2 Super-Growth Trends You Shouldn’t Miss at Google

HL is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Google’s (NASDAQ: GOOG) stock price hit a new high of $928 last month, signaling investors' confidence in its future plans. At that level, it sports a P/E of 26  – suggesting that its growth needs to keep up with its valuation. Google’s ambitions, though, are huge. Two super-growth trends in mobile, and the new potential revenue they may hold, present sizable markets to match this online giant's big goals.

"High-success consumer products"

In his inaugural Q2 2011 speech, CEO Larry Page declared  both Chrome and Android as "high-success consumer products," after Search. Since his bold proclamation, both Chrome and Android have grown from strength to strength, as the graphs below reveal:

<img alt="" src="http://g.foolcdn.com/editorial/images/64823/ata_large.png" />

Source: Mashable, Google I/O 2013 and Android Mobile Blog. 

<img alt="" src="http://g.foolcdn.com/editorial/images/64823/u-for-c_large.png" />

Source: Google I/O (2013, 2011), Earnings Call, Chrome Event and Google Blog (July 2009 and Dec 2008). 

As it stands today, Chrome boasts 750 million monthly active users, while Android has activated 900 million devices. The growth of mobile smart devices has played a big role. Chrome has increased its monthly active users by 300 million since launching its mobile browser last year. Not be outdone, Android has grown to 79.3% market share of worldwide smartphones. When put in context of the estimated 2.4 billion  users on the internet, these figures are huge.

But that's not all.

The Google services which tag along with Chrome and Android are starting to harvest the fruits of their dominance:

  • According to Global Web Index, Maps, Youtube and Google+ have taken three out of four top positions in the most-used smartphone apps. 
  • In the recent Google Event, SVP Sundar Pinchai announced that Google Play's revenue per user had increased by two and a half times since last year.
  • 88% of Mobile Search Ad clicks have been incremental to organic clicks 
The key drivers, Mobile Search and Google Play, has powered mobile revenue to a $8 billion run rate  last year, up from a $2.5 billion run rate in 2011. It is estimated to hit $8.85 billion  in 2013. 

The board is set -- the pieces are moving 

These significant bets on Android and Chrome are crucial to help the online giant stay ahead of its able adversaries.

According to eMarketer, Facebook (NASDAQ: FB) is Google's closest competitor for mobile ad dollars. The social network giant recently boasted  that 41% of its advertising revenue came from mobile, while is overall ad revenue grew by an astounding 61% year over year. 

On the content and app retail front, Apple’s (NASDAQ: AAPL)  iTunes network generated a whopping $12.9 billion last year, dwarfing Google's entire mobile revenue. Although Apple holds a smaller stake in mobile operating systems, the iPad commanded an impressive 81.3% in tablet web traffic  in April, leading to strong content and app sales. 

But Google is not standing still.

Google's Enhanced Campaigns provide advertisers with a more complete solution including YouTube, Search, Display and Maps across all devices. While Facebook's 150 billion friend connections offer tremendous viral marketing potential, the collective and diverse scale of Google's services counteroffers an equally strong value proposition for its customers.

Google Play, which was re-branded last year, has overtaken  Apple's iTunes in app downloads, and is poised to close the revenue gap with its faster growth. From the Q2 2013 conference call, we learned that Google Play is the main contributor to the 138% growth in Google's "Other Revenue" segment.    

Google plus many futures

It may be surprising to learn that Android and Chrome were introduced less than five years ago. Atop their success, Google has been able to add and extend popular services such as Drive, Maps, YouTube, Gmail and Google+. New Google-branded devices such as Chromebooks, Nexus, and Glass help further proliferate these operating systems.

The potential to increase of users of Google services remains significant. Mobile smart device growth is now poised to expand to another 3.5 billion non-internet users worldwide. At the current rate of 1.5 million daily Android activations, it would take almost seven years to reach all 3.5 billion of those people. This vast market space presents a once-in-a-lifetime opportunity for a first mover advantage.  

With increasing growth rate of Chrome and Android, Google is making bigger strides every day toward dominance into new markets. It is unusual to see a company of its size grow revenues at high double-digit percentage rates, but the size of its as-yet-unconquered markets may just justify that optimism.  

HL Chin owns shares of Apple and Google. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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