Google (
GOOG
) announced that it will acquire Wildfire, a firm that helps
companies deploy marketing campaigns on social networks such as
Twitter and Facebook. The exact terms of the agreement have not
been released, but estimates state that Google paid approximately
$250 million for the company. This acquisition shows that Google
continues to focus on the lucrative social arena, and we expect it
will integrate Wildfire's offerings with Google+ to improve
advertising experience on the platform. In the social advertising
space, Google primarily competes with social networks such as
Facebook (
FB
) and LinkedIn (
LNKD
).
See our complete analysis of Google here
With over 90% of Google's revenues coming from ads, it makes
logical sense that it seeks to make its ad offerings, either
organically or via acquisition. Google+, the social platform that
the company released last year, has been growing steadily, and this
acquisition should empower the company to better generate
high value advertisements targeting specific users. If Google
integrates Wildfire without any problems, we believe the ad
campaigns on Google+ would also help increase revenues for the
company's search platform.
Earlier this year Google launched social search, an integration
of Google+ with the Google search engine. In this service, if a
person in a user's circle has +1′ed a similar search result, the
specific result will show as one of the top results in new
searches. We think that as more ad campaigns are conducted on the
Google+ platform, Google will also be able to provide more targeted
advertising on its search engine.
For example, if a user does a Google search for a general
Mexican restaurant and a specific one has been +1′ed during a
Google+ ad campaign by someone in his or her circle, an
advertisement for that specific restaurant would show at the top of
their search results. This increases the likelihood that the user
will at least click on the ad to determine whether or not they are
interested in the product offering. We think that the integration
of campaigns on Google+ and Search will benefit both advertisers
and consumers because of accurate targeted advertising, but can
also increase the click through rate (
CTR
) and cost per click (CPC) on Google's search platform.
We currently estimate that Google's revenue per search on PCs
will decrease to $12 by the end of our forecast period; but, if the
revenues stay relatively flat because of more targeted ads, we
estimate a 5% upside to our target price. You can use our tool
below to assess the impact that a change in Google's revenue per
search on PCs will have on the stock price.
Overall, this acquisition presents an interesting revenue
generating opportunity for Google. We think that a successful
integration of Wildfire will not only drive revenues on Google+,
but also on its search service due to its social search offering.
We currently have a
$681 price estimate for Trefis
, which is approximately 8% above the current market price.
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