Caris & Company analyst Tim Boyd addresses clients on Google's July domestic query search data. His note follows:
1. Despite suffering from several methodological shortcomings, the qSearch data has proven to be a solid indicator of market share. Hence, we view the headline results as a potential negative for Google and a potential positive for Yahoo!, MSN, Time Warner and Ask.com, all of whom appear to have gained a fractional amount of share at Google’s expense.
2. Domestic query-share losses are not a new phenomenon for Google: in July 2005, Google’s U.S. share dropped 30 bps M/M. In our view, this is indicative of a particular seasonal weakness for Google in the month of July. All search engines tend to exhibit unique seasonal patterns due to varying degrees of strength in a wide array of search verticals – in our view this tempers the negative implications for Google.
3. In August 2005, Google reversed the share losses it saw in the prior month. The August 2006 data will, therefore, be of importance in determining whether Google’s market share has indeed peaked or whether this has simply been a one month hiccup like last year.
4. Amongst the top five search engines, Google continues to be the only one outgrowing the overall search industry on a Y/Y basis.
At the margin, we view the new data as neutral to modestly negative for Google and maintain our 1*/Buy rating on GOOG shares.
GOOG 1-yr chart: