Over the next few quarters, look for Google (Nasdaq: GOOG) to keep up the pressure on Apple (Nasdaq: AAPL) as it enters the music download business, strengthens the Android software platform’s capabilities, and likely rolls out a few new technologies and services we have not yet heard about.
But as Google focuses on new growth areas, it needs to keep an eye on its core search business, which is the key driver behind the company’s massive sales and profits. There’s no need to sound an alarm just yet, but Yahoo! (Nasdaq: YHOO) may be stepping up its game in hopes of stealing back some market share.
According to just-released data by Comscore, Yahoo’s market share of the search category just moved back above 20% for the first time in more than a year. Some of that is coming right at the expense of Google. In February, 2010, Google controlled 65.5% of the U.S. search market. That figure has now dropped for five straight quarters down to 61.6% in July. In that time, Yahoo’s market share has risen from 16.8% to 20.1%.
What’s behind that shift? Yahoo is making great strides in an area known as contextual search. These are searches that tie content and relevant search together, and can include slideshows and contextual short-cuts. Total contextual-driven searches for Yahoo! sites grew from 520,000 in June 2010 to 690,000 in July 2010, which is a +33% sequential increase.
In terms of traditional search, Yahoo’s impressive amount of content across its network of web sites has increasingly enabled it to keep users on its site rather than leaving to do a search on Google. Techies call that “stickiness.”
The improving outlook for Yahoo search — especially as its search partnership with Microsoft (Nasdaq: MSFT) takes root by the end of the year — is one of the reasons I believe investors may be prematurely writing Yahoo off, as I’ve noted previously.
Yahoo will eventually be using Microsoft’s search technology, which both companies agree is the more robust search engine at this point. The deal helps Yahoo save on further development costs while still staying on the leading edge of search technology. Both companies believe that by joining forces, they can get the critical mass (with more than 30% market share) to steal back some of Google’s momentum. As noted earlier, that momentum has already begun to reverse in recent months.
Mobile search
In light of these market share shifts, it will be interesting to see how smart-phone and tablet-based search evolves. These devices are expected to see continued explosive growth over the next few years, and right now, Google is sitting in the catbird seat, thanks to the growing deployment of its Android software. The fact that users can utilize search while on the go through these devices means that advertisers can deliver very relevant localized results that more frequently lead the consumer to take action, such as stopping in at a local store or restaurant.
And if recent trends are any indication, Apple has reason to worry about how mobile search will play out. In July, smart phones using Google’s Android software outsold Apple’s iPhone for the first time ever, according to Nielson. That’s the result of strong support from a range of hardware makers such as HTC, Motorola (NYSE: MOT), and others. In effect, Apple isn’t competing against Google, it is competing against Google and all of its partners. The tide may be turning in favor of Google and friends.
Google has myriad paths to growth, yet its shares are off more than $100 from their 2010 highs thanks to management’s decision to maintain heavy levels of spending to capitalize on all of its opportunities. Such a move should help fuel solid growth during the next few years, and makes the shares a good buy for long-term investors.
Source:http://seekingalpha.com/article/221716-is-google-the-ultimate-buy-and-hold-stock
