Google Has Two-Thirds of Search Market

March 23, 2014 by Douglas A. McIntyre

Googleplex_Welcome_SignGoogle Inc. (NASDAQ: GOOG) continues to keep its dominant share of the U.S. search market taking 67.5% last month. Try as they might, its competitors have not been able to make inroads into the crucial source of internet traffic. Google’s edge remains insurmountable.

According to online research firm comScore, Microsoft Corp.’s (NASDAQ: MSFT) search sites had 18.4% of the market in February as measured by use in both work and home locations. Yahoo! Inc. (NASDAQ: YHOO) was far behind at 10.3%.  The alliance between Microsoft and Yahoo! has done little to improve the prospects of either, because even their combined searches represent less than one-third of the market

Google has used its edge on PCs and consumer familiarity with its service to dominate the new market of smartphones. Research shows that it has nearly 95% of that market. Because of the huge presence of its Android operating system within the smartphone industry, Google has operating system support for its significant edge.

Search remains critical to profits for online business. Based on eMarketer data, Google has almost a third of the U.S. digital ad market, while second place Facebook Inc. (NASDAQ: FB) has only 5%, although the social network piece is growing rapidly. Yahoo!’s earnings have suffered because it cannot gain ground in search or display. Its display advertising business has also been stagnant, meaning both of its sources of income are flat.

Microsoft has viewed search as a strategic effort, one meant to help it in the software market which Windows has ruled for nearly three decades. But, as operating systems like Linux and Android become larger parts of the business, Microsoft needs more tools to fend them off. Search, the company believes, is one of these. If so, Microsoft’s approach has failed.

Wall Street has rewarded Google for its success. Its market cap ranks third among all U.S. public companies at nearly $400 billion. Only Exxon Mobil Corp. (NYSE: XOM) at $407.5 billion and Apple Inc. (NASDAQ: AAPL) at $475.3 billion are ahead of Google. And, at $1,183 a share, Google trades near an all-time high, up 46% over the last 12 months and 67% since the end of 2012. And its powerful earnings engine continues to post spectacular results. In the fourth quarter of last year, revenue rose 17% to $16.9 billion. For all of 2013, revenue was up 19.2% to $59.8 billion.

Summing up Google’s prospects: Its competition will never catch it in U.S. search

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