Will Twitter Inc (TWTR)’s Strong Growth Damage Google Inc (GOOGL)?

Twitter Inc (NYSE:TWTR)’s strong second quarter earnings report is bad news for Google Inc (NASDAQ:GOOGL). At least, this is what Ted Murphy, the CEO of IZEA, said in an interview on Fox Business. He made his case by arguing that there are two reasons as to why Google Inc (NASDAQ:GOOGL) should be afraid of social networks. The first one is that advertisers begin to move from “search” into “social”, having at last acknowledged the benefits social networks can bring. According to Mr. Murphy, “search” helps to gain more demand, but “social” can create more discovery and brand awareness.

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The second reason is that the CPM (cost per mile) continues to go down at Google Inc (NASDAQ:GOOGL)’s display advertising network, as people click less on the banner ads. This leads to advertisers seeking more ways to engage customers.

“Advertisers now are moving away into these native forms of advertising, and that’s sponsored stories, that’s sponsored tweets, and publishers are taking those display ad tags and are removing them from their sites,” Mr. Murphy said. However, this is still a small part of the market, and only in the longer term it will have an effect Google Inc (NASDAQ:GOOGL).

Twitter Inc (NYSE:TWTR) has posted second quarter results that beat the analysts’ expectations  by showing a surge of 124% in the ad revenue, and a 6% increase in the average number of users.  This was driven in part by increased user activity during the FIFA World Cup. Twitter Inc (NYSE:TWTR)’s stock rose 20% following the announcement.

Disclosure: none

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