As online search grows more complex and encompasses new
categories of content, we expect overall search volumes to increase
sharply during the Trefis forecast period. We think search
advertising market leader Google (
) will reap the lion's share of benefits from this trend, followed
by distant competitors Yahoo (
) and Microsoft (
Our analysis follows below.
Search advertising market
Google is the overwhelming leader in the search advertising
market with a global share of 65%, versus 10.4% for Yahoo, 9% for
Microsoft and 3.2% for AOL. Google posted $15.2 billion in search
advertising revenue in 2009, compared to $1.4 billion for Yahoo and
another $1.4 billion for Microsoft.
We estimate that search advertising contributes around 72% of
Google's stock value, 21% of Yahoo's stock and less than 2% of
Microsoft's stock. As a result, Google's stock is far more
sensitive to changes in the search market than Yahoo's and
New search trends
The days are long past when Internet search was mostly confined
to text on websites. Search now extends to digital videos, images,
books, music and so on. Crucially, search is becoming an
increasingly mobile business. Going forward, we expect search
growth to be driven by rapid adoption of search-capable mobile
phones, higher mobile Internet speeds, and increasing partnerships
between search engines and mobile phone manufacturers.
This broadening of search has been stimulating increased user
engagement in search. As a result, the average number of searches
per Internet user per month has risen sharply in recent years, from
around 17.9 per month in 2005 to 33.4 per month in 2009.
We currently expect this trend to continue going forward, reaching
an average of 49 searches a month by the end of the Trefis forecast
period. You can drag the trend-lines in the charts below to create
your own search growth forecasts and see how they impact the three
If growth in the average number of searches per user exceeds our
expectations, reaching 55 searches per month by 2016, it could
yield a 5% upside to our stock price estimate for Google and a 2%
upside to our Yahoo estimate. The impact on Microsoft's stock would
be minimal because search advertising represents only a tiny share
of Microsoft's revenues.
You can see the complete $683 Trefis Price
estimate for Google's stock here
You can see the complete $19 Trefis Price estimate
for Yahoo's stock here.
You can see the complete $28 Trefis Price
estimate for Microsoft's stock here.