Why Bing will lose search and Apple should by Yahoo

Today the majority of the search market is desktop but by the end of the year that might not be the case. In the US mobile ad spending grew by 120% in 2013. Desktop on the other hand only increased by 2.3%

By 2018 in the US alone search advertising spend is projected to be $32B but $26.4B will be coming from mobile. Compared to this year, mobile advertising spend will be $9B and $13B for desktop. Fast forward a couple of years, clearly the future of search advertising is mobile.

As it stands, Google currently has control of 67% of the search advertising business. Microsoft and Yahoo are distant challengers but its a on-going battle, and there is no guaranteed winner yet. And that’s because desktop still dominates, but once mobile officially dominates, unless Microsoft makes significant advancements in mobile market share, Bing will be in serious trouble. And Yahoo? Who’s Yahoo?

Google already dominates the mobile market and that strong hold is only going to become stronger as Android grows in developing markets. There isn’t a single market, anywhere in the world where Microsoft phones dominate, no where. Who will challenge Google’s 95% market share today? Short of Apple buying Yahoo (great idea)…no one.

Considering the trend of search moving almost entirely to mobile, you can see why Google’s decision to develop the Android operating system is pure genius.

One thing that we should pay a lot of attention to is Apple’s iBeacon. That could very well become a strong advertising and marketing platform. They will need to be careful in the actual implementation, after all being greeted with a personalised advertisement when you enter a store could be alarming, reminding consumers about how much data digital companies actually have on us.

The loss of Bing and Yahoo will hurt advertisers more than anything else. With Google dominating the advertising business, they will define the market price. Even if Google calls the ad platform a auction system, there is data that shows Google does have a hand in directly setting market prices, or at least influencing them strongly. For example, its rare to be able to buy clicks for .01.

As a whole search advertising is going to become bigger and more sophisticated. As we integrate location data, health data (hello Apple iWatch) and all of the other elements generated from a constantly on computer that is always following you and emitting radio singles from your pocket. The opportunities are limitless.

Just because search is done on the mobile, won’t mean its done within the browser. For example, I often search for businesses in the navigation application I use when I’m looking for directions, the app shows one other restaurant that is similar to the one I’m going to. An advertisement, of course powered by Google.

Expect search to be embedded into a lot of other applications. Take for example LINE, search could easily be embedded into LINE or WhatsApp or any other strong mobile messaging platform.

WhatsApp said they will never implement advertising, but that could have just been in relation to the messaging interface, if another interface was added, for browsing the web for example, they could fairly integrate it into that.

All and all companies that do not own dominant mobile apps, or the operating system will be crippled. The only two companies with operating systems that are growing in market share are Apple and Google.

Microsoft is going to have to give away Windows mobile, or even pay carriers to use it if they want to gain any foothold in the mobile search business. Alternatively they could have purchased a company likes WhatsApp. Perhaps that will be one of their long term strategies, to own the dominate applications, if not the operating system. Seems to be Facebook’s approach.

The trend for search advertising is clear, and it will be interesting to watch companies struggle to survive. Watch as Desktop advertising disappears along with gasoline fueled cars. We will one day tell our children about the times we lived with gasoline and desktop search. Oh, those were the days.


Originally published in my Sankei Column: http://www.sankeibiz.jp/business/news/140317/bsj1403172242004-n1.htm