Here's How Google Is Responding to Facebook in the Mobile Sector

Facebook (NASDAQ: FB  ) has successfully transitioned from a computer-based business to a mobile company. The social media giant reported that its mobile advertising revenue represented more than 58% of total ad revenue in the first quarter of 2014. Analysts believe Google (NASDAQ: GOOG  )   (NASDAQ: GOOGL  ) should be concerned about the gains Facebook has made over the last 15 months. Google's apps initiative, its sensitization of marketers about mobile ad campaigns, and its control of Android's open-source software are appropriate responses to Facebook's growth.

Google's apps initiative
Facebook's successful use of apps tells Google it has change its strategies. Since mobile users spend a lot of time within apps, Google is creating an index of the content inside apps and placing "deep links" in the mobile search results that point to them. The company will benefit since the additional data that mobile devices capture about users will allow it offer better targeted ads.  The BBC said the overall digital ad market will grow by 14.8% in 2014 to $137.5 billion.

Sensitizing marketers as an upside
Marketers can monetize their mobile properties using HTML5 as a creative medium; it enables them to monetize their highly trafficked mobile properties.Google and its partners are asking marketers to use HTML5 for their ads. Google will educate marketers on how to implement successful mobile campaigns, and as marketers monetize their mobile properties, Google will benefit  from an expanding sector. Research firm eMarketer said the mobile advertising sector will grow 75% to $34 billion in 2014, up from $17.9 billion in 2013.

Google's control of Android will be crucial
Google is expected to earn $14.7 billion in net ad revenue in 2014, with a significant contribution from smartphones and tablets. To ensure this, Google will continue to control its open-source Android software by requiring device manufacturers to obtain a mobile services license. IDC expects Google's Android to control 76% of the operating system market by 2018.

Rivals
Facebook is among the winners in the mobile sector. Though it does not own a mobile ecosystem, its strategy is to purchase an arsenal of stand-alone mobile apps with high traffic. Since advertisers are shifting marketing budgets to apps with a high traffic, Facebook will make gains in the long run. Gartner predicts there will be 310 billion downloads with an estimated value of $74 billion in revenue from app stores by 2016.

Though Google and Facebook dominate the mobile ad sector, a small player like Pandora could also experience a massive improvement in its top line. The company is looking to sell its ads through Windows mobile devices on Pandora One.  According to IDC, the revenue from mobile application downloads will increase from $10.3 billion in 2013 to $25.2 billion in 2017.

Foolish takeaway
Many people are convinced that Google should be concerned with Facebook's growth, and the company is responding with appropriate strategies. Its initiative to increase app revenue, the sensitization of marketers, and its firm grip on Android will enable Google to remain the dominant player in the mobile ad sector, at least in the near future.        

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  • Report this Comment On May 20, 2014, at 6:52 AM, secularinvestor wrote:

    FACEBOOK IS CRUSHING Google in MOBILE

    Facebook is gaining mobile market share from Google and its other competitors. According To Statista total Mobile advertising has grown from $8.7B in 2012, to $18B in 2013 and is forecast to reach $31.4B in 2014 i.e. 261% increase between 2012-2014.

    Googles mobile Ad revenue has grown from $4.6B in 2012 to $8.9B in 2013 to a forecast $14.7B in 2014 i.e. Google growth 220% 2012-21014 - so Google is LOSING MOBILE market share.

    Facebook’s growth in mobile has been far, far faster: from $0.5B in 2012, to $3.1B in 2013 to a forecast of $6.8B in 2014 i.e. Facebook has grown mobile revenue 1,260% in just two years. In other words FACEBOOK IS GROWN NEARLY FIVE TIMES FASTER THAN Google!

    FACEBOOK IS HUGELY PROFITABLE IN MOBILE

    Almost all Facebook’s revenue growth in the past year has been from mobile. While online revenue has been flat at around $1026 million between Q1 2013 and Q1 2014, Facebook’s online revenue has grown from $427 to $1,476 million in the same period.

    Driven by mobile, Facebook’s EPS has soared 183%, rising from $0.12 in Q1 2013 to $0.34 in Q1 2014.

    GOOGLE IS LOSING MONEY IN MOBILE.

    Android has been a disaster for Google. They are losing money in mobile when you take into account

    * The $ billions they have spend developing Android which they give away for free.

    * The $ billions they have spent subsidising Nexus, which has been a dismal failure in terms of sales and market share

    * The $12 billions Google spent buying and subsidising Motorola which they then sold off at a huge loss

    * The more than $1 billion they pay Apple every year for the privilege of access to their iOS devices.

    ANDROID IS A DISASTER FOR GOOGLE

    The Author, like many commentators has been misled into believing that Android’s alleged 78% market share of smartphones translates into Advertising revenue. This is not the case.

    * Google is locked out of most Android devices because they are forked. That applies to Amazon and most Chinese devices. So Google can only gain access to a small part of that 78%

    * In evidence to Congress Google admitted that 80% of its mobile revenue comes from iOS devices and just 20% from Android.

    * Every survey shows that iOS users are more affluent, use the internet more, are better educated, buy more goods and services and are the preferred target of marketers.

    * In a survey by Nanigans they found that Facebook advertiser on iOS devices made 1,790% higher ROI (Return On Investment) than the same adverts on Android.

    FACEBOOK HAS A FAR LARGER MOBILE USER BASE THAN GOOGLE.

    One of the most common mistakes made in the media by journalists, bloggers and commentators alike is to not appreciate just how large ad fast growing is Facebook’s mobole user base,

    They normally quote the 1,276 million MAUs (Monthly Active Users) and many comment on the assumption that Facebook will be unable to grow rapidly because it is meeting market saturation.

    The above numbers relate to online (PC) Facebook users. But two years ago Zuckerberg announced that Facebook would become a mobile company, and that Facebook would become a platform with a rapidly growing portfolio of products and services, mostly mobile.

    They fail fail to understand that Facebook has a total of around 3,184 million users of their products and services on Facebook platform, of which around 1,908 million are mobile users:

    *1,008 million mobile MAUs - 520 million added in the last 2 years

    * 200 million Instagram users

    * 200 million Facebook Messenger users

    * 500 million WhatsApp user.

    * In addition Facebook have added Facebook Paper, Facebook Moves, for which there are no numbers yet.

    * Also Facebook Platform has over 500,000 Apps and Games, which unlike Google’s work on iOS as well as Android and othe platforms.

    * Facebook has tens of thousands of developers working on Apps and Games. Social Interactive games is a huge growing market and Facebook has bought Occulus to add virtual reality to the platform

    2 IMPORTANT POINTS

    1) The total numbers of Facebook’s mobile users is several times larger than the combined total of its mobile and social media competitors combined i.e. Google+, Twitter, Linkedin, Yelp, Pinterest, etc. etc.

    2) Facebook has barely started to monetise its huge mobile user base. There is huge, huge growht of revenue and profits to come.

    FACEBOOK ACHIEVES FAR HIGHER ROI (Retrun On Investment ) FOR ADVERTISERS

    For this reason Facebook has been able to increase its advertising rates, which Google had to reduce itheirs

    This is largely because of much higher engagement levels than on Google+, which although Google claims to have 300 million users, most actually user it just to join other web sites and don;t actually use to it communicate with friends.

    An example of just how much more profitable Facebook is for advertisers was shown in an experimental test by Toyata using Gaoogle+ and Lexus using Instagram.

    Instagram beat Google+ by incredible margins. For example:

    * Lexus/Instagram total engagement increased 6,807% compared to just 228% for Toyota/Google+

    * Lexus/Instagram like increased 6,713% compared to just 69% for Toyota/Google+

    * Lexus/Instagram generated 10,769% more comments compared to just 104% for Toyota/Google+

    see:

    simplymeasured(DOT)com/blog/2013/12/18/instagram-beats-google-by-a-ko-social-ads-drive-2885-higher-engagement-in-early-test/

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