Commentary

Is Mobile Search Cannibalizing Google's Core Search Business?

Along with the continued strength of YouTube, Alphabet on Thursday credited mobile search with driving fourth-quarter revenue.

During the period, revenues were up 22% year-over-year, and 24% on a constant currency basis.

“This performance was led by mobile search and YouTube,” Ruth Porat, CFO of Alphabet, stated.

Yet  analysts are not sure mobile search is necessarily growing the fortunes of Google’s parent company. “We see mobile search growth as generally cannibalizing [Google's] own non-mobile search activity, much as programmatic advertising cannibalizes non-programmatic sales at its display network GDN,” Pivotal Research Group analyst Brian Wieser explains in a new investor note.

Rather than mobile search, Pivotal expects product innovations like Customer Match and the establishment of marketing technology products to grow Alphabet’s market share over time. Such innovations “might be responsible for some of the acceleration in advertising revenue growth [Alphabet] has delivered over the past year relative to prior periods,” according to Wieser.

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“Whatever the drivers … Google’s core business benefits from scale and offers the potential to improve the efficiency of most aspects of the company’s operations,” Wieser added.

As always, advertising was the primary driver of Alphabet’s business during the fourth quarter. Ad revenue grew by 17%, and accounted for 86% of the company’s revenue.

Non-advertising businesses within the Google division grew by 62% year-over-year.

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