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Google Continues To Dominate Search Advertising

Posted on Wednesday, Oct 19th 2011

Media researcher MagnaGlobal estimates that search-based advertising will grow 23% over the year in 2011 to reach $37.7 billion. The researcher further estimates that Internet ad spending will climb 20% this year. comScore data for September indicates that within search in the U.S., Google’s market share continued to rise to 65.3% from 64.8% a month ago, with Yahoo following at 15.5% and Microsoft at 14.7%.

Google’s Financials
Google’s (NASDAQ:GOOG) Q3 revenues grew 33% over the year to $7.51 billion, ahead of the market’s estimates of $7.22 billion. EPS of $9.72 shattered the Street’s projected earnings of $8.74 per share. The growth was driven by a 28% increase in paid clicks over the year and 13% growth over the previous quarter.

Google-owned sites revenues grew 39% over the year to $6.74 billion, while partner sites’ revenues grew 18% over the year to $2.60 billion. International markets brought in 55% of total revenues for the quarter compared with 52% a year ago.

Google’s Social Media Offering
It is not just search that has been successful. Google+, the company’s social media offering released earlier this year, is seeing strong results. Within the first three and a half months of its launch, Google+ reported 40 million users. While this is still a far cry from Facebook’s more than 800 million users, the pace at which Google+’s membership has grown is impressive. Users posted more than 3.4 billion photographs on the site. As they geared more efforts toward Google+, Google also shut down their failing social networking service, Buzz.

To ensure user engagement also rises, Google has been working on acquisitions and adding features such as games and sharing options, to name a few, to Google+. Earlier this summer, they acquired social networking site, Fridge. Fridge was best known for the ability of users to customize the view available to the user’s groups. Through the acquisition, Google+ will be able to leverage Fridge’s tool on Google+. Recently, they also acquired Twitter analytics startup SocialGrapple. Launched a year ago, SocialGrapple’s tools give visual insights, email reports, and other analytic insights into understanding a user’s Twitter account statistics. It is expected that Google will use SocialGrapple to help with analytics for Google+.

Google’s Mobile Growth
Google has also been working on expanding their mobile business reach. Android has now grown to more than 190 million devices globally and boasts of a revenue run rate of $2.5 billion annually, compared with $1 billion reported a year ago. Furthermore, StatCounter reports that Google commands 97% of the world’s mobile search. Google’s mobile revenues are sourced from advertising services and not from Android manufacturers using its software in their phones.

Google is scheduled to launch version 4.0 of Android, dubbed Ice Cream Sandwich. It is claimed that the new version will “outdo Apple’s iOS operating system.” The version comes with features such as being an OS that is capable of running on all mobile devices with a much easier user interface.  It is also expected to allow external devices such as mice, keyboards, and game controllers to be connected to mobile devices.

In August of this year, Google also announced plans to acquire Motorola Mobility, a dedicated Android partner, for $12.5 billion. As of earlier this year, Motorola Mobility held 14,600 granted patents and 6,700 pending patent applications, worldwide. Google will run Motorola Mobility as an independent business and is expected to benefit from Motorola’s hardware expertise to better compete with Apple, which has both software and hardware capabilities.

Google’s Acquisitions
Google continued acquiring smaller companies to help expand their capabilities across their business offerings. Within the mobile wallet segment, they acquired Punchd and Zave Networks. Both Punchd and Zave focus on digital loyalty cards and coupons. The acquisition will also help them expand their commerce-related services.

They also bought facial recognition company Pittsburgh Pattern Recognition, known as PittPatt. PittPatt’s technology is used for recognizing faces in images and video, a capability that is expected to complement image search features in YouTube, Picassa, and Goggles.

After having been snubbed by Groupon, earlier this year, Google acquired Dealmap and DailyDeal. California-based Dealmap has more than 2 million users accessing deals collected from more than 450 sources and organized by location on both the Web site and a smartphone application and will complement Google’s existing Google Offers. Germany-based DailyDeal was acquired to help grow in the deals market in Europe as DailyDeal has strong presence in Germany, Austria, and Switzerland.

More recently, Google purchased Zagat, the online reviews giant. Terms of the deal were not known, but analysts expect it to have cost Google $100 million-$200 million. Google estimates local searches to contribute 20% of all searches and a greater share for all mobile searches. Google plans to supplement Zagat’s reviews with Google Places and thus offer a more comprehensive localized search offering.

Google is going with all engines full throttle. Their stock is trading at $579.92 with a market capitalization of $187.4 billion. It touched a 52-week high of $642.96 in January of this year.

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