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As the rumors of a larger iPhone screen(s) reach a fever pitch, it's only natural to focus on all the new sales expected to come Apple's (NASDAQ: AAPL ) way. The long-awaited moves, should they come to fruition, involve taking the core iPhone 4-inch screen, and upping the ante to a more functional 4.7-inch screen. Additionally, developing a 5.5-inch "iPhablet" is rumored to be in the cards.
The implication here -- as sales of Samsung's Galaxy and to a lesser extent, Note -- seem to support, is that a segment of people want larger screens. This certainly makes sense. Apple could be missing a piece of the mobile market that may actually prefer Apple products, but require more space to leverage their robust data packages and ever-interesting apps successfully on their mobile device.
So, aside from playing Angry Birds, what do these users tend to do on their phones?
Here's where we reverse course, and take a look at one company that might stand to benefit from users having a more functional mobile device.
Google (NASDAQ: GOOG ) .
With over 90% of Google's revenue still coming from core search products, Google stands to reap big rewards from any directional changes that improve the search experience. While a .7-inch increase (rumored for the iPhone 6) seems less than impressive on the surface, it represents a 17.5% increase in usable screen space. Additionally, and even more importantly, it means Apple recognizes the need for screen size convergence, and the consumer's basic desire to balance "it fits in my pocket" with "I use it to perform commerce-oriented activities."
Today, Adwords advertisers anecdotally bid over 50% more for desktop, and tablet, traffic than they do for mobile traffic. The main reason for this is, quite simply, that traffic on smaller devices does not convert as well. It's simply more challenging to perform complex transactions on smaller screens. Hence, the value of a user on a small device is less than that of a larger-device user to the companies that power Adwords bids. Ultimately, this is the reason for the cost-per-click (CPC) disparity between mobile devices and their larger tablet brethren.
Larger screen sizes mean higher conversions. This leads to higher bids, more auction participants seeking mobile traffic, and higher average CPCs for Google. The biggest challenge Google has faced, in terms of improving mobile CPCs, has been the simple fact that smaller screen sizes underperform their larger counterparts for the companies that buy the traffic.
What's the Foolish takeaway for Google investors?
Expect the larger iPhone screen to improve mobile monetization for Google as Adwords advertisers benefit from improved conversions. Clicks will become more valuable, and Google will take another step toward bridging the CPC gap between desktop traffic and less valuable mobile traffic.
A larger screen size, additionally, gives Google engineers more space to optimize their search results set. Time has shown that Google is quite skilled at placing quality ads, powered by profitable advertisers, in front of an enabled audience. All three of these criteria improve with additional screen space.
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