Facebook Is Gaining On Google -- Ahead Of The Tape
01 February 2016 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/1/16)
By Steven Russolillo
In the continuing battle for world domination, a cool $15
billion separates Google parent Alphabet Inc. from Apple Inc.
That is the difference between the two in terms of market
capitalization. Yet investors gauging whether Alphabet's run to
market-cap supremacy has legs may be better off sizing up the
search giant against a smaller force: Facebook Inc.
Wall Street has cheered Facebook's recent mobile success. Last
week, Facebook said some 80% of total fourth-quarter advertising
revenue came from mobile, well ahead of estimates and up from 23%
three years ago.
Next up is Alphabet's fourth-quarter earnings report, out
Monday. Analysts estimate earnings of $8.10 a share, up 18% from a
year earlier. As with Facebook, a key question around Alphabet's
Google is how successful its search and advertising businesses are
on mobile.
Google last year said search traffic on phones surpassed desktop
traffic world-wide. According to an eMarketer estimate, Google had
roughly 33% of global mobile Internet ad revenues in 2015. That is
ahead of Facebook, which the firm estimates had around 17% of the
total.
But Facebook has been quicker to pivot toward mobile, which
could help it gain ground on Google. For example, eMarketer
estimates that Google's net mobile Internet ad revenue will rise to
about 70% of total net ad revenue by 2017, up from just under 50%
in 2015. That is a brisk pace, but not as brisk as Facebook's.
Agility is important given debate over whether the future of mobile
will be through the web or apps.
Meanwhile, Google's growth in total advertising revenue has
leveled off.
Some could argue investors are assuming Google will do fine. The
stock is up by more than one-third in a little over six months. Its
valuation, at around 22 times forward earnings, isn't far off highs
of the past five years.
Gains have come in part thanks to a new emphasis on cost
control, hopes for capital returns and transparency the company is
promising. Maintaining progress, though, will depend on being fleet
of foot in mobile.
(END) Dow Jones Newswires
February 01, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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