) successful new product-listing ads (PLAs) are expected to hurt
retailers such as
). Introduced last year, Google's paid product-listing ads have
removed many unwanted, unsolicited ads and replaced them with
products that top retail houses with huge funds would want to
This is expected to hurt retailers' profitability, as they
will be forced to increase their spending on promotions. The new
product particularly hurts Amazon, which has gained significant
visibility through Google's unpaid search results prior to the
launch of the new system.
As the new paid ads appear above organic, non-sponsored search
results, they negatively impact visibility of an unpaid ad. In
order to boost their visibility companies such as Amazon,
) recently started buying these paid ads. We believe that this
incremental spending by the leading retailers will boost Google's
top-line in the near term.
Google is a market leader in online advertising and has been
trying to explore various ways to diversify its revenues and
fight competition. Acquisitions have been a key catalyst over the
years, as Google continues to acquire smaller companies with
specialized technology to boost product offerings.
In Feb 2013, it acquired Channel Intelligence for $125 million
to boost its e-commerce business. Earlier this year, it acquired
an infrastructure startup company, Talaria Technologies, to boost
its cloud offerings. Google also acquired a mobile mapping and
navigation company - Waze Inc. - for about $1.1 billion.
Google reported gross revenue of $14.89 billion in the third
quarter of 2013, up 5.6% on a year-over-year basis. The company
has expressed its intention to increase investment in its core
products in the future, which we believe will boost its market
share in the long run.
Currently, Google has a Zacks Rank #2 (Buy).
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