Oct 19, 2012 Comments Off Dinah Tellya
Excerpted from CNBC: Google may be on its way out as the dominant player in search, according to one analyst — and could even “disappear” in as little as five to eight years if the competitive pressures that ultimately claimed other search giants start to take root.
In the wake of a surprisingly weak earnings report, Eric Jackson, Ironfire capital founder and managing member, said Google Google [GOOG 681.79 -13.21 (-1.9%) ] could easily find itself fending off the woes that eventually took hold at embattled Yahoo! [YHOO 15.84 -0.16 (-1%) ].
“They could disappear in five to eight years and disappear in the sense that Yahoo used to be the king of search. Now, for all intents and purposes, Yahoo has disappeared,” Jackson said Thursday on CNBC’s “Squawk on the Street”.
The primary reason Google may lose its search dominance is because the company is facing the same mobile problem as Facebook [FB 19.00 0.025 (+0.13%) ], Jackson said. (Read More: Google Has the Same Mobile-Ad Problem as Facebook)
“If Facebook saw a deceleration in their sales and their growth lead to a halving of their stock price…why wouldn’t it also be something that is very negative for Google as it continues to play out?” he said.
Google reported in its quarterly earnings, which were released Wednesday, that its cost per click (CPC) was down 15 percent in the third quarter.
While the company reported that ad sales had increased, it is likely that CPCs will continue to decrease, Jackson said.
The reason? Consumers are searching more and more on mobile devices, yet advertisers aren’t as willing to buy advertisements formatted for mobile devices, because these ads are not as prominently displayed.
Also, mobile ads tend to run more cheaply than ads made for desktop computers.
“Obviously, everyone is focusing on CPC…Profitability is way down for five quarters now, for Google, quarter after quarter. Paid clicks, the rate of growth is slowing,” Jackson said. “We’re facing a scenario, where I think in a couple of years, we might hit peak search.”
The rise of mobile will lead consumers to want to search in new ways, which may open the door for others to enter the search space. The number one contender may just be Apple [AAPL 609.84 -22.80 (-3.6%) ] — one of Google’s fiercest competitors, he said.
“I think that there is a big opportunity right now for someone to step forward and assert themselves for a new way of getting people information for doing search in a mobile world,” Jackson said.
“I don’t think typing in a blue box is the ideal format for a mobile world. And I think the best opportunity out there to displace Google in this area is probably Apple’s Siri.”
However, Google could still turn things around, and the company is doing some things to make up for the decline in CPC.
Google shopping, for example, has been changed to only show paid results in a way that should generate a lot of money for the company, Jackson said. This too, however, could pose a new problem for the search giant.
“The question is, is that move going to degrade the service, is that sort of the tip of the iceberg?” he said. “And are we going to start to see paid search results in other areas of Google and is that going to degrade the experience?”