Google Search – Strength & Sustainability of Operating & Financial Performance – 29 September 2020

Could you describe Alphabet’s Google’s Search business and its positioning?

What would you say are the business’ primary search offerings? How have the key products and areas of focus evolved? You discussed the pivot to Google Ads from AdWords and highlighted products around commerce, paid listings and travel. I know Gmail, Google Maps and Google Play are to some extent rolled up into this.

How do customers purchase the advertising? What are the most important ways to think about this? You referenced how practitioners up to the largest companies globally purchase the ads in somewhat similar ways. Is there one menu that allows budget allocation across solutions? Is it more fragmented than that? I know it used to be possible to choose mobile vs desktop.

Could you estimate the percentage of the “Google Search & other” segment revenues that are accounted for by Google Search itself vs other ad services such as display and video?

Could you describe how Google has adjusted to an increasingly mobile world? As it became obvious that the shift to mobile would have a long-standing impact, I doubted that consumers would click on search-related ads on small mobile device screens as much as they would on their computers. You mentioned that 50% or more of Google’s searches were being driven by mobile five years ago, so how do you think the business has managed the transition?

How would you say mobile pricing has progressed, given the significant concerns around how the pricing would shake out five years ago? Initially, I thought pricing would be challenged by smaller screens and interface issues, and I believe the desktop product was priced at a premium vs new and emerging products, but you discussed parity of consumption and distribution occurring regardless of platform. Is there any separate pricing on the back end between desktop and mobile? What other elements can be added to mobile to identify certain user types? Are those a major factor?

How do you think Google’s percentage of mobile searches has changed since reaching 50% in 2015? Has mobile reached peak percentage yet?

How would you say Google approaches innovation and algorithm changes to Google Search? The business seems to provide an update every couple of quarters explaining the impact of changes on operational and financial performance, as well as outlining expectations for the current and forthcoming quarters. The company, Alphabet, added more people to Google Search in 2019 than any other area apart from Google Cloud, which suggests continuing investment and innovation. Nevertheless, the big algorithm changes are spread out so as not to overwhelm key stakeholders.

You mentioned that Google achieves 15% net new searches per year. Yet, Google Search’s growth is decelerating, perhaps due to the rise of vertical solutions from players such as Amazon and LinkedIn and voice search tools, where Google lacks category leadership. What are your thoughts on Google’s number of searches amid these headwinds, particularly on searches conducted using Google in a traditional way? How could Google be impacted?

What do you think has driven Google Search’s double-digit revenue growth over the years? Many have been surprised by its sustainability – in an increasingly mobile world, I would expect users to increase their direct searches on the vertical solutions we discussed. Has more and more people coming online driven up search volumes overall? What about the impact of voice? How could the business continue to sustain this growth, given you expect it won’t slow very much any time soon?

How interested do you think Google is in further pursuing its in-house vertical solutions around travel, insurance, etc? There’s been a fair amount of activity in local services over the last couple of years, such as plumbers, electricians and pest control, and I know the business has dabbled in real estate. Do you think these areas or others could be ripe for further innovation and investment from the business?

How important would you say Alphabet’s distribution relationship with Apple is to Google Search? I believe the company pays USD 7-8bn annually to make Google Search the default search engine on Safari. Could Apple go elsewhere for the functionality? Could it buy a small search provider and build out its own capabilities? Are there reasons beyond economics that might motivate Apple to do this?

What would you say is the most pressing issue around legal and regulatory scrutiny of Google Search, given the heightened attention from governments over the past few months and years?

Google unified control of its search engine and advertising businesses under Prabhakar Raghavan a few months ago. What do you think this move means for the business given his reputation in search-related research?