Groupon and its ilk convey Google AdSense increase instances
Best known for its search advertising business, Google is also looking to grow its display advertising business. Google has hundreds of partnerships with other websites and its affiliate advertising product is known as “AdSense”. AdSense is an agreement under which Google provides advertising services to its partners and then shares the revenue with them.
Google competes with Yahoo, Microsoft, AOL and Facebook in both the search advertising and display advertising markets.
One catalyst for the display ad business is the social buying phenomenon at companies like Groupon that buy ads through AdSense. We estimate that AdSense is roughly 5% of our estimated $ 603 price for Google stock. Our price is close to the market price.
Social buying phenomenon on the rise
Social buying is one of the hottest online trends these days with people sharing great deals in a group. Groupon, along with LivingSocial, are the leading companies catching up on this trend. Groupon works with companies to offer consumers incredible savings on products and services. Social deals create a win-win situation for consumers and businesses. Consumers benefit from heavily discounted offers, while companies benefit from more targeted and cheaper advertising while increasing their customer base at the same time.
The barriers to entry into this market are low, however, and players like Google, Yahoo, AOL and Facebook have embraced the growing phenomenon of social buying – Google ‘Offers’ and Facebook ‘Deals’ are such examples. We addressed this phenomenon and the increased competition between these players in our previous announcement entitled “Yahoo Enter the Local Marketing Arena”.
How is Google benefiting from Groupon?
We believe Groupon’s ad spend on AdSense is substantial. This can be seen from the fact that Groupon’s competitor LivingSocial spent 2.4 million US dollars on AdSense in June 2010 alone. [] In addition, LivingSocial has a much smaller reach than Groupon as it is present in far fewer countries and cities than Groupon. In addition, Groupon’s attractive business model means that its ads achieve higher user click-through rates, as many users tend to click on the discounted offers. Hence, Groupon’s ads create higher monetization opportunities for the Google AdSense program.
We estimate that AdSense program revenue per page view could increase from about $ 1.70 per 1,000 page views in 2010 to about $ 2.20 by the end of the Trefis forecast period. However, while Groupon’s ad spend on AdSense appears substantial, the benefits to Google stock are limited as AdSense adds little to Google’s stock value.
Check out our full analysis and $ 603 price estimate for Google
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