Credit: Shutterstock photoAs the Internet search giant begins to expand into new areas such as Internet delivery, Google (GOOG) must not lose sight of its key business and continue to strengthen its advertising business, in an effort to not only boost its profile against rivals, but a lagging share price as well.
In a research note, Pacific Crest Securities analyst Evan Wilson wrote Google has three big priorities for 2015 when it comes to its display business: brands, YouTube and marketing technology. Wilson rates Google shares outperform.
Brands: By getting larger brands to advertise on Google's properties and doing more for them, the company can boost its profile. "[Google's] focus is more on building out products and tools specifically for the brand-use case," Wilson wrote in the note. "The industry is heavily focused on fraud, and ... investors will see a lot more investment from Google on that going forward."
Google ()YouTube: YouTube has become one of, if not the best, acquisition Google has made. Since acquiring it in 2006 for $1.65 billion in stock, YouTube has become a dominant online advertising platform. Some analysts estimate its worth around $40 billion if it were its own company, due in part to advertisers taking advantage of the demographic and advertising trends.
Wilson believes that YouTube is at the heart of what brands want to do with regards of advertising, given declining TV viewership rates and rising online viewership for videos. "With TV viewership down 4% and online video viewership up 60% in the last year (according to Nielsen), the shift in advertising dollars is more imminent than ever," Wilson wrote in the note. "There is more content uploaded to YouTube today than from the big TV networks in the past five years."
The analyst also suggested the potential that YouTube could be spun off by Google, "given what appears to be a growing 'conglomerate discount' at Google's current valuation."
Market Technology: Marketing technology is the last area Wilson believes that Google needs to focus on for its display business in 2015, given the opportunity surrounding it. However, Neal Mohan, Google's vice president of display and video advertising products, questioned whether this was an opportunity for Google at a conference, but Wilson believes it'll become a bigger issue than it is now. "However, if this conference is any indication, [market technology] will increasingly be a bigger part of the digital conversation," Wilson wrote in the note. "We think Google's existing technology for CMOs in ad tech could, and should, be extended to [market technology] before the big enterprise software players gain any more of a foothold."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
