More consumers are turning to Google Maps than to Yelp for local business information, yet another sign that the search engine's mapping data will be the key to winning on mobile ads.
Google (GOOG) is the first choice for about 35% of users, according to a survey released Thursday by Cowen & Co. analyst Kevin Kopelman. That trumps second-place Yelp's (YELP) 16%.
That's important, because the search giant is betting that its investment in mapping and location data will pay off as it navigates toward being a mobile-ad-focused business, says Global Equities analyst Trip Chowdhry.
"Google Maps is now a very strong platform for almost every activity," Chowdhry said. "You can now use it to write geo-targeted applications, do geo-targeted ads and social networking based on location.
Maps Key To Mobile
The more users Google can attract by building apps based on its location-based software, the more highly targeted — and valuable — ads it can eventually serve them. Because location is so vital to success on mobile devices, Google Maps might be as important on mobile as Google Search has been on the desktop, says Chowdhry.
Yelp has long been seen as a front-runner in local ads, though it's been held back because it does not advertise, wrote analyst Kopelman, who nonetheless rates the stock as outperform, or buy.
That lack of awareness is one of its weaknesses vs. Google. While 98% of surveyed users had at least heard of Google Maps, only 65% had heard of Yelp.
Google Maps benefited from coming pre-installed on Apple (AAPL) iPhones from 2007 through 2012, but it's been replaced by Apple Maps, which uses Yelp data.
But analysts see Google taking steps to try to sideline those rivals, as well as smaller local-business search firms such as TripAdvisor (TRIP), Groupon (GRPN) and Angie's List (ANGI).
Each of those earned just 3% of users in Cowen's survey.
Google earlier this month bought Waze, an Israeli mapping program that adds crowd-sourced traffic information. It reportedly beat out Facebook (FB), which also is trying to find ways to monetize its fast-growing mobile users.
Google Favors Google
When Google this month altered the way local search results are displayed on mobile and desktop, the search engine started favoring its own local business data vs. Yelp's, according to Macquarie Research analyst Ben Schachter.
Before that change, "more than half" of Yelp's 100 million monthly visitors were Google referrals, but that could drop off because Google has prioritized its own maps and data, Schachter says.
"Notably, this new feature falls above organic search results and sponsored links" from Yelp and other data providers, he wrote.
Funneling traffic to Maps and adding more targeted ads may be lucrative long term, but such efforts spark regulator scrutiny. The Federal Trade Commission this week warned search companies that ads should be clearly distinguished as such.
FTC concerns might be overblown, says Wedge Partners analyst Martin Pyykkonen. Because of the design of ads in Google Maps, consumers will likely be able to pick out ads. Even if they can't, most users won't care whether a link is an ad as long as it's a good search result, he says.
"Obviously it looks a little different stylewise," Pyykkonen said. "I don't think it's any less clear (in Google Maps) than it is in a search result.
Google wants to sell more ads on mobile, CEO Larry Page has said. For now, the online giant says it's simply trying to better user experience. For that reason, offering directions based on location is one of the "core features" that Google is working on, Page recently told analysts.
Google has been working to integrate location data from maps into almost every new product, from self-driving cars to Google Glass, says analyst Chowdhry.
"So far, Google is the only company that has the breadth and depth of geographical coverage," he said. "That includes every country, including Afghanistan."
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