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Google Worth More Than Microsoft, Why?

Friday - 5/10/2013, 2:35pm  ET

It is a revolution, or a resolution, for some it is both. The Dow Jones Industrial Average crosses the 15,000 mark. Investors are celebrating as it marks the first cross above 15,000. Part of what’s leading that valuation lead is Microsoft . Microsoft has rallied by 20.53% since the beginning of 2013. Microsoft’s advance is lifting up the Dow Component and is a primary contributing factor to the broad market strength. After all, undervalued equities are the first to be bid up in a cyclical stock market recovery.

Some are left scratching their heads, as Google for the first time is trading at a valuation that exceeds Microsoft’s. Currently Google trades at a market capitalization of $284.7 billion whereas Microsoft is trading at a market capitalization of $278.7 billion. Google is pulling ahead of Microsoft in terms of valuation. The question all of you are beginning to ask, is why? Why Google, why is it loved so much by the street?

Google versus Microsoft

Google pulls ahead of Microsoft and Yahoo! in terms of search. Putting this in perspective, Google’s advertising solutions for small and medium businesses is by far the best in the world. Part of what makes Google such a success is that advertisers are able to measure the return on investment dollars in marketing which allows a marketing division the ability to justify additional funding for Google ad words or Google ad sense.

There are many ways to sell products and services on the web. But, by far the best way to do it is by doing it the Google way. Professions are being created, under the terminology referred to as Search Engine Optimization. These people’s sole job is to identify key search terms that are priced appropriately. Not only is it their job to find the right key-word, but also to make sure that the customers who click through the website are buying enough products and services in order to cover the costs of Google Search engine marketing. Many, many companies in niche markets have been able to gain market share, and grow sales by utilizing Google ad words, and Google AdSense. It is a revolution in marketing.

Source: Data from International Telecommunication Union with the data from 2012-2020 forecasted by Alex Cho

Currently the world-wide-web is only partially saturated internationally. With worldwide internet adoption expected to increase. Currently the internet users as a percentage of the worldwide population are 30%. This is expected to double over the next ten-years giving investors a compelling reason to stay the course with search based enterprises like Google.

Google versus Bing and Yahoo!

Source: ComScore

Google still leads the pack in terms of the number of searches. Part of what has led to the -0.40% decline in search engine market share may have to do with Microsoft’s ad-smear campaign, titled Scroogle. If you want to find out more about the ad-campaign, try to Google search, Scroogle.

That being the case, Google still holds onto a substantial amount of market share making it more or less unaffected by Microsoft’s childish advertising campaign. It is also unlikely that Microsoft will be able to gain any substantial traction in demand as its best attempt at punching Google in the face was the “Scroogle” ad-campaign. Google’s market dominance is pretty well-established, and it is unlikely that it will lose any of it any time soon.

Microsoft and Yahoo! are starting to be left behind. The demand for Yahoo’s display based advertisements have declined by 6% over the previous year. Whereas Google’s display based ads grew by 12% year-over-year. Google’s robust advertising platform is also strong. Google’ search revenues grew by 18% year-over-year. Yahoo’s growth in search revenues was 6% year-over-year comparatively. Google’s growth in both display and search advertising is what keeps investors highly optimistic of Google’s immediate future

It also helps to know that Google has been able to increase its international revenue. With Google’s international revenue growing from $4.8 billion to $5.6 billion between the 2011 and 2012 period. Google grew its international revenue by 16% year-over-year. When compared to Yahoo’s exit from South Korea, Google is doing a pretty admirable job internationally.

Conclusion

So the answer is pretty clear, why Google? Google’s advertising service for small and medium businesses is the best in the world. Perhaps even better than Facebook’s even though Facebook has demographic data about its users, Google has been able to offer actionable information to marketers that they are unable to find on other advertising platforms, like Bing and Yahoo! search.

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