) recently released Google Instant, a new search technology that
makes search results appear faster by predicting queries and
showing results as soon as the user begins to type.
We think Instant could help Google consolidate its already
dominant share of the search advertising market. Although the new
technology will probably reduce Google's click-through rates, we
expect this decline to be offset by rising cost per click, keeping
Google's search revenue roughly constant.
Our analysis follows below.
Search advertising market
Google currently controls 65% of the search advertising market,
's 10.4% share (
) and the 9% held by
According to Google, Google Instant will shave between two and
five seconds off the time required for a typical search. As a
result, Instant should drive up the total number of searches.
We currently expect Google's search advertising market share to
grow in coming years, reaching 73% by the end of the Trefis
forecast period. However, there could be an upside of 5% to the
$643 Trefis price estimate for Google stock if the impact of Google
Instant boosts Google's share to 78%.
You can drag the trend-line in the chart above to create your
own search market share forecast for Google and see how it impacts
the company's estimated share value.
Revenue per search
We currently expect Google's revenue per search to increase from
around $35 per 1,000 searches in 2009 to $44 by the end of the
Trefis forecast period. Revenue per search equals the click-through
rate (CTR) multiplied by the cost per click (
Instant will probably drive Google's CTR down because each
ad may be displayed several times as the user types letters into
the search box. However, users are unlikely to click on ads until
they have completed their queries.
Google's CPC may actually increase because Instant will help
people search using terms that connect them more directly with the
information they need. Advertisers should benefit from higher
conversion rates, making the average search term more valuable.
Google's CPC could increase because Instant will allow users to
type shorter queries before getting results. This will likely force
advertisers to bid higher for more common terms.
In this scenario Google's rising CPC would offset declining CTR,
leaving our search revenue forecast unchanged.
You can see
the complete $643 Trefis Price estimate for
Google's stock here.