How Mobile Is Punishing Google

Google Inc GOOGLGOOG generates most of its revenues through advertising and search advertising. For a company that is so dependent on advertising, every inch of the screen counts, and as consumers progress from larger to smaller screen devices, the advertising real estate for companies like Google will continue to shrink.

Heather Bellini, partner and managing director at Goldman Sachs, was on Bloomberg Friday to discuss how the consumer's shift to mobile is impacting Google.

Size Matters

“Mobile search is a big shift,” Bellini said. “They were dominant and grew up in the desktop age; and in the age of mobile, search economics are a little bit different. So, it does create a challenge.”

She continued, “The revenue per search that Google generates on mobile search, because the real estate on your screen is much smaller than on the desktop, is less; and so the price that advertisers are willing to pay for ads at least at this point in time is just significantly lower. We estimate about half.”

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Searching Elsewhere

Bellini was asked how mobile can cause a dent in Google's revenues when it has significantly increased the number of searches over the years. She replied, “You probably have apps on your phone, and instead of searching a restaurant on Google, like you might have in the past, maybe you go to OpenTable or you go to Yelp.

“And so those types of things mean that Google isn't necessarily getting the revenue that it was before. So, yes, there are a lot more searches, but you just have to think about where they are going.”