) announced in its quarterly earnings that mobile search is
becoming more important to its search and display revenues. Mobile
search revenues are expected to pass $1 billion this year at
the current run rate accounting for roughly 4% of Google
Google competes with Microsoft (
) Yahoo (
), and AOL (
) in the search advertising market.
We believe that Google will continue to build upon its lead in
the search advertising market, and expect its market share to
increase from around 67% in 2009 to 71% over the forecast period.
However if its search business takes off faster than we anticipate,
Google could potentially grow market share to 80% implying just
about 7% upside to
our price $632 price estimate
- which is 20% above the current market price.
3 Driving Factors for Mobile Search:
1) Rapid Adoption of Android
Android is the operating system used in smartphones and competes
with Apple (
) iOS, Research in Motion (RIMM) BlackBerry OS
and Nokia (NOK) Symbian.
According to Gartner
, Android share in the mobile phone OS market worldwide will
increase from 4% in 2009 to 18% by 2010, and then to around 30% by
2014. Google search is the default search engine on Android phones
and so Google should benefit from the rapid adoption of
2) Better Payment Mechanism
Presently, the payment mechanism system on Android is not as
smooth as that of Apple's app store, which discourages people from
completing the transaction from their mobile phones. According
to TheStreet, eBay's (EBAY) Paypal is expected to be
integrated with Android soon, which will make the payment process
much better. This will enable more transactions to be completed
through mobile, which will drive up the mobile cost-per-click rates
3) Location Based and Personalized Searches
Location based and personalized searches are helpful to the user
looking for information nearby. For example, the user searching for
car rentals will see an ad telling him or her how far it is to the
user's present location and a map.
Similarly, other features such as 'click to call' enables the
user to call the vendor directly by clicking on an ad link shown
beside the Google search result rather than clicking through to a
web site and searching for the number - helpful for popular
destinations such as restaurants.
These personalized features are likely to create more clicks or
in other words better click through rates, driving up the mobile
revenues for Google.
… Leads to Market Share Gains
According to Google, mobile revenues will reach around $1
billion and mobile search queries have grown 5x over the past
couple of years. This equals about 4% of total revenues and we
believe the above factors will help this grow rapidly in the coming
We currently estimate that Google's market share will reach 71%
by the end of our forecast period. However if mobile search grows
faster than we anticipate, this could help Google reach market
share of close to 80%.
There could be an upside of 8% to the
$632 price estimate for Google's stock
, and imply a projected price estimate of close to $680.
You can see the complete $632 Trefis Price
estimate for Google's stock here