A Big Anniversary for Google
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A growing number of people are interested in earning money online. This trend has picked up lot of steam over the past 10 years, and there is no reason to think that this will change in the future. With all this in mind, Google (NASDAQ: GOOG) has been at the center of the conversation for quite some time. The search engine giant has done all that it can to help people all over the world earn money online.
A decade of AdSense
Did you know it has been a decade since Google launched its AdSense program, with the hopes of helping publishers earn money via their websites? While things are not the same as they were in 2003, this program continues to push forward and help millions of people around the globe make money online.
If you don’t understand just how important AdSense has become to the Google business model, you will want to check out the company’s most recent blog post. Here is an excerpt:
“Fast-forward 10 years, and AdSense has become a core part of Google’s advertising business. The AdSense community has grown to include more than 2 million publishers, and last year alone, publishers earned more than $7 billion from AdSense. AdSense is a community that thrives because of all the content creators we are so fortunate to partner with. Their stories inspire us to do our part to make AdSense great.”
If you have never used the Google AdSense program, this may not mean much to you. However, it has likely impacted your search activity in one way or the next. For example, many of the websites you visit on a regular basis probably use this program to earn money.
Believe it or not, there are many people who earn a full-time living thanks to the Google AdSense program. This may not be something the search giant saw coming 10 years ago, but over the past decade, it has truly grown into one of the best ways to earn online.
It goes without saying that AdSense has grown to become an essential part of Google’s business model. Two years after launch, the program accounted for 15% of Google’s total top line, and over the past few years, this percentage has fluctuated in the upper twenties, and is consistently above the one-fourth mark. Google shares 68% of revenue generated by AdSense with content network partners, and 51% of revenue generated by AdSense with AdSense for Search partners, indicating that there’s potential for upward mobility the tech giant requires over the long-term.
More importantly, though, it’s Google’s potential successor -- which Larry Page already indicates is the replacement for AdWords -- that is worth clamoring over. In the company’s latest conference call, Page had this to say about Google’s new program, Enhanced Campaigns:
“Our goal is simple; to enable advertisers to focus on their audience and their message while we dynamically adapt their campaigns across multiple devices. I've been very pleased with the rate of progress so far. We are smoothly moving a huge advertising system and ecosystem on a dime.”
Adding to his point, Page mentioned that the goal of Enhanced Campaigns is to make “make advertising across devices really simple for our customers,” with Senior Vice President and Chief Business Officer Nikesh Arora calling it “an important long-term bet that will help market tiers.” It’s reported that over 1 million campaigns were upgraded to Enhanced Campaigns in the first quarter, with more adoption expected in Q2, but the point is simple: more simplicity should yield better results.
Should investors take notice?
With the passing of AdSense’s 10-year anniversary, a more connected future has Google’s top-line prospects looking quite bright, and on the bottom line, analysts agree. Wall Street expects Google’s earnings to grow 14.9% a year over the next half-decade, and shares aren’t too expensive at a PEG of 1.80.
Microsoft (NASDAQ: MSFT), which is experimenting with a new advertising concept of its own, in which fluid, motion-filled contextual designs are used to boost interaction, sports less expected growth. Sell-side analysts expect Mr. Softy to grow its EPS by an annual rate of 8.7% through 2017, and its shares are actually more expensive than Google’s, at a PEG above 2.
This basic fact gives Google the decided advantage from a valuation standpoint, which is something that it cannot say when compared to Yahoo! (NASDAQ: YHOO). Yahoo!’s recent acquisition of Tumblr has literally filled the company’s newsfeed for the past two weeks, and the company’s continued push for inorganic growth has some analysts feeling quite bullish.
The Street expects Yahoo! to generate better EPS growth than Microsoft at 13.5% a year over the next five years, and it’s clear that the markets haven’t caught up to this potential; shares trade at a PEG near 0.50. Clearly, this forecast rests on Yahoo!’s ability to build an advertising platform on Tumblr’s massive network of homemade blogs in a manner that’s “tasteful and seamless,” according to Marissa Mayer.
If Yahoo!’s recent home page re-design is any indication, Mayer’s ability to influence design in a “tasteful” manner is proficient, so Yahoo!/Tumblr bulls have cause to be excited. Still, when compared to Microsoft and Google, it’s the latter that still looks like the dominant force in online advertising, and its 10-year AdSense anniversary should give way to another 10 years of prosperity with Enhanced Campaigns.
We’d prefer growth to value here, and Google -- which continues to edge closer to the $1,000 mark -- offers the best combination of both factors in comparison to its closest peers.
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This article is written by Chris Bibey and Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. Meena has long positions in Google and Microsoft. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft. 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!