Google/Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) announced a number of new features at its annual Developer Day. The big focus this year was to promote traffic to its app stores, encourage download and potentially move into game/interactive media. One area worth highlighting is the "Search Trial Run Ads" that allow users to try a mobile game inside the search results before downloading it via Google Play. Given the importance of game promotion for the developers, this feature is a good monetization platform for GOOG to squeeze additional ad dollars from the developers. Additionally, the newly rolled out video recording API could potentially magnify the market for mobile game streaming. Worth noting is that the recent trend in video game competition, widely known as eSports, has been centered around PC and console games, but mobile games such as Clash of Clans and World of Tank Blitz have been gaining some traction. Overall, I believe these two new features could drive GOOG app store advertising and mobile video advertising, and are supportive of GOOG's ad revenue model. That said, I remain bullish on GOOG given its 1) stable core business growth outlook and 2) plenty of call options in the Other Bets projects involving payments, broadband/wireless and driverless cars.
For "Search Trail Run Ads", GOOG's latest search page modification allows users to try the game before downloading it via GOOG Play. Game developers that wish to promote their games on the search page will have to pay GOOG for this privilege. Compare to the typical freemium model where GOOG monetizes via advertising, this model could potentially allow GOOG to generate revenue from 1) ad sales on the search page and 2) game sales on GOOG Play (typically 30% of the retail price). The feature will be available in the coming weeks.
Developers also benefit from this feature given that GOOG effectively transformed the search page into a user acquisition platform that allows the developers to attract users beyond the traditional app store model. Additionally, search page trials allow potential users to become comfortable with a particular title, which could result in higher chance of download than through app-store discovery.
Another revenue channel at GOOG's disposal involves mobile game streaming with the recently rolled out video API. Mobile video and particularly mobile game streaming has been an area dominated by Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN). I believe that the entry into mobile game streaming is a way for GOOG to address its weakness and position itself favorably amid the growth in eSports.
eSports has largely been centered on PC and console games such as Leagues of Legends and Call of Duty but mobile games are gradually gaining traction as a form of competitive gaming. Worth noting that both the Clash of Clans and World of Tanks Blitz have become some of the most popular mobile eSports titles on the market given their competitive elements (i.e. strategic planning, focus, and multiplayer battle mode). Judging by the popularity of video game streaming site Twitch, GOOG could leverage its YouTube Gaming and mobile game streaming to draw incremental viewership and ad dollar that will ultimately be supportive of its ad revenue model.
Conclusion, GOOG's recent updates on search page and video API are two positive developments that give me comfort in the growth of the core business and allow me to remain bullish on the stock.
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