"Based on our discussions with marketers, we believe Instant will increase search volume, drive traffic to 'head' terms, and increase average cost-per-click. While we cannot accurately quantify the impact, the introduction of Instant should prove positive for Google," Benchmark Capital analyst Clayton Moran said in a note to clients.
Analyst Moran, who has a "buy" rating and $600 price target on Google stock, said the results so far indicate greater traffic to trademark terms and other category or head terms.
"Essentially, traffic is aggregating around shorter, more direct phrases," the analyst said.
Google Instant makes search results appear faster by predicting queries and showing results as soon as the user begins to type.
As Google Instant changes the search experience, it should get users expected answers more quickly and more accurately. Instead of searching 4-5 times to find the relevant results, the user may narrow the query in the search box in real-time. Thus, ad targeting should also be improved.
According to Google, Google Instant will shave between two and five seconds off the time required for a typical search, thereby increasing the total number of searches.
"Suggestions are leading users to searches they may not have otherwise done. For instance, coupon sites are gaining traffic as searches for retailer websites yield coupon sites as well, typically in the second or third suggestion," Moran said.
"Coupon and other affiliate marketing keywords can be relatively expensive terms as affiliate marketers use them to drive traffic to their sites. As such, it appears that more traffic is clicking on higher-cost links, driving average cost-per-click higher," the analyst said.
In addition, a rise in number of clicks and queries could boost Google's ad revenue amid a surging mobile ad market in the U.S.
Recently, stock analysis firm Trefis said Google's latest Instant search technology could boost its stock by 5 percent.
"We think Instant could help Google consolidate its already-dominant share of the search advertising market. Although the new technology will probably reduce Google's click-through rates, we expect this decline to be offset by rising cost per click, keeping Google's search revenue roughly constant," Trefis said.
Google currently controls 65 percent of the search advertising market, far surpassing Yahoo!'s 10.4 percent share and the 9 percent held by Microsoft's
"We currently expect Google's search advertising market share to grow in coming years, reaching 73 percent by the end of the Trefis forecast period. However, there could be an upside of 5 percent to the $643 Trefis price estimate for Google stock if the impact of Google Instant boosts Google's share to 78 percent," Trefis said.
Also, Google could enjoy less threat from the competition as Bing's response to Instant may not come as quickly as expected and Bing is in the process of integrating with Yahoo! and readying for the holiday season.
"We believe Google is the best positioned company to benefit from the secular shift to digital advertising," Moran said.
Shares of Google closed Friday's trading at $490.15.
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