Google (GOOG)
Related: AKAM , BABA , BIDU

New Scenario
Request Scenario
Sankey Grid
Select a component to explore
Below is a list of modified and key drivers for the scenarios.


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 mobile Search Market Share: Google also continues to lead the mobile search market with an estimated market share of 85% in 2014. Google also faces a potential threat from Apple's Siri, which has enjoyed immense favor with users of iPhone. There could be a downside of 10% to the Trefis price estimate if Google's mobile search market share declines to around 75%. On the other hand, if Google continues to bring innovation such as enhanced campaigns that bundles mobile search with desktop search, it could continue to gain market share. There could be an upside of 10% to the Trefis price estimate if its mobile market shares increase to 95% by the end of Trefis forecast period.

  • Google Desktop Search Market Share: Google's global PC search market share has stayed at dominant levels, from 66.4% in 2010 to around 62% in 2014.However, Microsoft has been able to gain some market share over the past few years due to its partnership with Yahoo and Facebook in 2010. There could be a downside of 10% to the Trefis price estimate if Google's PC market share declines to levels of 50% and its mobile search market share declines to around 75%. On the other hand, if Google continues to expand its reach, through increased internet penetration and new search products, 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 75% by the end of Trefis forecast period.

  • Google Search EBITDA Margin for desktop and mobile: We currently forecast Google's PC Search EBITDA margin to decrease from about 61.3% in 2014 to about 61.5% by the end of the Trefis forecast period. Historically, Google's main operating cost component has been traffic acquisition costs (TAC). We believe that if Google 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 5% to the Trefis price estimate for Google if Google's PC Search EBITDA margin were to improve to 65% over the forecast period. However, it margins were to decline to 55% over the forecast period, our price estimate could decline by 5%.

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, 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 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 $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.


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 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.

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, 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 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.

Threat from in-App search

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.

Threat from AD-Block Software

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.

Recent Trefis Articles

In Adding The Ability To Install Apps From Search Results, Google Can Increase Mobile Search Volumes

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  Reports Earnings, For The First Time Breaking Out Core Google: Ad Revenues Improve Due To Mobile, Programmatic And TrueView Ads

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 To Release Google’s Earnings: Ad Revenues To Soar From Mobile, Programmatic And Video Verticals

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

Why Is Google Increasing Its Focus on Virtual Reality?

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

Google Adopts Open JDK For Android

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

“Google For India”: How Does This Fit Into Google’s Big Picture?

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

Reasons Why Google’s Latest AI-TensorFlow is Open Sourced

Alphabet's (NASDAQ:GOOG) subsidiary Google recently announced that it was open-sourcing its latest machine learning engine engine called TensorFlow. ...More

Car Wars – IV: How Do Driverless Car Fit Into Google’s Business

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

Why Search Business Is Most Valuable For Google?

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

Car Wars – III: Software Proliferates In The Car

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 Announces Google’s Results: Mobile, YouTube And Programmtic Ads Shine Through

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 To Release Google’s Earnings: Revenues Likely Increased As Mobile Takes Center Stage

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

Can Google Retain Its Edge In Mobile Search?

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

Is Facebook A Threat To YouTube In The Booming Online Video Ads Market?

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

Trends In Global Advertising Industry: Winners And Losers – Part 2

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

OTAs Have A New Demon To Battle: Google!

 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

Trends In Global Advertising Industry: Winners And Losers – Part 1

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

Car Wars – II: Why Is Apple Interested In Cars?

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

Car Wars – Part I: Lessons For The Auto Industry From The Ascent of The Smartphone

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

Smartwatch War: Can Anyone Challenge Apple?

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

My 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.