Google: Will it be vulnerable in mobile search?

Google: Will it be vulnerable in mobile search?

Summary: Google has leveraged its desktop dominance to the mobile realm. However, Bernstein analyst Carlos Kirjner makes a case that Google may be a bit vulnerable in the future.

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Google dominates mobile search courtesy of its Android operating system and deals with Apple on iOS, but its position could become tenuous as the value stack in smartphones shifts.

That's the gist of a research note from Bernstein analyst Carlos Kirjner. Today, it's clear that Google dominates mobile search.  Kirjner outlines the mobile Internet stack and where Google fits.

In other words, Google has leveraged its desktop dominance to the mobile realm. However,  Kirjner makes a case that Google may be a bit vulnerable. Why?

Google correctly saw that the iPhone could have been a monopoly and created Android. That move ensured that Google would control its mobile search fate. However, the worries for Google could occur in that device layer in the chart above. Should Apple and Samsung dominate the smartphone industry---not a stretch---both could charge Google more to be the default search.

Kirjner explains:

In the longer term, assuming that search and discovery remains important in the mobile Web, Google's margins from mobile search will be dictated less by competition with Microsoft and other potential search providers, and more by the industry structure in the other layers.

And while we believe Google now is not under tremendous pressure, competition in other layers is fragile and could play out in ways that are detrimental to Google's interests.

For instance,  Kirjner says that the carrier layer of the mobile stack may become smaller. Can Sprint and T-Mobile really compete with AT&T and Verizon?

The device market gets even trickier.  Kirjner  says:

In the device market, Apple is capturing a large and increasing portion of the value pool, which raises question about the long-term competitiveness of the Android ecosystem. Looking at the revenue and value shares captured in the device layer, it seems to us that the outcome where Apple and Samsung end up controlling, on a sustained basis, the near-totality of the smart phone market is not out-of-the question. In this scenario, Samsung, whose entry and current success in the smartphone segment was very much dependent on Google's Android, could turn around to Google and ask: "Who depends on whom now?

Note: The Bernstein analyst that penned this research note was Carlos Kirjner not Craig Moffett. The post has been corrected throughout.

Topics: Google, Browser, Mobility, Smartphones, Wi-Fi

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5 comments
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  • Windows Phone!

    Windows Phone will make a huge impact in this layered theory,, in time.
    rodneyej
  • RE: Google: Will it be vulnerable in mobile search?

    Apple can flip the switch to bing and google will be in trouble. bing results are better than google in many areas. Once average joes' understand that there are other players in search, google is dead
    owlnet
  • RE: Google: Will it be vulnerable in mobile search?

    Switch off of Google search, I don't buy your device
    kingcobra23
  • No mention of Siri?

    I was surprised and pleased to get through the write-up without hearing about Siri. The analysis is correct in that the threat to Google comes from the other parts of the value stack. But the stack also should include the input interface. Meaning that if Siri is how you interact with search, it could very easily display search results from a source other than Google. At mTrax (http://mtrax.com), we're focused on yet another layer, what happens after you search and call. At that point, session cookies break, and new types of analysis will help drive how marketers spend their money.
    DevBhatia
  • Yes and google is panicked by it already, and google investors need to know

    As WP share grows, google search shared shrinks. As W8 tablet share grows google search share shrinks. As iphone/ipad search moves to siri, google search share shrinks. As W8/ipad tablets grow, FireFox is out and google search share shrinks. As desktop/mobile search moves to facebook/twitter streams, google share shrinks. As people wake up to google search doing nothing but copying Bing for the last 12 months, google search share shrinks. There's a reason google is shutting down projects all over the place and circling the wagons. They have no proven ability to control their own destiny.
    Johnny Vegas