Is Google Losing Its Search Influence? (Is this a sign of lower stock price and increased loss of market share?)

With all the talk of Facebook becoming the next big search engine (in the US), and Google being run out of China, leaving the ever-expanding Chinese market open to Baidu, it makes you wonder if Google has peaked?

For those that don't know what I do when I'm not writing about music or art, I'm an analyst (and currently a graduate student, too!) One company I analyzed 6 years ago was Google and how exactly it managed to takeover the search industry and dominate the market, from a "come from behind" position against the current dominant engines of the time. (For those that don't realize, doing such a thing in the Internet space is rare, usually the first into a new space becomes dominant and stays dominant -- unless they 'let' the competition run them over. ala Netscape versus Internet Explorer)

I've recently been looking at Google again, especially with their new Instant Search. Instant Search doesn't impress me, and unlike other folks analyzing it, I think it shows a Google feeling very vulnerable right now. Instant Search obviously has other reasons for being, one of which may be to promote Google in the mobile market, another might be the usual Google 'presentation' to make users think it is being somehow more innovative and unlike any other search company out there. (Actually, as you can tell from my writing, I found this 'presentation' to the public to be counter to the actual available facts.)

Recently, Google pretty much lost its confrontation with China...and I say it really didn't have a chance in the first place. Foreign American/European companies in Asia face issues they don't in America or Europe (or not as much). Now that vacuum will be filled (most likely) by Baidu or another Chinese-based search engine -- and with the majority of Chinese fully supporting the change as a point in national pride.

It's also important to note that in Japan, Google is not king, though it manages to be the secret advisor to the king. In 2008, it was Yahoo on top with Google second (http://www.comscore.com/Press_Events/Press_Releases/2008/11/Japan_Search_Engine_Rankings)
and this hasn't changed in 2010, though Yahoo Japan has agreed to use the Google engine instead of the Bing engine, when offered a very, very sweet deal by Google in order to freeze Bing out. As Japan is ranked 3rd in search market size (after the US and China), this is significant. But since there are several Japanese search engines out there, from Rakuten to Goo, one has to wonder if Yahoo-Google days are numbered in Japan as well. And it also shows (potentially) a fear of Bing.

Add to that, that Google is just a blip in South Korea with Naver the dominant engine, and Russia? forget it. Google does still dominate in Western Europe. Apparently there isn't really a homegrown European search engine that can satisfy that region.

Perhaps it is business as usual, but Google's influence does not seem to be as dominate (and as automatic) as it used to be. In fact, while Google still has 65% market share of the US market, its global market share of the search arena has dropped, losing ground to Yahoo, Bing and Ask. Much of this is because of the China loss, where Baidu gained as a result, but Bing has been on a hotstreak of growth this year, something which neither Google nor Yahoo can easily claim.

Here's a map showing Google across the globe:
http://www.labnol.org/internet/google-market-share/13939/

This is actually quite serious, because unlike Microsoft (Bing), Google is heavily reliant on search money (advertisers). Google also still dominates in Enterprise level search, a subarea of search, but again, Yahoo and Bing are narrowing the gap. If Google continues to lose ground, even if it is a slow decline, you can expect the stock to peak*** and begin to slide as well, signalling that Google as a growth company is done. However, it does present great opportunities for local national seach engines to reassert their dominance in their home markets (just like Baidu did), and for new search engines (companies, or divisions of a bigger company) to take over some of Google's traditional territory or reclaim some of their own.

Anyway, thought I'd share this, especially as good search is invaluable to little companies or bands or singers or artists...so what these big players do does affect you as well. Google's new Instant Search may make it harder for the little players to get noticed, while making it easier for the big names to continue to dominate. But again, if the competitors to Google realize this, then they may turn out to be a better bet for the little guy now.

You can read more about what I do in my 'real life' here: (sort of an info site, for 'quick' summaries of some outstanding strategic/policy issues...select the Policy Analysis button. If you want to punish yourself by looking at a lot of stats -- an example of ad placement evaluation -- then click Web Analytics.)

CG's Strategy Portfolio Info Site:
http://students.washington.edu/cganders/StrategyPortfolio/

My take: Google is still dominate in the US and Western Europe, but if Yahoo and Bing are smart, especially Bing, this gap will continue to narrow. Google is either not dominant or else vulnerable elsewhere, especially Asia, and may completely lose traction in that area as local search engines assert themselves. Google has relied on how it is 'perceived' by users (and advertisers alike), but that doesn't mean longterm loyalty. So if this perception is revealed as just smoke and mirrors, and/or Google is no longer 'cool', then the slide effects could be exponential. So far, this hasn't happened, but Google is no longer an up-and-coming startup. It is a mature company now and is seeing more and more criticism of its policies, its abusive interview style and arrogance (which by reports was worse than Microsoft's in its day), its acquisitions and other things. Some of these are mainly just allegations, and some, while true, may be intermittant and not reflective of the company or the people as a whole, but all of it affects Google's 'perception' by the public and therefore its popularity with users.

And in the search market, popularity and perception matter.

Additional Note: I should add that a company (or any entity) that feels threatened, especially when it has become accustomed to a place of dominance, is very likely to become more aggressive in order to protect that status. So Google's deal with Yahoo Japan may be one example of an increased need to protect its position, and there will likely be more such bold, aggressive moves -- which for companies doing business with Google means that it may be more willing to negotiate better deals for you than it has in the past, or buyout takeovers could be more lucrative for the acquired company as Google may feel more desperate to stay ahead of the competition. However, this may lead to lower revenues for Google itself, which would negatively affect its stock price and its perception in the financial markets.

***update: my mistake in wording, I rechecked Google's stock history. The stock has already peaked once and has lost almost a third of its value in the last few years. This is expected because of the recession. What I mean to address, is post-recession, when companies should be on the rise again, Google's perception in the market, if perceived as weakening, will lead to a more permanent slide that it may not be able to recover from -- rather like many dot coms post the dot com bust.