The Motley Fool:
4 reasons why Google is a relative sell within technology:
- Desktop search usage appears to be peaking, as Internet users worldwide transition to mobile devices such as tablets and smartphones. Google’s dominance in the mobile arena is less secure, as evidenced by a must-read New York Times article which discusses how competitors Apple and Amazon are gaining a mobile foothold.
- Advertiser revenue declined 1% year-over-year during first quarter 2013 at IgnitionOne, a third party which manages more than $1 billion in annual Google advertising for 500+ clients. The figure is particularly worrisome as the same metric rose at an average 18% during the last 8 quarters (Jan. 2011 - Dec. 2012).
- Google’s earnings mix is shifting towards lower margin areas. The company is introducing an “Enhanced Campaigns” feature during the second half of 2013 in order to offset declining margins. Advertisers will be required to adopt the new standard on a take it or leave it basis, which may cause some customers to defect.
- Facebook Home is a credible threat to Google’s search dominance on the mobile platform. While analysts may downplay Facebook’s new initiative, investors should recognize there is no precedence in mobile. Further adoption by users as the "gateway" to your phone could be meaningfully detrimental to Google’s mobile ad revenue.