Google dominates the desktop search engine market with a share of over 65% in the U.S. However, with the increasing use of mobile devices such as tablets and smartphones, most of the revenue growth for
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Web Traffic From Mobile Devices On The Rise
According to data from Walker Sands, web traffic from mobile devices accounted for more than 31% of total web traffic in Q4 CY13. Furthermore, according to Cicso visual networking index, global mobile data traffic grew by 81% in 2013.
The reasons for this growth are faster cellular networks that are capable of transferring data at speeds comparable to fixed lines and rampant use of smart connected devices that can use wireless networks effectively. As a result, users now stream both videos and data directly to their smartphones, many of which now also boast a bigger screen size.
On the operating system front, smartphones now have sophisticated operating systems that support a host of user friendly apps. As a result, users increasingly access Internet through these apps rather than web browsers installed on desktops and mobile devices. This is evident from the figures cited by CNN Money from
Mobile Ad Spending Expected To Grow
Mobile ad spending is expected to grow in the coming years due to increasing ad budgets, which is fueled by growth in internet traffic from mobile devices. According to eMarketer, global mobile ad spending increased 105% to $17.96 billion in 2013 and is poised to grow to $31.45 billion in 2014 and $94.91 billion in 2018.
Google's Dominance In Mobile Ads To Continue
The mobile search ads division is the second largest division for Google and makes up approximately 29% of its total value. Google, with 90% market share, dominates the mobile search engine market. One of the key reasons for this dominance is its flagship Android OS, which has witnessed excellent adoption and penetration in the smartphone space. A user with an Android phone is more likely to use Google search compared to a user using another OS. This is especially relevant when competing OS’s such as Windows Phone use their own search engines on the mobile devices. Android held nearly 79% market share for smart phones in 2013 and will be a key driver for Google’s mobile search ad revenue.
Furthermore, eMarketer estimates that Google's market share in mobile ads spending was close to 50% in 2013, and is expected to be close to 46% this year. It estimates that mobile ads (including display ads shown on YouTube mobile app) contributed $8.85 billion to Google?s revenues in 2013 and is expected to bring in $14 billion in 2014.
The primary reason for Google's dominance in the mobile search ads industry is its reach among mobile phone users. According to comScore, Google Sites ranked as the top web property on smartphones in the U.S., reaching 89.4% of the mobile media audience (mobile browsing and app usage). Even in the app space, Google's apps such as Google Play, Search and YouTube app have close to 50% reach for mobile audience. Considering Google's reach, advertisers are willing to pay higher revenue per search, the average advertising revenue generated by Google for every 1,000 searches conducted on google.com and other websites on mobile devices, for ads. Going ahead, we expect revenues from mobile search to grow to $32.61 billion by 2020, bolstered by the growth in revenue per 1000 search. We project RPS to grow to $8.50 by 2020.
We currently have a $547 price estimate for Google, which is in line with the current market price.
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