading week ending on 19th September. As a result the, NASDAQ Internet Index (NASDAQ:QNET) traded near a one-month low, as investors sold some of the bull market’s best performing shares. ...More

Google’s Android One Platform About More Than Just Phones

Google (NASDAQ:GOOG) announced the launch of its Android One platform on Monday, September 15, targeting the low-end smartphone segment in emerging markets. While newly launched phones are currently available in India, the company plans to roll them out to other developing countries such as Indonesia, the Philippines, Bangladesh, Nepal, Pakistan and Sri Lanka in the coming months. ...More

Week In Review: Google, Yahoo, AOL, Yelp, Facebook

Internet stocks started this week off on a strong note. However, the broader market indices gave up gains mid-week on account of profit booking and macroeconomic factors. Internet stocks followed suit, and the NASDAQ Internet (INDEXNASDAQ:QNET) index fell by 100 basis points. ...More

Amazon’s Stock Can’t Defy Gravity Forever

By Louis Basenese, Equity Analyst By Louis Basenese, Equity Analyst Amazon (AMZN) has been basking in the glory of higher sales and share prices, thanks to a phenomenon known as “showrooming.” That’s when consumers hit their local stores to get an up-close look at a…Read More The post Amazon’s Stock Can’t Defy Gravity Forever appeared first on Wall Street Daily. By Louis Basenese Related Posts Amazon’s Legal Tightrope Act is Nothing Short of MiraculousFriday Charts: Ballmer’s Biggest Blunders and the Next $1,000 StockClerical Error Awards Every Employee $345 MillionThe Biggest Scourge on the Tech Industry ...More

Google Earnings:Ad Volume Soars Even as Cost Per Click Declines

Google (NASDAQ:GOOG) posted its second quarter results on July 17. The company reported 22% year-on-year growth in revenues to $15.95 billion, which were in line with our expectations. Its operating income from continuing operations grew by approximately 22% to $4.26 billion. However, the company continued to invest heavily, with some pressure on margins. ...More

Google Earnings Preview: Revenue Growth From Mobile To Buoy Results

Google (NASDAQ:GOOG) is set to release its Q2 2014 earnings on Thursday, July 17. In Q1, the company posted that its revenues grew by over 19% year over year. The result failed to enthuse the market which was expecting far better growth in both the top line and the bottom line. ...More

A Robot Apocalypse . . . Mankind’s Deadliest Foe?

What’s the greatest threat to mankind? No water… no food… nuclear war… a devastating global pandemic? Nope. It’s a robot apocalypse. Don’t believe me? Even the smartest man on the planet – renowned theoretical physicist, Stephen Hawking (a guy with…Read More The post A Robot Apocalypse… Mankind’s Deadliest Foe? appeared first on Wall Street Daily. ...More

Savvy Acquisitions to Propel Growth in These Stocks

Six weeks ago, I told you there was no tech bubble. Looks like I was right. There’s no bubble. And there’s no imminent downturn, either. On the contrary. Tech stocks are actually recovering nicely from their spring stumble. And buyout…Read More The post Savvy Acquisitions to Propel Growth in These Stocks appeared first on Wall Street Daily. ...More

Viewer's Notes

Name (Required)
Email (Required, but never displayed)



By using the Site, you agree to be bound by our Terms of Use. Financial market data powered by Consensus EPS estimates are from QuoteMedia and are updated every weekday. All rights reserved.

Content Attribution Policy
Terms of Use

NYSE/AMEX data delayed 20 minutes. NASDAQ and other data delayed 15 minutes unless indicated.