Microsoft Corporation (NASDAQ:MSFT) is the largest software company in the world and the largest OS. In recent times, Microsoft has tried to diversify its core software revenue base with branching out into other businesses. The company has achieved mixed success in these endeavors with mega-hits like Xbox and failures like Bing. In short, the Internet based ventures have not gone well, but the company has had some success with hardware segments such as Xbox and the recently launched Surface RT/Pro. Microsoft Corporation (NASDAQ:MSFT) operates in a mature industry, therefore it is understandable that its revenue streams have shown little growth over the last few years.
Best Advertisement Play
The story of Facebook Inc (NASDAQ:FB) is very different from the software giant Microsoft Corporation (NASDAQ:MSFT). The company primarily relies on advertisement revenue and is operating in a booming industry. The consumers have started spending more time in front of the computer screen whether it’s handheld or PC as compared to television. This has increased the value of online advertisement space because the Internet has become an effective tool for advertisement. Facebook primarily competes with the mega-giant Google Inc (NASDAQ:GOOG) in this market. The company is new at the stock block, and its equity has seen much turbulence since it got listed due to shifting perception on its earning potential from handhelds.
In a very short time, the social giant has become the best placed Internet advertisement bet. This is because it has achieved that which has eluded Google Inc (NASDAQ:GOOG) even during its total domination of the Internet advertisement market. Facebook Inc (NASDAQ:FB) has been able to successfully monetize handheld devices according to its recent earnings report. In an environment where handhelds might totally dominate computing in the near future, this can be a major factor. Even if handhelds are not able to completely dominate the computing industry, it is highly likely that leisure computing would totally shift to handhelds. Even now the number of people using laptops and desktops for anything but serious work is constantly diminishing. This is truer for North America than other countries around the world as the handheld penetration is the highest in this region. This limitation doesn’t alter our thesis because the Internet advertisement industry is the largest in the States and can provide plenty of growth.
Google vs. Facebook
Facebook has started to get a lead on Google with its penetration into handheld devices. According to eMarketer, Google leads the US display advertisement industry with a 15.4% share, and Facebook is catching up with a 14.4% share. Despite carving out a major market share, Facebook still lags behind Google when it comes to advertisement technology. Google is the leader when it comes to online advertisement technology, but a recent acquisition by Facebook will even out the playing field: The company announced that it has acquired to buy Atlas Advertiser Suite from Microsoft for an undisclosed sum.
Atlas Sale
Microsoft had acquired the suite in 2007 with its $6.3 billion acquisition of aQuantive in 2007. Atlas is an ad management and measurement platform that will help Facebook compete with Google through better assessment of ad effectiveness. As I have mentioned above, Microsoft has not been able to make effective use of online advertisement technology because it has failed to drive growth from this segment, despite its various attempts with Windows Live, Bing etc. This technology will help Facebook measure the effectiveness of its ads and make it easier for the company to demand high rates for its display space. Microsoft has fallen out from the online display race, but Google and Facebook are all set to dominate.
Bottom Line
The discussion above shows that while Google is the leader right now, it will have to do a lot to hold on to its top spot. Facebook is the best bet for online advertisement and Google remains an attractive investment in the industry but will have to more effectively leverage Android to compete with Facebook in the long run.
The article More Reasons to Make This Technology Bet originally appeared on Fool.com and is written by Mohsin Saeed.
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