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Few companies are more dominant in their industry than Google in the search engine field. Google, controlled by parent company Alphabet (GOOG), controls nearly 90% of global market share of desk top searches, and technology giant remains strong in the US and abroad .
Google has dominated the search engine market for a number of years and the stock has performed particularly well over the past 10 years.
Data by YCharts
That's why the recent report on the company's results was so surprising. Specifically, the company's core business, online advertising revenue, showed serious signs of slowing.
Google has had a blistering time and, given the potential financial and political challenges that are coming forward, now seems like a good time to sell its products.
Google's recent results have been poor. The company has seen advertising revenue growth slow and amazon is starting to gain market share. Advertising revenue growth increased only 15% in the last quarter. This is the lowest growth rate recorded by the company in this area since 2016. This is particularly interesting, as Facebook has recently announced a 26% increase in its ad revenue, and Amazon has seen impressive advertising. recent. growth figures as well. Google is clearly losing market share.
Google has also seen pay per click rates and overall click-through rates drop. Google has seen a 29% drop in pay per click rates compared to last year and 9% compared to the previous quarter. Increased competition from Amazon and Facebook not only takes market share, these companies also limit Google's pricing power in the advertising industry. In the past, small businesses have been forced to advertise on Google, and although companies still advertise a lot on the Google platform, their pricing power is down.
In addition, Google pays nearly 23% of the company's advertising revenue to Apple (OTC: APPL) to maintain its position as the premier search engine on the iPhone. Google has not seriously entered the smartphone industry until late, and the Pixel company's phone series has been a complete and utter failure. Even though Android devices, such as the Samsung phone line, have worked well, Google has not been able to market their smartphone line with real success. The iPhone continues to be the strongest phone in the North American market with around 40% market share, and that is why Google continues to pay huge fees to Apple every year . Last year, Google paid nearly $ 10 billion in advertising costs to Apple.
The launch of Google's smartphone with the Pixel series has been a failure and the low-budget models of the company, such as the newly launched Pixel 3A, do not change the game. Google 's software continues to slow significantly after users have these phones for more than a year and the processing speed of the new phone is not impressive. Google needs a high-end phone to compete at the top of the market and offering low budget phones will not solve the problem because many iphone users like the social status of the phone.
Finally, their political problems could also be a problem for Alphabet. Elizabeth Warren and other influential Democrats such as Bernie Sanders are talking about dismantling large corporations in highly centralized industries, and Warren specifically raised the idea of ​​dismantling Alphabet. Sanders spoke of breaking the banks and did not talk as specifically as Warren to crack big tech companies, but the Democratic Party's progressive wing remains strong and some of the leaders of this wing are supporting the breakup of the big ones companies like Alphabet.
Google remains the leading player in the search engine industry in the United States and around the world, but the company still has no clear strategy in the US smartphone market, and competition in the advertising industry online will only intensify. Moreover, it is always difficult to predict political winds in advance, but the progressive wing of the Democratic Party continues to become more powerful and progressive leaders are already talking about dismantling big tech companies like Google.
Disclosure: I / we have / we have no position in the actions mentioned, and we do not intend to initiate a position within the next 72 hours. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose shares are mentioned in this article.
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