Google+ Could Get A Boost With Nik Software Acquisition

by Trefis Team
Alphabet Inc.
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Google’s (NASDAQ:GOOG) Sr. Vice President of Social Vic Gundotra recently made two key announcements. First, Google+ has crossed 100 million active users per month and, second, the acquisition of photo software provider Nik Software.

From the onset, Google+ has been a platform preferred by many users for uploading photos. We think the acquisition of Nik and its Snapseed app should allow users to increase the quality of their photos on the Google+ platform. Since photo sharing is a big part of social media, it could drive users to choose Google+ for more of their photography-related needs. This would likely increase the number of page views on the platform and could attract new users seeking a superior photo experience than that offered by rival Facebook (NASDAQ:FB).

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New users can drive search revenues

If the acquisition of Nik Software can attract more users to Google+, the company will be in a better position to use social media to gain user of other products. For instance, Google’s social search offering is integrated with Google+ and offers an improved search experience to the users while driving an increase in search advertising revenue with more targeted results. If Nik Software can increase user engagement on Google+ and drive page views to other products like search, we could see upside to our price estimate.

Even without the social search offering, the acquisition could drive Google’s search revenues. For example, when users upload photos to the Google+ platform, the company can use the information of their whereabouts to create a better profile. When a user conducts a search, the company can use the more detailed profile to display advertisements that are better targeted to a user’s interest. Advertisers are likely to pay more for better ad targeting, and this could help mitigate the downward trend in Google’s revenue per search.

Overall, we think this acquisition gives Google a good opportunity to increase its number of active users as well as user engagement on its social platform. With increased competition for most of its products, an increase in the social user base can help the company maintain revenue growth.

We currently have a $661 price estimate for Google, which is approximately  10% above the current market price.

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