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|The Future of Search - The decline of Google?|
|Written by David Viney|
|Thursday, 01 November 2007|
An incredible 256 million people visited a search engine in December 2006 – 81% of the global Internet population. Neilsen, Hitwise and Enquisite estimate Google’s underlying market share to be in the range of 77-80%. During 2006, Google became the second biggest advertiser in the UK (overtaking channel 4) and UK online sales grew by 50%. Could this represent a peak of Google's powers? This article explores the likely scenarios.
Google at their Zenith in 2007?
As Jimi Hendrix once sang “even castles, made of sand, fall in the sea....eventually”. Three key global trends are working against Google maintaining this astonishing 80% share and phenomenal profit growth:
The second point warrants closer investigation. Google are strong in the western world and most so-called advanced economies but do not enjoy strong positions in every developing nation (whether in Asia or elsewhere): Whilst performing well in India (with a 75% market share), Google have a market share of only 27% in China. Baidu dominate the Chinese market with 55% and are pulling ahead.
If more than 50% of all new internet users over the next three years are from China (as seems likely) Google’s global market share will fall simply through the law of averages. According to ComScore, 9% of the 635m worldwide searching online each month (in early 2007) already visit Baidu and this penetration could more than double over the next three years. Baidu have opened in Japan and have plans to challenge Google in Europe. Google are similarly challenged elsewhere in Asia (with a market share of less than 2% in already mature Korea, for example).
In Russia, also one of the world’s fastest growing economies – and the most heavily populated country in Europe – Yandex dominates with a market share of more than 55% with Google third (on most measures) to number two player, Rambler. Google also struggles in other former Eastern block countries, including the Czech Republic.
It is difficult to speculate on what might happen to Google’s global market share over the medium to long term (as it depends on all sorts of factors, including their ability to penetrate the developing world), but the following table provides an insight into the scale of the opportunity (or risk):
You may have realized (from the above) the sheer weight of numbers in China and India in particular. North America currently comprises 20.4% of all world internet users, whilst only having a 5.1% share of the world’s population. If (a) internet penetration levels in the developing world continue to rise at current growth rates and (b) Google are unable to substantially grow their local language share of the market, one could speculate that their overall (world) market share could fall to less than half current levels within eight years, with Baidu eventually overtaking Google as the world number one.
In February 2006, Google’s CFO, George Reyes, gave a veiled warning that the Internet search giant would need to find new income sources in order to sustain its profitability growth. I have to agree with him. For the time being Google is near the peak of its powers – having redefined the market in which it operates. Google is to search what Hoover once was to vacuum cleaners. However, it would be wise to keep an eye on the emerging competitors to Google and the huge growth of India and China.
|Last Updated ( Saturday, 05 April 2008 )|
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