Mobile transition will benefit Google in the long-run if it explores Google Play and in app advertisements
Since going public in exactly a decade ago, Google Inc. has expanded its business to include all the tech spheres. Virtually all its businesses are revolutionary, especially its core search business which has continued to experience unrivalled success thanks to its omnipresent mark on the internet. However, the increasing use mobile devices is slowly eating on Google’s search business and particularly its -per-click (CPC).
YouTube has been tipped as the frontrunner to take over from Google Search as the next big growth driver for the search engine multinational. Google acquired YouTube, a video streaming website, in 2006 for $1.65 billion. Those who tipped YouTube must have ignored the perpetually growing Google Play and the strategic position it holds in this company.
Google Play and its Revenues
Google Play is a digital app store whose contents include games, books, magazines, TV programs, movies and music. According to consensus estimates, the venture is expected to contribute close to $4.4 billion in the FY 2014. Correspondingly, Google Play’s annual gross sales are expected to be $9 billion with net revenue of $1.5 billion. Though this still trails Apple Inc.’s (NASDAQ: AAPL) App Store revenues, the two digital stores are predicted to be level at $19 billion with a net revue of $5.7 billion by 2016.
As the Android community continues to grow, so does Google Play and its subsequent revenues. In this app marketplace, mobile games are the leading revenue earners accounting for almost 90% the total app revenue.
The mobile transition and the future of Google
In the past couple of years, there has been a mass migration of users from PCs to mobile gadgets. As result, mobile internet traffic has been on the rise at the expense of PC traffic, right from 1% in January 2009 to over 30% so to speak. During the same period PC internet traffic has declined to 70% from 99%. At this rate, it is predicted that mobile traffic will dominate the internet come 2015.
In preparation of this, Google Inc. (GOOGL) has heavily invested in Android, an operating system for mobile gadgets such smartphones and tablets. While it is yet to monetize this platform, it has opened it for handset manufacturers such as LG, the South Korean electronic outfit Samsung, and a host of Chinese handset makers including Lenovo and Huawei.
Since the Android users have Google’s email service as the default account, the growth of the android community helps Google secure more users for its search services. Also this helps it earn more from Google Play given that the search engine giant earns 30% of subscription payments from its developers, and which it only uses to cater for the credit card fees, but share the rest with its telecom partners.
Google Play can earn more through in app advertisement
Mobile apps have transformed how people surf the web today. While the mobile internet traffic has increased over the years, many consumers spend time on mobile apps rather than the internet. The number of people who are directly using apps without passing through the normal searches has also increased substantially in recent times.
But Google has made impressive inroads in the world of mobile apps during this mobile revolution through Google Play. As a result it has positioned itself strategically to exploit the more than $3.5 billion in app advertisement of the mobile advertising market.
What if Google introduced in-store advertisement, or it cohorts with the app owners to initiate in app advertisement? Or isn’t this why Google acquired AdMob,a company with focus on in-app advertising, back in 2009?
