Google’s Mobile Challenge

Google’s master plan has always been clear: Get more people using the Internet, and sell more ads alongside their searches. As I’ve written, that adds up to $6.30 per Internet user per year.

Unfortunately, that plan has hit a snag, as the Guardian’s Charles Arthur uncovers. As the desktop dwindles and mobile devices surge, “new users and new platforms on which Google is available aren’t as valuable as the old ones.”

Put more bluntly, “Mobile search is a real problem for Google: people don’t do it nearly as much as … it would like.”

Don’t Drink Don’t Search: What Do You Do?

To arrive at this conclusion, Arthur digs through Google’s public numbers. As he notes, there are 1.8 billion smartphones in use outside China (Google doesn’t have a straightforward presence in China, though it’s working to fix that), and 50 billion mobile searches per month. 

The resulting math is simple, even for an English major like me: 0.925 mobile searches per day per device. And you don’t need my writing background to pen the sorry conclusion: anemic mobile search revenue for Google. 

Yes, Arthur details, this same basic math applies to the desktop, too. But given that many desktops are not in regular use, the actual number of searches per user per day is greater than one. And, more importantly, the spread of non-searchers to power searchers is very different: “although the proportion doing more than seven searches per day is about the same (5% or so), [in mobile] you have a far greater number who don’t ever get beyond zero.”

As he concludes: 

“So there is the problem for Google: the PC base is static or even falling, while the number of people holding smartphones is growing. But the latter group tends not to use search, and so doesn’t see its most profitable ads.”

What do they do?

It’s An App-Eat-Search World

The answer, in a word, is “apps.”

We already know that 90% of our smartphone use is consumed by apps, not the mobile Web. Of course, some of that app time is actually Web time, as we read articles and watch videos through apps like Facebook and Twitter. But still, most people don’t spend much of their time browsing the mobile Web. 

This could be a big problem for Google.

For Apple, however, it’s fantastic, as Arthur details: “[I]t turns out that search wasn’t actually the gatekeeper to mobile; having a well-stocked app store is. That’s where the searching really happens.”

Apple generated over $20 billion in app revenues in 2015, keeping more than $6 billion for itself. While that doesn’t add up to Google’s $12 billion-plus in mobile search revenue (it was $11.8 billion in 2014), Apple’s App Store revenue has been growing at a 50% clip, with no end to the growth in sight. Plus Google reportedly paid Apple $1 billion last year just to remain the default search engine on the iPhone.

Google has reorganized as Alphabet to simultaneously let Google focus on its core advertising business while the rest of the company figures out different ways to make money. It comes not a moment too soon. As the company must know better than anyone, mobile changes everything, including how often we search.

Photo of Google CEO Sundar Pichai by Owen Thomas for ReadWrite

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