Google (GOOGL) has ruled the world of search to such an extent that the name is often used as a verb to describe the activity of searching online. Google’s share of the U.S. desktop search market remained steady at 63.9% in October with Microsoft (MSFT) taking a distant second place with 20.8% and Yahoo (YHOO) coming in third with 12.5%, according to comScore, an Internet analytics company. The desktop numbers suggest that Google’s preeminence in search is ironclad, but actually the company faces increasing threats, particularly in the context of the mobile world.

Search Advertising Revenue

Google’s 2014 revenue underscores the critical importance of search and search advertising to the company. In 2014, Google generated $59 billion in ad revenue, the majority of which was generated by search ads. Advertising revenue represented a massive 89.5% of  company's total revenue. (For more, see: How Google's Search Engine Makes Money.)

Migration to Mobile

In May, Google confirmed what had been expected for some time: that mobile search volume would overtake that of desktop. On the Adwords official blog, the company stated:  “More Google searches take place on mobile devices than on computers in 10 countries including the US and Japan.”

As mobile usage continues to rise, the advertising dollars are expected to follow. Market research company eMarketer estimated that mobile will grow to represent 72% of the total U.S. digital ad spending by 2019.

In the area of mobile, Google search doesn't enjoy such a clear leadership position as it does on desktop. People tend to perform browser-based searches less on mobile devices and behavior is largely based around apps. Searches often take place within apps rather than on traditional search engines.

For example, a person searching for a local pizza restaurant on the desktop might go straight to Google to do a search, but when using a smartphone, that person might prefer to open an app such as Yelp (YELP) and do a search in the app instead. Paid ads often appear within the search results of apps. 

In the increasingly app-based world, Apple (AAPL) owns and controls a massive ecosystem independent of Google. In June, Apple announced that its App Store surpassed 100 billion app downloads. Search within the iTunes App store itself presents competition to Google desktop search. For example, a person planning a vacation in Spain might start by going to the iTunes App Store and downloading an app like TripAdvisor (TRIP) rather than going to Google to do a search. 

Voice Search and the Rise of Virtual Assistants

Virtual assistants and the ability to search using voice is another growing area that threatens to erode Google’s dominance. The Google Now personal assistant faces stiff competition from Apple's Siri, Microsoft's Cortana and Facebook (FB) M. As search results progress from links on a web page to answers from a digital virtual assistant, the playing field among the tech giants changes dramatically, and each has its unique strength.

Amazon and Facebook 

In 2014, Google Chairman Eric Schmidt stated: “Really, our biggest search competitor Is Amazon.” Recent data suggest that he may be correct and that Amazon (AMZN) has an increasing number of people going directly to its platform rather than making shopping-related queries on Google.

A 2012 study by Forrester Research found that 30% of shoppers go directly to Amazon to make shopping-related searches. A 2015 survey commissioned by e-commerce software startup BloomReach showed a rising trend with 44% of people surveyed going directly to Amazon when looking to buy or research a product online versus 34% using search engines. The studies suggest that Google is actually losing ground in product-related searches, which is one of the most lucrative areas of the market. (For more, see: How Amazon Competes With Google.)

On the other side of the world, the competition between the dominant search and e-commerce companies played out differently. China’s largest e-commerce company, Alibaba Group (BABA), blocks China’s largest search engine, Baidu, from indexing its pages, thereby forcing would-be shoppers to go directly to Alibaba to do searches.

Facebook, with its treasure trove of knowledge about its users, is another potential rival to Google in search. Facebook’s internal search feature receives 1.5 billion queries a day. In October, the company upgraded its internal search function by enabling users to look up old posts, of which 2 trillion have been indexed. (More more, see: Why Facebook Is The Biggest Threat To Google's Ad-Revenue Throne.)

The Bottom Line

It appears unlikely that Microsoft Bing and Yahoo Search will ever dethrone Google in desktop search. Rather, the real threat to Google is that the desktop search market itself is being disrupted, with the growing movement to the app based world of mobile.

The author does not own shares in any of the companies mentioned in the article.

 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.