Apple's Larger iPhone Screen: Why Google Stands to Profit

See how Google shareholders benefit from the shift toward larger screen sizes.

Apr 11, 2014 at 2:19PM

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.


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.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Matt Leonard currently owns Google (C shares). The Motley Fool recommends Apple and Google (C shares). The Motley Fool owns shares of Apple and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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