Google Inc Earnings: How Should You Play This Giant?

Google's (NASDAQ: GOOGL  ) shares have taken a beating this year. The search giant's first-quarter results were below estimates, with the core online advertising business failing to impress analysts. Even though online advertising drove up Google's revenue by 19% year-over-year, the company's shares declined. Moreover, with competition from Yahoo! (NASDAQ: YHOO  ) getting stronger by the day, will Google be able to live up to expectations in the future? 

Positives across the board
Google is seeing good traction in retail, automotive, and CPG businesses. Particularly, there are three areas fueling growth for Google and its clients. First is the company's sustained effort to help marketers reach customers across various platforms such as mobile and PC. Next, Google's continued progress in brand advertising is seeing growth. Finally, Google's ad technology platforms, used by thousands of agencies and publishers, are also expected to bolster results. 

Performance advertising is the base of Google's core business. The company is witnessing good growth in this area, driven primarily by increased search activity across different hardware devices. Last year, Google made a strong effort to reach people across hardware in a big way through Enhanced Campaigns in AdWords.

Google is also seeing good momentum in product listing ads. It is continuing to improve the experience for shoppers and retailers to gain more business. The company is expanding its footprint on the customer side and launched Google Shopping in eight more countries late last year. Google Shopping Express, the company's same-day delivery service, has opened to shoppers in the Bay area and is gaining momentum.

Making itself better for customers
The company is also focused on building great content on YouTube, as this platform gives brands a wide reach and unique audiences. YouTube has over 1 billion viewers per month and saw a 50% increase in daily watch time last year. 

In addition, Google now allows customers to better measure the performance of ads. This would enable brands and agencies to optimize campaigns based on metrics like reach, recall, or awareness. Google has enabled advertisers in its Display Network to start buying ads based on viewable impressions. This is an important step to helping brands invest online, and the search giant has received positive feedback for its efforts from major clients and agencies.

In ad technologies, Google's DoubleClick buying tools have been adopted by agencies around the world. The move toward private ad exchanges, in which a premium publisher uses its technology to make ad space available to a small number of hand-picked, high-quality, and highly qualified advertisers, is another developing trend. This is expected to deliver a very safe, real-time environment for both brands and publishers.

Focus on content
Google is concentrating on content with Google Play, and looking to win customers with the latest books, newspapers, and magazines, along with 20 million songs, thousands of movies, textbooks, and music. The Google Play Newsstand, introduced late last year, brings together more than 2,000 free and paid news sources, including newspapers like The New York Times and The Wall Street Journal.

Enriching Google Play with more content is important for Google, especially when rival Yahoo! is doing the same. Yahoo! is looking to grow with great content on mobile and the web, and as a result, it has made a number of acquisitions since Marissa Mayer became CEO.

One of Yahoo!'s acquisitions last year was Summly. Yahoo! has now integrated this acquisition into Yahoo! News Digest to deliver an enhanced user experience. The result has been spectacular, as 40% of the people who downloaded the app eventually became daily active users. This is a testament to Yahoo!'s improving capabilities, and also the reason why the company could become a bigger threat to Google in the future.

Bottom line
Although Google's performance in the previous quarter wasn't as great as analysts had expected, the company still reported good growth. Its strategies to capture growth across different areas look impressive and should help share prices move north.

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  • Report this Comment On April 28, 2014, at 3:47 PM, GaryDMN wrote:

    If the media and Wall Street ever stops hyping it, it would be time to short it. There profit margins have fallen for over 10 straight quarters, they lost billion in the smartphone market and the public will figure out soon, that Android is the largest propagator of bugs, malware and viruses the world has ever seem. Then there are the lawsuits and more that will impact Google at some point.

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