Google Loses Market Share, Looks Beyond Search for Growth

At the close of Q1 2011, Google had lost some search market share and fell short of earning expectations. As a result, the search giant will be looking beyond its search products to drive future growth. Indeed, the company seems to seeking stability in a diversified revenue stream.

Google’s Market Share & Earnings

Comparing Q1 2011 to the same period the previous year, Google’s earning increased 27 percent. But that increase wasn’t enough to keep investors happy.

Google posted $2.3 billion in profit on $8.58 billion in revenue, but as AdAge reports, “[w]hile those numbers are huge, Google’s $8.08 per-share earnings weren’t quite enough to please Wall Street, which was expecting $8.11 per share.”

So if Google’s still making a good profit, why don’t investors have more faith in the company? Well, there are probably three parts to the story: Google’s failed social initiatives, recent departures, and sliding market share.

Google’s Social Failures

Since launching Google Buzz, the company has been plagued by social failures and accused of Facebook envy. Even the much anticipated Google Me was rumored to be plagued by infighting. And when this alleged “social layer” finally launched as Google +1, it really fell short of its potential.

These social failures can’t be good for investor confidence. After all, Facebook surpassed Google in page views in 2010, their competitor Bing has exclusive access to Facebook data for personalizing search experience, and Americans spend over 6.5 times more time on social networks than searching.

Key Departures

Insofar as these failures reflect internal problems (probably managerial, operational, and development related), the company has also experienced some departures that have probably left a bad taste in investors’ mouths. First, investor favorite Eric Schmidt stepped down as CEO, leaving a much less business-minded Larry Page to fill the role.

Apparently, one of the points of contention between Schmidt and Page and Co-Founder Sergey Brin was Google’s withdrawal from China — Schmidt wanted Google to stay and continue censoring searches. Turning its back on the largest consumer market certainly affected investor confidence, but losing the guy who wanted to stay in China would only add insult to injury.

More recently, SVP of Product Management, Jonathan Rosenberg stepped down the same day that Page stepped into Schmidt’s former shoes. Such a seemingly protest-resignation from another business-minded decision-maker most certainly had an impact on investors’ perceptions of Google’s long-term potential.

Google’s Sliding Market Share

Now whether Google’s sliding market share reflects investor confidence or vice versa, one thing is clear: the two seem to be trending down the same path.

According to Hitwise, Google’s share of the US search market was down 2 percent in February 2011. Now, 2 percent doesn’t seem like much except when you consider that Bing’s was up 5 percent from the previous month. This left Google and Bing at 66.69 percent and 28.48 percent of the US search share respectively.

It’s hard to tell why Bing is gaining more ground than Google is losing, but part of it might have to do with Bing integrating Facebook data (such as Likes) into its search index. This has given Bing an advantage when it comes to personalizing search, and given the lead in user data that Facebook has over Google, that might be a lead that Google +1 can’t help Google regain.

Whither Google?

With Google failing at social media, losing high level management, and sliding on its market share, the questions becomes: What is Google going to do to maintain growth and restore investor confidence?

Well, it looks like Google is placing its bets on display ad products, YouTube, mobile, and the Chrome web browser. Last quarter, Google sold premium display ad space to big brand advertisers on a guaranteed basis.

Recently, Google also acquired Next New Networks a company that helps package web series to advertisers. Maybe they’re trying to take YouTube ads to a place that more closely resembles TV advertising.

Finally, Google has seen some growth in the mobile sector with its AdMob platform. According to AdAge (linked above), the AdMob platform “Google market share is seeing ad requests from 150 million Apple- and Android-powered phones and its Chrome web browser.”

So while Google might have lost a tiny foothold in a market that it relies on (search), the company is actively pursuing other digital channels that show some promise (YouTube), if not outright guarantee (mobile). Whether this diversification is rooted in desperation and will see the company spread itself too thin, or if it is a sound and responsible business decision to not rely on a medium that can become obsolete at any moment, only time will tell.

About CT Moore

A former Staff Editor here at Revenews.com, CT Moore is a recovering agency hack with over 7 years experience leveraging search and social media to help brands meet their business goals online. By day, he provides SEO and social content strategy to both SMBs and enterprise level companies in the tech, entertainment and travel industries, including Acquisio, Microsoft Canada, and Luxury Retreats. CT is also an accomplished blogger, podcaster, and conference speaker who educates groups and companies about how they can effectively leverage different online channels.

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