How to make money when the going gets tough
As Google Inc (NASDAQ:GOOG) revealed its first quarter earnings figures, the company’s constant efforts to boost up the prices of its ads displayed on mobile devices seem to have borne fruit, as it coincided with the heightened interest in phones and tablets. For instance, Google effected a change in policy for advertisers who are members of AdWords, its bread-and-butter online ad system, saying that in case they choose to opt for desktop advertising, they need to pay for tablet-based ads as well.
At the same time, advertisers now have to pay a fee to get them listed on Google Inc (NASDAQ:GOOG) Shopping, the company’s online service to help search for products. And retailers do not seem to mind the fact that this was a free service earlier, simply because ads displayed on Google Shopping have had a better performance rate than those displayed through AdWords. So, if you look at it that way, the company deserves a lot of praise, especially because of the fact that it slowly seems to be reversing a trend where mobile-related ads traditionally tend to cost less than ads displayed to desktop users. This is another feather in the cap for Google as it is able to successfully manage the transition to a post-PC world.
Letting prices take care of themselves
And if investors are worried that average prices paid by advertisers to display their ads on Google sites are still going down, the boost in ad prices has already arrested that decline to some extent. Not only that, the gap is sure to narrow down in the future, considering the increasing trend of users to switch over to smartphones and tablets, which would in a way compel more and more advertisers to look at mobile ad-based options. This also means Google Inc (NASDAQ:GOOG) would continue to be the main beneficiary, thanks to its overwhelming dominance of around two-thirds of the web search domain.
Perhaps the best thing about Google has been the fact that it could foresee the transition from PCs to smartphones and tablets much earlier than industry peers and took quick steps to be a part of this change. This is also what has helped it to remain dominant as a company, as it continues to reinvent itself to be a constant part of everybody’s lives. At the same time, the company has never lost its focus as far as its lines of revenue are concerned. Web search continues to be the backbone of its revenue earning divisions, while the spread of Android ensured that Google became synonymous with the term ‘mobile.’ And Project Glass, along with Project Fiber and the rumored ‘X’ phone, may very well open up endless possibilities for the future.
Microsoft Corporation (NASDAQ:MSFT)’s bad misses
Sadly, even though Google Inc (NASDAQ:GOOG)’s peer Microsoft Corporation (NASDAQ:MSFT) also took steps to adapt to the changing scenario, its efforts were often misdirected and not adequately researched. This is evidenced by two things – Windows 8 and the company’s push into the smartphone scenario. In case of Windows 8, Microsoft Corporation (NASDAQ:MSFT) made changes in the overall user interface (such as removing the start button and bringing in the Metro tiles feature) that were perceived as too confusing by some users, one of the factors that have resulted in a lower-than-expected adoption rate. And the absence of adequate apps for the Windows smartphone and tablet operating systems continues to be a major hindrance to a pick-up in related sales.
Wake up, Cupertino
Talking about the mobile devices scenario, Google’s Android operating system has helped it to gain a solid headstart over Cupertino-based Apple as well. According to Kantar Worldpanel ComTech, Android moved far ahead of Apple Inc. (NASDAQ:AAPL)’s iOS, as devices powered by Android grabbed a 51.2% share of overall smartphone sales in the US, as compared to 43.5% for iOS-powered devices, in the period between December 2012 and February this year. And now, research firm IDC has recently predicted that tablets powered by Android will move ahead of Apple’s iPad in terms of sales this year. That has never happened since the latter’s launch in 2010. And even if we discount the data, a simple occurrence such as the recent Apple Maps fiasco provides evidence enough of just how popular Google Inc (NASDAQ:GOOG) services such as Maps, Gmail, YouTube and Chrome are among traditional iPhone users.
But, the most important difference between Google and Apple Inc. (NASDAQ:AAPL) till now has obviously been in the area of innovation. Google has certainly had a headstart recently with the Google Glass, Google Fiber and possibly, the ‘X’ phone, if the rumors about the latter are indeed true. Apple is, unfortunately, still stuck with bringing out updated versions of the iPhone and the iPad. And please don’t say that a ‘cheaper iPhone’ would be a completely new thing altogether. The pressure’s certainly on Tim Cook – perform or perish. That’s Apple’s hard reality now.
The future is truly exciting
Coming back to Google Inc (NASDAQ:GOOG) and its futuristic products, I do have my reservations about whether or not the Google Glass will succeed, given the privacy issues involved and also the simple fact that some of us would not prefer being seen wearing a pair of (hi-tech) glasses, which is what it’s really all about. But then again, if the ‘X’ phone turns out to be truly shatter-proof and also offers a unique user experience, then this will turn out to be a great product in the end. I’m sure Google will leave no stone unturned in those directions.
Finally, once users start experiencing the amazing bandwidth speeds of Google Fiber, and realize how it will boost their multitasking abilities, some of them won’t mind paying a premium for such services. After all, it’s hard to believe Google won’t commercialize the Fiber experience, given its immense potential as a future revenue stream. Oh, and did I mention that high-end products such as the Chromebook Pixel can only serve to complement this terrific online connectivity? The verdict is clear. Google Inc (NASDAQ:GOOG) should not only be a big addition to your portfolio, it’s actually something that needs to be treated as a ‘financial performance booster’ for quite a few years to come.
The article This Is Why Google’s Dominance Is All Set To Continue originally appeared on Fool.com and is written by Subhadeep Ghose.
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