Google potent at securing internet markets

Google is one of the few companies able to position itself continuously for major moves in the internet market, Craigs Investment Partners broker Chris Timms says.

Through acquisitions and research and development, Google had build up a competitive position in the most important digital consumer markets, including mobile and digital structure, digital services and monetisation.

''This diverse range of products and services have allowed Google to be exposed to the largest areas of user traffic on the internet, which it can use to leverage its advertising business.''

Google had recently realigned its sales go-to-market strategy into a performance advertising group and a brand advertising group where before, it was split between products, he said.

The push focused on the YouTube online video business but also included Google's display advertisement network and its social network, Google Plus.

The bulk of Google's advertising revenue was from performance with advertisers only paying when a consumer clicked on their advertisement. The company was starting to make gains in the $US30 billion ($NZ36.4 billion) digital ''brand'' category.

''With the increasing shift of video consumption to the internet, this move is very timely for YouTube and could signal a new opportunity for 2014. YouTube gives brands a very wide reach and provides access to targeted audiences very few online media providers can do.''

YouTube had more than one billion views per month and saw a 50% increase in daily watch time over the past year, Mr Timms said.

Google planned to repackage YouTube to look more familiar to television advertisers, making it easier for big brands to evaluate YouTube advertisement buying.

It also recently started using Nielsen's Online Campaign Rating service which helped advertisers measure the performance of YouTube advertisements, similar to TV advertisements, he said.

''Google is investing in creative ad formats which pivot around user engagement. The company's marketing teams have found simply taking television ads and transplanting them on YouTube was not a successful strategy and that ads needed to be tailor-made for the internet.''

Last year, three video advertisements created by brand marketers, specifically designed for YouTube, made it on to the list of the top 10 most watched videos for 2013.

In early January, Google announced the agreement to acquire Nest Labs for $US3.2 billion.

Nest was a manufacturer of digitally-connected home products, including the Nest Thermostat and Nest Protect smoke and carbon monoxide alarm.

Along with its operating systems investments of Android, Chrome and devices like Chromecast, the acquisition of Nest Labs added to Google's efforts to take its platform into the home, Mr Timms said.

The company was an active acquirer in the fourth quarter including in AI, buying DeepMind Technologies, robotics company Boston Dynamics and launching the Open Automotive Alliance with GM, Honda, Audi, Hyundai and chipmaker Nvidia, to bring Android to cars.

''The general theme seems to suggest Google is looking to move into more personal computing in the home, the car and the workplace with smartphones, tablets, PCs, set-top boxes, TVs and robots.''

At the end of the second quarter, Google had $US58.7 billion in cash and equivalents on the balance sheet, or $174.80 per share.

Management had made it clear its cash balance was still considered a strategic asset for long-term growth.

Therefore more acquisitions in the near term could be likely, Mr Timms said.


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