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.
Google (NASDAQ:GOOG) posted its first quarter 2015 results on April 23rd, reporting 12% year-on-year growth in revenues to $17.7 billion, in line with our expectations. Google’s operating income from continuing operations increased marginally by 3% to $4. ...More
Google (NASDAQ:GOOG) is the biggest online ads company in the world and accounts for nearly 45% of global online ads sales. One of the key trends in the online search industry is the advent of mobile devices for initiating search and following through on queries. ...More
Both The Coca-Cola Company (NYSE:KO) and Google (NASDAQ:GOOG) are top dogs in their respective fields, commanding a dominant position and strong brand recognition. A comparison between the two companies reveals that while the market capitalization of Google is 2. ...More
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
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 (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 (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
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’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
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
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 (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 (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
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
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
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 (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
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
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 (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
NYSE/AMEX data delayed 20 minutes. NASDAQ and other data delayed 15 minutes unless indicated.