Google Inc (GOOG): Why You Can Still Be Bullish

Google Inc (NASDAQ:GOOG) has developed itself into one of the largest technology companies in the world. It already dominates the search arena, but has now become the leading smartphone OS provider in the world. The company has introduced a number of other interesting services to diversify its core search business such as Google Market Place, Google Play etc. As the PC-based search model declines, Google Inc (NASDAQ:GOOG) is trying to focus on improving its mobile monetization.

Recently, the company reported another stellar quarter, which led to a rally in its shares. Let’s take a look at them.

Quarterly results

Google recently reported results for 1Q 2013. The Street was expecting the company to report earnings of $10.68 on revenue of $11.2 billion. Google Inc (NASDAQ:GOOG) easily trumped earnings estimates with an EPS of $11.58, but missed slightly on revenue with $11 billion. The real surprise was the 16% rise in net income, which led to the earnings beat.

The search business continued to perform strongly. There was an 18% y/y increase in revenue from Google owned sites to $8.64 billion for the quarter. The company also reported a lesser than expected decline in CPC for the quarter. CPCs have been declining continuously for the last couple of quarters due to a combination of bad economy and increasing focus on handhelds. There was a 4% decline in CPC, which is much lower than the 6% CPC decline in Q4.

Along with the positives discussed above, there were some negatives from the quarter. A particular sign of worry is the slowdown in international and U.S. gross revenue. In Q4 2012, international revenue had exhibited a growth of 27%, but it grew 25% in the recently-reported quarter. While Google Inc (NASDAQ:GOOG) is still the leader in search, it is increasingly facing tougher competition from Facebook Inc (NASDAQ:FB) in the display segment.

The industry

Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB), and Yahoo! Inc. (NASDAQ:YHOO) are the biggest players in the U.S. internet advertisement industry. This is one of the fastest growing spaces in the entire market and has huge potential for investors. According to a recent research report by PWC, the U.S. internet advertisement industry is worth $36.6 billion and has grown 15% in the last one year. The fast growing segment in this space is mobile advertisement, which has grown a staggering 111% in 2012. Handheld advertisement in the U.S. is currently worth $3.4 billion (2012) as compared to $1.6 billion in 2011.

There is tough competition in this space between Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB), and Yahoo! Inc. (NASDAQ:YHOO). Facebook is currently the leader in the display segment and has the best mobile monetization plan. Facebook has the potential to provide services such as video, text, status updates, and market place etc. at a single location.

If the quality of service is the same, then users could prefer visiting a single platform for all their needs. This is what makes Facebook Inc (NASDAQ:FB) unique and gives it the ability to dominate the future of internet advertisement. The company already provides free video streaming, messaging, inbox, and video calling.