Dipping Inside Online Advertising

07/28/2014 12:01 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

MoneyShow's Jim Jubak delves inside the online advertising world to determine what investors need to know about the recent earnings data from Google.

Every once in awhile, it's good to remember that Google's (GOOG) a company and a stock rather than a force of nature, a basic foundation of principle of the cosmos, etc. Second quarter is a good reminder of that because Google which has had a problem over the last two years in mobile advertising, continues to have problems in that sector. Not huge but if there is a potential weakness at Google, this is where it is. Okay there are two problems with mobile as far as Google is concerned. One is that mobile ads which are growing very, very fast don't pay as much per click as PC ads do so we had another 6% decline in cost per click at Google reflecting that, but the other thing is that Google is not as dominant in mobile as it is in PC. At least that's what the trend is suggesting. If you look at global online ad revenue, there's Google and then there's everybody else and everybody else is way, way, way down there so Google had in 2013 about 32% of that global online ad dollar market. Number two was Facebook (FB) at 6%. You can see how dominant Google is. If you look at mobile ads revenue, the initial figures suggest that Google's even more dominant. We're looking at in 2012 for example, Google had about 49% of that market, Facebook number two at 9% but what's happening is that you're seeing Facebook move up and Google move down so in terms of market share, Google went from 49% in 2012 down to 41.5% in 2013. Facebook went in the other direction from 9% in 2012 to 16% in 2013. Not enough really to make, to say oh, the sky is falling; we're going to see a new king. We're going to replace Lebron James with Wiggins or Love or somebody like that. Not that kind of shift but the trend is going in the wrong direction suggesting that Google still has a problem in mobile that it needs to fix. I think Google knows that. I think Google is trying to fix that and I certainly wouldn't say sell Google on this news but if there's one potential weakness to watch, this is it. >/p>

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