Google: A Dominant SEO Force In The Growing World Of Online Commerce

By Maxwell Fisher - September 6, 2012 | Tickers: AAPL, BIDU, GOOG, YHOO | 0 Comments

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In this day and age, with an ever higher concentration of commerce being conducted on the internet, search engine optimization (SEO) is a growing business in allowing suppliers to match up with consumers. There are hundreds such companies, and one I wanted to take a look at today is Tasty Placement, a seven-year-old Austin, Texas based internet web designer, search engine optimizer, and social media marketer.

There is only one reason to choose a company as a host SEO, and that is, to drive up placement in common web searches, thus driving up the client's revenues. Tasty Placement has a leg up on its competition as its founder and CEO, Michael David, quite literally wrote the book “WordPress 3.0 Search Engine Optimization”, perhaps the seminal work in the field of getting a website noticed. The other thing that Tasty Placement has going for it is its website and its emphasis on building its clients' businesses without “cell phone” type time commitments. For the company that has seen its website typically buried several pages into a search engine, utilizing a company with the obvious expertise and lack of risk that utilizing Tasty Placement would seem to possess, the advantages are obvious.

There is no single hard and fast rule how Google (NASDAQ: GOOG), the world's most dominant search engine, organizes searches on its system. Placement determinations are made on a two hundred point system. This is not a game that an amateur, such as this writer, needs to undertake on his or her own.

As an investment, Google continues to hum right along. Its stock price has risen about 120 points, or about 20%, since late June, and its market capitalization is up to $223 billion. In its second quarter revenues grew by about 35% from the year ago quarter, in part due to its Motorola Mobility acquisition, to $12.2 billion. Income was up 11% to $2.78 billion, or $8.54 per share.  I see the company on track to earn adjusted earnings of about $43 per share this year, and its 5 year PEG is 1.

The big news in the second quarter for Google was its $12.5 billion purchase of Motorola Mobility finally closed. The purchase was primarily noteworthy due to the 17,000 in patents, and another 7,000 in patents pending, that were part of the purchase. Patents have become such a key part of the commercial environment in recent years, and Google is not the first company to pay a premium to acquire a horde of patents that might become handy one day in a litigation environment. I see this as a fundamental problem in American commerce, as the money being used to purchase patents either offensively or defensively is money that might otherwise have been used for research and development, or dividends to shareholders. Rumors abound that Google is talking with Apple (NASDAQ: AAPL) as I write this to seek a resolution of patent matters, Apple perhaps being emboldened by its recent victory resulting of a $1.05 billion judgment against Samsung (SSNLF) stemming from that company's Droid based phones.

I see Google as a unique American success story. Its shares are expensive in gross dollar term, and its recent decision to split its stock will do little to alleviate the fact that many investors can only afford a few shares at a time. But Google may yet be successful in conquering the search and app worlds, and I would not want to sit on the sidelines as that happens. I agree with Bank of America (BAC) analysts, in that Google is a buy for investors not in need of current income.

Yahoo! (NASDAQ: YHOO), once a high flyer, has seen its search engine traffic market share slacken as Google's has risen. As of this August, Yahoo!'s domestic market share had fallen to 6.2%, compared to Google's 84.3%. Globally, it is even bleaker, with Google having an 87.6% market share, and Yahoo! a mere 2.4%. Despite a highly news worthy year so far, with management shake ups and a big investment sale, Yahoo! stock has traded in a range from $14.50 to $16.50 thus far this year. The management shakeup was all for the best, for in the end Yahoo! somehow got Marissa Mayer from Google to become Yahoo!'s new CEO. Yahoo! also has agreed to sell half its stake in Alibaba for a bit over $7 billion. Yahoo! bought the overall 40% stake in Alibaba for $1 billion in 2005, meaning there will be a sizable tax bite, and the balance was originally planned to be a one-time distribution to shareholders, though some money may be reserved in order to fund new business ventures.

The future of Yahoo! is unsettled. It has long been a merger target, as evidenced by Microsoft's (MSFT) overtures a few years ago. Alibaba also has a supposed interest in acquiring Yahoo!. As an investment, Yahoo! is most suitable for speculators.

Baidu (NASDAQ: BIDU) has a 4.7% market share of the global search engine business, and is the dominant such provider in China. It is every bit as dominant a search provider in China as Google is in America, as Baidu had, as of the first quarter of this year, an 85% market share. But unlike Google, Baidu has actual competition, in the form of Qihoo (QIHU). This company has a 20% share of the Chinese browser market, and has more recently started to make its own search function the default function on those browsers. Due to the threat, analysts such as Credit Suisse (CS) have lowered their expectations for Baidu. I have liked Baidu for a long time, but it is struggling with the slowing Chinese economy. Nonetheless, it is the premier brand in Chinese computer technology, has tremendous growth possibilities, and a low 5 year PEG of 0.61. I view it as fine entry choice for those looking for Chinese investment opportunities.

While Google dominates the domestic and global search engine business, having a professional's assistance in helping to navigate that business is a necessity if one wants to use the vast potential of these search engines to drive your online business. 

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