Google Is Losing The Social Media War
In the Internet business, there's Google and then there's the competition running about ten laps behind. Everything about the tech giant dominates the capitalism of the World Wide Web. Google has more searches per second than all other search engines combined; they take in 55% of all dollars spent on online advertising; they snapped up YouTube in order to control the most popular web page and the third-most popular web page in one fell swoop. With phones, tablets, and even self-driving cars, there's just one market that Google positively cannot penetrate. The sole chink in the Google armor lies in their social media platforms, which have completely failed to catch up to the benchmark set by Facebook and Twitter. A recent announcement by Google stated that the company would remove Google+ integration, their great social media experiment, from all affiliated platforms. Does this herald a downturn in the company's performance, or a cause for optimism going forward?
The Internet War
No matter where you turn on the Internet, consumers are barraged with a list of demands on their attention. Click here, buy here, watch here. While that's mostly a successful strategy, it fails to capitalize on the audience when too many barriers lie between the user and their desired content. Google broke this relationship with their customer base by prompting a variety of sign-in forms whenever a user came to a Google site or a Google-related site. Rather than unify their customer base under one grand aegis, Google merely served to limit the exposure and traffic by necessitating a lengthy signup feature. Bradley Horowitz, vice president, noted that Google wanted to facilitate better account management in the future in order to minimize the hoops that a user had to jump through in order to navigate onto one of their sites. In 2014, company CEO Vic Gundotra resigned over the decision to list Google+ profile pictures in the company's search engines, a move that pushed their stock (GOOG on the NYSE, trading for $631.24 a share) to lose nearly twenty percent value in less than three months. The company next separated photos from outlinks, then decided remove Google+ from the mail, maps, and search functions. The death knell came two weeks ago with the announcement that, while Google+ will continue, the company will look to milk a new cash cow rather than beat a particularly dead horse.
How poorly did Google+ fare? In a word: very. As little as five million persons use Google on a monthly basis, compared to a tremendous 1.5 billion (that's billion, with a B) Facebook users and about 300 million Twitter users. Despite the fact that about a quarter of a billion persons have a Google+ account, only about two thirds of those members have posted any content to their profile, rendering a full 33% of Google's platform an anchor on their overloaded servers. While those who spend little time on social media besides sharing the odd cat picture may think little of this trend, the battle for social media reflects a larger battle for the Internet. Social media and search engines will only grow closer over time, at least until a new digital phenomenon overtakes one or the other, with about $25 billion in spending per year flowing over Tweets, Vines, and Instagrams. Within as little as five years, social media ad spending could overtake television ad spending, especially as the usage trend for the former spikes upwards while the latter suffers from catastrophic collapse. Since Facebook, the biggest competitor to Google on the block, has decided to use third-party site support and apps instead of relying on an all-in-one brand, they can compete more efficiently with Google by spending less money and pocketing more profit. Such is the headstone for Google+: by trying to spread the larger brand, Google failed to connect users with one another and so failed the biggest social media litmus test.
Better Days Ahead?
The decline and fall of the Google+ empire has already created a downward trend in the company's stock after Google enjoyed a white-hot month of July in which their stock price rose by nearly $200 per share. The uptick came on an extremely strong second-quarter earnings report in conjunction with a study released by Morgan Stanley that outlined how the surge in the smartphone market would help, rather than hinder, the company's market share. The good times lasted only until the middle of the month, however, when the reports on social media sent the stock tumbling by nearly ten percent. Google needs a new ace in the hole, but predictably they may have one just as their hand appears grim. In addition to the ongoing benchmarks the company hits with their self-driven car (to hit dealership pavement in 2020), the company has a leg up on Facebook as the two try to develop photo recognition software ahead of the other. Facebook wants photos that instantly identify and tag users; Google wants to categorize and backup photos on the cloud for easier searching. Whichever company gets their first will experience a boom in popularity and growth, with Google currently in the lead with the launch of their Google Photo service in April. The newest smartphone, the Android M, will include the visual recognition software to provide superior photo organization and search algorithms, with the hope that Google Photo can do to images what the search engine has done to a few words of text.
Good Value, Not Good Growth
- It's unlikely Google will throw their hat into the social media ring again. That will keep their stock from big gains for the near future, as Google lacks a new product to create a boost set for release in the next year, while Facebook has released valuable new content like their messenger feature.
- Investing in Google stock directly will help just about any portfolio for value, though their growth days sit well in the rear-view mirror. That mitigates the volatility of the shares, making it an attractive option for portfolios with higher-risk holdings.
- Nearly every tech mutual fund includes Google shares, often as the largest percentage of total holdings. Google's inclusion allows a lot of tech funds to roll with the punches by anchoring or offsetting losses.
- Remember that Google has no dividend payments, making it less attractive for income investors.