Below are key drivers of Alphabet's value that present opportunities for upside or downside to the current Trefis price estimate for Alphabet:
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, Alphabet makes money by placing advertisements on other Google-owned properties such as video sharing site YouTube, email service Google Mail (Gmail), etc. Alphabet 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 of Alphabet due to the following reasons:
Alphabet's flagship search business, Google, continues to dominate globally. Competitors such as Microsoft have been consistently pushed back as Google retains market shares of around 63% and 95% in PC and mobile devices respectively. The company's superior algorithms and brand recognition have clearly found favor with users, and to 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 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 Zion Research, global mobile ad spending is expected to grow to $245 billion by 2022, a CAGR 15% over 2016 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 does 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.
With the advent of the smartphone, application development has taken center stage. Most smartphone users now use specific apps to search for products and services. For 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 a loss in revenues and market share for the company. However, to get around this issue, Google introduced deep links that surface information stored in apps. This has helped the company to counter the effects of in-app search, and the mobile revenues for the company have improved.
Penetration of Adblock software, which restricts websites from displaying ads on websites, is increasing. There were 615 million devices using Adblock around the world in 2016. This number costed publishers nearly $30 billion during 2016. This trend is especially detrimental to Google's business as the company heavily relies on Ads for its revenues.
Alphabet (NASDAQ:GOOG) announced its Q1 earnings on April 23, reporting a solid 26% increase in revenues to $31.1 billion. Much of the revenue growth came from Google's core advertising segment, particularly on Google owned and operated properties such as Search, Gmail, Maps and YouTube. Google Properties revenues were up 26% to $22 billion, forming 70% of the company's net revenues. ...More
Alphabet (NASDAQ:GOOG) is scheduled to announce its Q1 earnings on Monday, April 23. The company has reported strong growth in revenues in recent years, driven by Google's core search advertisement business. Advertising on Google's own platforms, or Google Properties revenues, have made up 70% of Alphabet's net revenues in recent years, and have grown at around 20% annually in the same period. ...More
Alphabet (NASDAQ:GOOG) has been a high-growth stock in the last few quarters, with its market price surging from under $800 at the beginning of last year to nearly $1,200 earlier this year before falling to current levels of around $1,020. Alphabet's net revenues have continued to increase, driven by Google's core search advertisement business. ...More
Alphabet (NASDAQ:GOOG, GOOGL) reported consistent growth in revenues over the past three years. However, its margins declined in 2017 as fines imposed by the European Commission impacted profitability. Alphabet’s revenues from Google’s ad business remains its key source of revenue and profitability. ...More
Alphabet (NASDAQ:GOOG) announced its fourth quarter results on February 1. The company posted 24% y-o-y growth in revenues to $32.3 billion. In line with our expectations, much of the growth was driven by mobile search, the programmatic platform, and YouTube. ...More
Alphabet Inc. (NASDAQ: GOOG) is set to announce its Q4 2017 earnings on January 31st. We expect that Google’s search ad revenues improved in Q4 as ad volumes increased, offsetting pressure on cost per click. ...More
Amazon is reportedly ramping up its presence in the online advertising space, which is currently dominated by Google. As Amazon looks to strengthen its presence in the online ad market, it could take some share from Google, which is the largest player in ... ...More
Google (NASDAQ:GOOG) had a solid year thus far, with superlative growth in revenues from the search ads business. However, the operating margins for the company declined as anti-trust fines imposed by the European Commission eroded profitability. Nevertheless, parent company Alphabet’s stock price has surged from $800 at the beginning of the year to around $1073 currently. ...More
Google's parent company Alphabet (NASDAQ:GOOG, GOOG) saw its stock price hit an all-time high recently. Over the past three quarters, Alphabet’s revenues have grown by 22% to $78.65 billion, largely due to Google's advertising business. ...More
Recently, Google (NASDAQ: GOOG, GOOGL) launched the Home Mini smart speakers. While Home Mini is a smaller and cheaper version of Google Home, it boasts most of the primary features available in Google Home, such as the ability to stream music and manage a wide variety of connected devices. ...More
Alphabet (NASDAQ:GOOG) announced its third quarter results on October 26. The company posted 24% y-o-y growth in revenues to $27.7 billion. In line with our expectations, much of the growth was driven by mobile search, the programmatic platform, and YouTube. ...More
Alphabet Inc. (NASDAQ: GOOG) is set to announce its Q3 2017 earnings on October 26th. We believe that Google’s search ads revenues improved in Q3 as ad volumes increased, offsetting the likely declines in cost per click. ...More
Last year, Google (NASDAQ: GOOG) launched its “Made By Google” campaign to signal its intent to aggressively participate in the hardware market, and last week it launched new devices to bolster its hardware revenues. ...More
Google (NASDAQ: GOOG) recently announced that it was acquiring part of HTC's mobile phone business for $1.1 billion. This is the second time Google has made an acquisition in the handset space. ...More
Alphabet (NASDAQ:GOOG) announced its second quarter results on July 24. The company posted 21% growth in revenues to $26 billion. The key highlights of the results were as follows: Google segment revenues for the quarter grew by 20.6% y-o-y to $25.7 billion. While Google’s operating profit grew by 11. ...More
Alphabet Inc. (NASDAQ: GOOG, GOOGL) is set to announce its Q2 2017 earnings on July 24th. For Q2, we expect that Google continued to dominate the online search ad market and its revenues improved as ad volumes increased, offsetting likely declines in cost per click. ...More
According to Trefis estimates, YouTube makes up nearly 18% of Alphabet’s (NASDAQ: GOOG) value. While most of YouTube's revenue stems from online ads, it did generate some revenues from its subscription services as well. We estimate that the company disbursed close to 70% of the revenues to video content producers as part of its content sharing agreements. ...More
Innovation never disappoints. That was the battle cry upon which I started at Wall Street Daily 10 years ago at the top of the oil boom. I’m especially bullish on three specific industries at the moment. The post 3 Innovation Trends You Can’t Ignore appeared first on Wall Street Daily. By Louis Basenese Related posts:Why Pokémon GO Has the Power to Save Lives Will We Be Ready When Robots Attack? Wearable Tech: From “Peak Hype” to “Peak Adoption” Friday Charts: Apple Pops, the Death of Volatility, and Fitbit’s Tragic End ...More
Alphabet (NADDAQ:GOOG) announced its first quarter results on April 27th. ((Alphabet Earnings Release)) For the quarter, the company reported 22% year-on-year growth in revenues to $24.75 billion, about in line with our expectations. On a constant-currency basis, revenues grew 24%. ...More
Alphabet Inc. (NASDAQ: GOOG, GOOGL) is set to announce its Q1 2017 earnings on April 27th. ((Alphabet Investor Relations)) For Q1, we believe that Google continued to dominate the online search ad market and its revenues improved as ad volume increased, which offset the decline in cost per click. ...More