Google is Trying to Do to Facebook What Facebook Did to Snap—by Aping Some of Its Features

Column DesignTech Deniz Taşkın deniz@dzgn.co
Deniz Taşkın
deniz@dzgn.co

Alphabet’s Google (GOOGL) unit has begun trying to do to Facebook (FB) what Facebook has largely done already to Snap: stifle its user growth by aping its features.

Just in the past two weeks, Google has:

– Updated its mobile app with data and features that make part of it look more like Facebook’s News Feed product. Google calls that portion of the app its “Feed.”

– Rolled out “SOS alerts,” tools that deliver emergency information to users of its Maps and Search apps facing a crisis. It comes nearly three years after Facebook introduced its “Safety” feature, which lets users check in with family and friends after a terrorist event, natural disaster or other potentially dangerous situation.

– Begun pushing notifications to users of its desktop Gmail application suggesting they try using the company’s mobile app. (See notification window below.) That marketing technique is notable because it is similar to the one Facebook used to push tens of millions of its users to try Instagram, a service which grew by 40 percent to 700 million users between June 2016 and April,2017.

Google is Trying to Do to Facebook What Facebook Did to Snap—by Aping Some of Its FeaturesThese moves suggest that even though Google has largely abandoned hopes of catching Facebook with its own social network, Google+, it still believes there is value in aping individual Facebook features. That’s not a bad idea, given how profitable and fast-growing Facebook has been.

“There’s no internet company that’s been better (than Facebook) over the last five years at delivering consistent, strong growth across its (financial) metrics,” says Scott Kessler, director of equity research with CFRA, a firm which has “buy” ratings on shares of both companies.

Google’s updates to its mobile Feed, which now includes local data on weather, events and restaurants along with articles from its media partners, are especially notable because they reveal the company’s biggest fear: That a growing portion of consumer internet activity is moving away from searching for things online to finding them via friends, family and favorite publishers on their social networks.

“The world is moving away from the notion of traditional search,” Kessler said in a phone interview with CNBC Friday.

By giving mobile app users relevant, bite-sized information even before they type a query into its search box, “Google is trying to make the search experience more dynamic,” Kessler said. “They have a lot of data and Feed helps them tie it together.”

Different price trajectories

It’s not like internet users have stopped searching for things online using Google, of course. Far from it.

Google’s number of paid clicks surged 52 percent during the second quarter from a year earlier, helping drive online ad revenue to a market-leading $22.7 billion.

“People may spend more time on Facebook, but when they want to learn something, they still go to Google” apps, Kessler says.

Yet Google’s cost per click—or what advertisers pay on average each time a user clicks on an ad served by Google —dropped 23 percent in the second quarter compared to a year ago, far more than Wall Street analysts expected.

That’s because advertisers won’t pay as much for smaller ads placed on tablets and smartphones as they will for larger ones for PCs.

Worse still, Alphabet CFO Ruth Porat said the shift to mobile means investors should get used to higher costs.
That helped send its shares down 3 percent after the report.

The average price of a Facebook ad, by sharp contrast, rose 24 percent year-over-year. Along with better-than-expected sales and profit and a reduced expense forecast, those results helped drive Facebook shares to record highs this week.

Mobile ad sales rose 53 percent year-over-year and now comprise 87 percent of Facebook’s advertising revenue.

Facebook’s core product is more suited to mobile advertising because the ads fit right into the main Facebook News Feed, in between status updates, news articles, home videos or whatever else people are sharing with one another.

So the broad shift to mobile web browsing has so far been better for Facebook’s bottom line.

Other measures of growth in each company’s second-quarter financial results show why Google might want to try to do more of what Facebook does.

Google does have a significant head start on Facebook in the market for mobile video ads, as its YouTube service now has 1.5 billion monthly users and lots of original content.

Facebook, meanwhile, is still figuring out what kinds of original video it wants to offer.

“If you could point to one area where Facebook hasn’t yet fulfilled its promise, it’s in video,” says Kessler, who otherwise calls the company the best in the internet sector at delivering “consistent, strong growth across all measures.”

In other words, not a bad company to imitate.

Image Info: Mark Zuckerberg And Larry Page Fight On Fortune’s Awesome Martial Arts Cover

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