Google (GOOG) has a good nose for revenue opportunity, and it is not sitting around. It sees something Facebook (FB) has that it wants. Both companies make most of their revenue from selling ads, but Facebook can tie online activity its members have to real names while it also collects who their friends are.
This is what Google wants, and it is in the process of obtaining the same info through the integration of Google + with its other properties. It is hoping to be able to target people more relevant to its ads and increase profitability. Here is how it works:
People create an account with Gmail. YouTube, or other Goggle services are also setting up a public Google+ page that anyone online can view. This sets up the company to attract more online viewers because Google+ will have people sign in to their Google accounts, and this lets the company gather more vital information of an individual's search habits and the websites they may visit.
All this information Google collects is attractive to marketers that buy ads. Since the company started this practice, "click through rates" for many of Google's client's ads have increased. The average click through has gone up between (2-15%) according to one Marketing company. The integration by Goggle also helped increase Goggle+ usage. In November, 235 million people used Google+ features across Google sites and this is up from 150 million last summer. This is what Google wants because it lifts traffic and thus ad revenue (95% of its revenue comes from ads).
It has a long way to go before it catches Facebook though. Google+ has not caught on like Facebook. Research firm comScore Inc. a year ago estimated that Google+ users spent an average of three minutes on the site each month, versus more than 400 minutes for the average Facebook user. In the U.S., Google+ had nearly 28.7 million unique visitors through PCs in October-well below Facebook's 149 million, ComScore says. But Google keeps coming after Facebook and will continue to battle the company for ad revenue.
This is Google in the future, in the short term, the company may not fare so well as it has increased its investment in market penetration.
Oppenheimer Lowers Google's Short Term Price Target
Oppenheimer Holdings reiterated its Perform rating on Google, but lowered its price target from $760.00 to $715.00. What was its thinking behind this? Google has a great profit margin of 83% and as the company reinvests to drive higher penetration for its Android tablet, it will see margins dilute because of it. Traffic acquisition costs will be higher and marketing expenses are also expected to be higher the first quarter of 2013. For this reason, Oppenheimer decreased its EPS estimates on Google for the fourth quarter.
I definitely could see a change in direction coming when the RSI screamed with an overbought position through the end of September into October. The stock has since dipped, and has moved up and pushed above the 50 day MA. This is significant. If it stopped at the 50 day MA, we could have used it as resistance, but it went right on through. Even the MACD has pushed up through the '0' line. Even though the stock still looks like it is headed in a longer term bearish trend, I would reserve my conclusions until I see if it pushes through the present resistance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.