Google Is Shrinking

According to the latest data from comScore, Google's (Nasdaq: GOOG  ) share of the search market fell four-tenths of a percentage point in August just as Bing partners Microsoft (Nasdaq: MSFT  ) and Yahoo! (Nasdaq: YHOO  ) gained share. Thus, the headline: Google is shrinking.

Except that it isn't true. Let's take a closer look at Google's average search market share for the first and second quarters of 2010, and then compare the findings with the average revenue growth of the top three search contenders:

Search Sites

Q1 2010

Q2 2010

% Point Change

Google Sites

65.3%

63.6%

(1.7)

Yahoo! Sites

16.9%

18.3%

1.4

Microsoft Sites

11.5%

12.2%

0.7

Ask Network

3.8%

3.6%

(0.2)

AOL Network

2.5%

2.3%

(0.2)

Source: comScore.

Company

Q1 2010

(in billions)

Q2 2010

(in billions)

Sequential Change

Microsoft

$14.503

$16.039

10.59%

Google

$6.775

$6.82

0.66%

Yahoo!

$1.597

$1.601

0.28%

Source: Capital IQ, a division of Standard & Poor's.

Google isn't shrinking it all. Sure, Bing's success seems to have created a tailwind for Microsoft, but that could just as easily be due to Windows 7.

What's important here is that The Big G's search market share doesn't correlate with revenue growth as neatly as the bears would like to believe. In simpler terms: Google isn't as dependent on search share as international peer Baidu (Nasdaq: BIDU  ) is.

Google has Docs, Gmail, Apps, Android, Maps, and several other hit products that help drive revenue. The Big G's Big White Search Box is a small part of its story.

Now it's your turn to weigh in. Do search market share statistics matter? Is Google well enough diversified outside search? Share your thoughts in the comments box below, and if you're interested in Google, click here to add it to your Foolish watchlist.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Baidu and Google are Motley Fool Rule Breakers recommendations. Google and Microsoft are Motley Fool Inside Value picks. Motley Fool Options has recommended subscribers open a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool owns shares of Google and Microsoft and is also on Twitter as @TheMotleyFool. All your base are belong to the Fool's disclosure policy!


Read/Post Comments (8) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 21, 2010, at 2:06 PM, ysers wrote:

    Common. Google doc. is so primitive can not do everything. Example does not even open VISIO document. Any apps can opened .doc but when it comes to other rich document type google still lack behind. is Google doc robust, I do not think yet since I am getting too many errors open some of my documents.

    Good luck Google. :-(

  • Report this Comment On September 21, 2010, at 2:20 PM, ishfive wrote:

    Typical M.Fool editorial approach: Attention-grabbing headline, followed by information that states just the opposite. Makes it hard to take whatever good reporting is done seriously.

  • Report this Comment On September 21, 2010, at 3:48 PM, TMFMileHigh wrote:

    @ishfive,

    Thanks for the comment.

    >>Attention-grabbing headline, followed by information that states just the opposite. Makes it hard to take whatever good reporting is done seriously.

    This make no sense to me. First, the headline speaks to the truth of the recent comScore findings. Google *is* shrinking when it comes to search market share. Factually correct, yes?

    Second, the point of this piece isn't to regurgitate fact but to analyze. My conclusion, based on reporting, is that comScore's monthly search numbers aren't nearly as important as investors have been led to believe.

    FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On September 21, 2010, at 4:17 PM, motleyjedi wrote:

    The reason Goog's revenue hasn't declined is because Goog is using the dot com trick. That is to show increase revenue via acquisitions. But nothing is free so earning estimate continues to decline.

    There is a correlation between market share lost and earning miss.

  • Report this Comment On September 22, 2010, at 7:42 PM, joco151 wrote:

    The data presented here are of essentially no value.

    The comparative revenue numbers are of no relevance, since greater than 90% of Google's revenues come from search, which is nowhere near the case for Microsoft.

    More importantly, share of the search pie is in no way correlated to the size of the pie - it's actual searches lead to revenues, not percentage points. Google's share of search could shrink to 50% and it could still grow in revenues if the total size of the search market (in dollars) grew enough to counter the loss.

  • Report this Comment On September 26, 2010, at 11:18 AM, ReadEmAnWeep wrote:

    I agree with Ishfive. That is why I have stopped visiting TMF directly. Only got here through Google Finance.

  • Report this Comment On September 28, 2010, at 6:05 AM, gevaism wrote:

    goog- keep the goog work...

    I think it is a very cheap buy...should fly soon.

    very strong growth- general operations doing very well. New products-improved products-market share...etc...

    My tgt is much higher... i prefer not to tell you what is it!

    (my comment expresses: my opinion only,any action you take is on your own risk)

  • Report this Comment On October 27, 2010, at 3:13 PM, biran642 wrote:

    What has really impressed me about Google is how they have truly become part of my internet life. From searching to Google sites, to Google docs/apps to Google voice, to Google Groups and Google maps.

    If Microsoft went belly up today, I might not notice for a couple of months or so, the same is with Yahoo or a number of other internet companies, but if Google went belly up, I would notice in 60 seconds.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1307656, ~/Articles/ArticleHandler.aspx, 9/3/2014 3:53:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement