A new report reveals that Google could be walking off with $5 billion in revenue from Google Search on tablets this year, which is an impressive number considering that in 2012 Google generated $40 billion in ad revenue, $8 billion of which coming from mobile devices (although the number includes ads alongside Google Play Store revenue).
The report, originating from Marin Software, “one of the top firms that helps advertisers to buy web-search ads” according to the Wall Street Journal, is based on data coming from various clients including Macy’s, Gap and the University of Pheonix. Combined, these companies that spend a total of $4 billion on search ads per year.
Tablet wars: Google ads win
While Google will not confirm such estimates at this time, it’s more than clear why the company wasn’t going to throw in the towel in the tablet wars, largely won by the iPad, when Amazon came knocking with a entry-level device in late 2011.
The Search giant is in a great position when it comes to controlling a large portion of the smartphone share, but in the tablet business it is yet to acquire a similar position, at least when it comes to overall share. The iPad is still king of the hill, enjoying most of the profits in the niche, even though its overall share has been shrinking in the last quarters.
But Google was able to counter the negative effect of the Kindle Fire, a device stripped of all Google services at launch, Search included, by relatively quickly releasing its own budget-friendly Nexus 7 tablet, followed by the Nexus 10 model, a device meant to compete directly against the iPad.
The move, while it certainly must have hurt the bottom line of certain Android tablet makers, convinced most of them to come out with budget-friendly offers of their own, all running an Android version under Google’s control, unlike Amazon’s forked version that equips the Kindle Fire.
Even so, existing reports do suggests that Amazon’s Kindle Fires are still very popular, with one in three Android tablets in the U.S. being made by Amazon. But at the same time, there are certainly more affordable Android tablets out there right now than in the previous year, which could explain why Google is more interested in taking tablet-ready mobile ads more seriously.
Sure, at the end of the day we don’t know how many Nexus 7 and Nexus 10 units have been sold to date, and we don’t have sales numbers for a variety of other Android tablets out there either, but recent estimates suggested that the total number of Android devices is on the rise, meaning that more Google Search users will see ads on tablets than before.
At the same time, Google is reportedly paying Apple $1 billion a year for being the default search engine on iOS devices, although that figure is yet to be confirmed by the Mountain View giant. In fact, more and more research notes keep telling us that iOS users are more active using their browsers than Android users, which means they may be more likely to click on mobile ads in the process. And Apple keeps selling more iPads each quarter than during the same time in the previous year, which means that, again, more Google Search users could turn to a tablet for their daily searches.
Considering the current tablet landscape, it’s worth pointing out that, at least for the time being, as long as Android and iPad dominate the tablet business, in whatever order, Google is ready to make lots of ad-based money.
Google mobile ads now cost more
In addition to actively helping OEMs increase the number of budget-friendly Android tablets being sold to customers in a variety of markets, Google has also taken steps to ensure that AdWords advertisers are ready to pay more for ads displayed on tablets.
The change, announced a few days ago, marks the first time Google is moving in this direction, clearly suggesting that tablet ads are becoming as important as regular online advertisements that usually target regular PC users.
At the same time, Google is leveraging its knowledge about you in its new “enhanced” AdWords campaigns. Because many people allow Google to track various things about them, the Search giant can offer better results to advertisers tracking a certain type of customer, especially one that’s on the move a lot and does most of his or her searching using a smartphone or tablet:
Why enhanced campaigns?
[…] For example, as devices converge, consumer behaviors on tablets and desktops are becoming very similar.
This creates great opportunities for businesses, but can also make marketing more complex and time-consuming. For example, a pizza restaurant probably wants to show one ad to someone searching for “pizza” at 1pm on their PC at work (perhaps a link to an online order form or menu), and a different ad to someone searching for “pizza” at 8pm on a smartphone a half-mile from the restaurant (perhaps a click-to-call phone number and restaurant locator). Signals like location, time of day, and the capabilities of the device people are using have become increasingly important in showing them the right ad.
Android and Google Now
What better way to actually put to work all that Google knows about you than by further optimizing mobile search on smartphones and tablets? That's exactly what Google has been doing since the introduction of Jelly Bean back in mid 2012, with Google Now being a brand new mobile search component ready to customized results to Android users.
Continuously tweaked to offer a better experience, Google Now could also help Google drive further mobile ad-based revenue in the future, although for that to happen Jelly Bean has to be made available to more Android users. Not to mention that Google has to find an unobtrusive way of monetizing the feature.
Will Google be able to enjoy increasing profits from mobile ads in the coming years, as more smartphones and tablets are deployed?
Google’s main competitor is Microsoft’s Bing, which is yet to put a dent in Google’s Search business, and considering that Microsoft is having a tough time fighting for market share in the smartphone and tablet businesses, it will be a while until it can really threaten Google’s ad revenues.
Apple is not likely to create its own search operation just so it can remove Google Search out of its iPhones and iPads like it did with other Google services, but stranger things have happened.
Furthermore, Facebook has made its intentions clear when it comes to search, and could further grow its social-based search business in the coming years. With over 1 billion users, close to half of them active on mobile devices, it’s no wonder Facebook is turning its attention to search. But that’s a work in progress and its Graph Search is not an AdWords rival.
Amazon is also a company that’s been rumored to work on its own online advertising system and one that could be quite good at selling targeted ads considering the amount of data it has on users. But we have no idea at this time when Amazon will kick off an online AdWords/AdSense-like business.
With all that in mind, we wouldn’t be surprised to see Google cash in on tablet searches this year, and in the years to come. While it will probably not reveal tablet-related ad numbers, so we won’t be able to see whether this $5 billion estimate is accurate, the company will certainly present mobile numbers in its quarterly reports, which we’ll follow closely in the coming months.
Are you buying a tablet this year?