Google and friends
Competitive analysis for Google Q12019 and beyond
Google stock received an 7.5% jolt just after the earnings report of Q12019 on lower ad revenue growth compared to previous years.
From a revenue perspective these are the markets google operate in —
Digital Ads
Google dominates the digital ads market in the US. Within Google, ad revenues come from mobile search, Youtube, desktop search followed by Admob and Google ad manager. (2019 Q1 earnings transcript)
In the retail vertical a lot of ad spend is moving to Amazon and this is evident from the increased revenue share Amazon is taking up.
There were many leading indicators of this trend as I wrote earlier. Users are more likely to start their product search in Amazon(54%) rather than Google(46%). This is definitely a worrying trend for Google and it is trying to surmount this challenge by focusing on building a rich marketplace in retail vertical by compensating advertisers with better performance(lower CPC-s) and users with richer experience.
Smart speakers — land grab in an AI first world
More than 25% of US adults now own a smart speaker. While Google has caught up to ~24%, Amazon is leading with 61% market share.
The most popular uses of smart speakers is not encouraging from a monetization perspective. However many emerging use cases show monetization potential
Since Amazon owns shopping from search to fulfillment, it has an edge here. However there is 75% of the pie to be grabbed still in terms of market share and Google still has a good chance in catching up
The war for your home
The smart-speaker is also hub to your smart-home and one of the keys to grabbing a pie of the 100B+ smart home market. Nest already makes close to a billion $ for Google and is one the ‘other bets’ that they are betting on.
YouTube
YouTube is still the most popular video platform for content creators and consumers. Youtube is getting tough competition from Facebook videos for user’s attention. Lazy discovery of new videos happen more on facebook than youtube and this should be a cause of concern.
Social Networks
Beyond retail, the competition for user’s attention is with social networks like Facebook, Snapchat, Twitter and other search engines like Bing, Yahoo etc.
As user attention gets increasingly captured by social networks, newer ad products and transaction experience will get built into these networks where the digital users reside. Shopping on Instagram already allows checkout.
Productivity & Cloud
Google is making steady steps into cloud and productivity markets dominated by Amazon and Microsoft. Startups and SMB-s are already used to Google suite of products and Google will be getting inroads into enterprise space slowly.
As far as cloud is concerned, machine learning as a service and Anthos are steady steps in this direction.
Next Bets
At the scale in which Google operates, from a revenue perspective the next bets — (Autonomous Cars, Drones…) are still just that - next bets. It will take a while for them to significantly impact its topline.
Summary
- Ads is still the predominant source of revenue and we can’t still say google is diversified from that perspective
- The next entry point for search — voice search is still not dominated by Google yet
- The biggest threat is Amazon for both of the above
In the short term at least, Google’s performance will continue to heavily depend on Ads.
