Even so, Google is still the initiator for 5 times the amount of domestic searches that Bing is. And when it comes to global searches, Bing doesn’t come nearly as close. Analyzing the ad revenue and hits per company, it appears that Microsoft is about half as effective in profiting from search ad revenue as Google.
Graph Search is Bing’s last hope
The only real hope for Microsoft Corporation (NASDAQ:MSFT) to stay relevant in online advertising is through Facebook (NASDAQ:FB). The two companies are currently working together to integrate search and Facebook interface. Currently, Facebook accounts for only .13% of Bing’s ad clicks. For good reason too; the current Bing integration is an afterthought, and isn’t readily available by users unless they search for it.
But with Facebook Inc (NASDAQ:FB)‘s new feature “Graph Search” being unveiled, Bing may be able to monetize searches in Facebook more effectively, and add a large amount of relevance to their online advertising efforts.
Graph Search itself is an interesting concept that allows users to search the Internet and Facebook that crawls data from their friends on the website. It allows people to search for things that are tailored to their lifestyle. It shows more promise than Google Plus, and may become effective in drawing ad revenue if Facebook can integrate it well enough.
Still though, the extent of their results is hard to gauge going forward. Microsoft’s return on assets is a low 13.5%, on par with Google’s current returns. And while we can’t assume this number holds true for their Bing operations alone, it gives us an idea of about how effective Microsoft Corporation (NASDAQ:MSFT) will be in their efforts to profit from online advertising projects. Additionally, Microsoft has a P/E valuation of 18, which places it in 81st percentile of the technology sector by earnings valuation. The company is cheaper than Google, but doesn’t compare to Yahoo!’s rock bottom valuation of 8 times earnings.
Google is still king
Even with these prospects, realize that Google still brought in $12 billion in ad revenue for 2012 and has a plethora of new projects in its pipeline for the future. The company doesn’t come cheap however, trading at over 25 times their earnings. So even though Google has promise, Yahoo! or Microsoft may prove to be better value investments.
Google still remains king when it comes to advertising, but Google hasn’t shown much success in the integration of social media into its ad revenue. If either Yahoo! Inc. (NASDAQ:YHOO) or Microsoft Corporation (NASDAQ:MSFT) can capitalize on this medium, then they could gain much more leverage with their search engines in the future, resulting in more popularity and more profits.
There are three very distinct levels of uncertainty for these companies, but I would personally choose Yahoo! given its extremely low P/E and my renewed faith the company’s attempts to stay relevant.
The article Can Yahoo! or Microsoft Leverage Social Media to De-Throne Google? originally appeared on Fool.com and is written by Ryan Gilbert.
Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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