There has been a lot of debate as to whether Google Inc (NASDAQ:GOOG)’s share price will continue trending upward moving forward. Pundits have clearly been divided over the issue, with some of them arguing for the idea and some of them arguing against it. The latter contend that Google will ultimately go the Apple Inc. (NASDAQ:AAPL) way, up then down. At first, I was inclined to believe that the argument against Google’s continued upward trajectory held weight. Nonetheless, a further probe has led me in the opposite direction; the only way that Google could go is up.
In order to put this argument into perspective, it is important to take a look at Google Inc (NASDAQ:GOOG) a year ago. At the onset of 2012, its stock was trading at around $600. As of this writing however, it is trading at around $800, a 30 percent year over year gain. The fact that the stock has gained so much in just over a year suggests that something was holding investors back in 2012 and 2011. After taking a skewed look at the industry at large, I came to the conclusion that investors were not sure about mobile monetization in 2012 and 2011.
Google’s share price gain coincides with notable improvement in mobile monetization. Figures from the tech titan’s recent earnings report show that its annual mobile run-rate increased to $8 billion in Q3 fiscal 2012 from $2.5 billion a year earlier. This increase not only signals a 220 percent gain but it also tells a story of a company that is pushing beyond its limits as far as mobile monetization is concerned.
Android market share a good sign for future mobile monetization efforts
In as much as Google Inc (NASDAQ:GOOG) has gained with regard to mobile monetization, I am disposed to believe that it can do a lot to improve. In fact, this seemingly huge gain in mobile monetization may be the onset of a lasting trend.
Why do I say this? All along, Google has used Android to latch onto the mobile revolution. Unlike its core competitor Apple Inc. (NASDAQ:AAPL), which primarily depends on actual device sales, Google depends on sales from different handset makers- from HTC to Samsung, the list is populous.
This approach has allowed its Android platform to secure a bigger market share in the global market relative to Apple’s iOS.
The chart below offers deeper insight
As shown in the chart, Android has gained notably over the past year relative to its competitors, particularly Apple’s iOS.
According to recently released statistics from Kantar Research, Apple Inc. (NASDAQ:AAPL)’s market share in the U.S has also been swayed Android’s way. The report says that Android went ahead to seal the gap and go ahead of iOS during the three month period between November and January.
Android constituted 49.9 percent of aggregate U.S smartphone sales, compared with the iOS’s lower 45.9 percent.
With the commendable market share that Android has in the global market and in the mature U.S market, I believe that Google is well positioned to monetize mobile.
Over the past several months, the huge discussion as far as smartphones and tablets are concerned has been emerging markets. Many tech heavyweights, including Intel, have ventured into this market. Nokia Corporation (ADR) (NYSE:NOK) specifically, has been upbeat about this market. In fact, Nokia CEO, Stephen Elop, made mention of emerging markets in a recent address. His mention, despite being purposely distant, exclaimed the company’s efforts in the market. Indeed, the Nokia Corporation (ADR) (NYSE:NOK) Asha line has managed to gain formidable share in emerging markets like Asia, Africa and Latin America.
With Android however, Google has a better chance of steering through this potent market better than its peers. Why? Google Inc (NASDAQ:GOOG) is nothing like Apple. Issues like cool brand perception have no place at the Google round table meeting. For Google’s board, sales volumes and market share take priority. That is why Google’s Android powers most budget smartphones under the $150 price mark.
Even if Apple Inc. (NASDAQ:AAPL), were to introduce a low cost ’ iPhone mini’, as hashed out by many analysts, it would not have the muscle to compete with all the low cost Android-driven smartphones in emerging markets.
Tyranny of numbers
In conclusion, I believe that the potential that Google has in the lower segment of the market is outstanding. This potential, coupled with big numbers in the wide market, transforms Google into a redoubtable force. Also the fact that mobile monetization has gained momentum suggests that these large numbers could translate into huge returns for Google.
Google’s case overtly demonstrates the power in numbers, or as I would put it; the tyranny of numbers. Its large footprint in the global market suggests that the only way the stock could go is up. I would recommend establishing a long position in the stock.
The article The Only Way That Google Could Go Is Up originally appeared on Fool.com and is written by Lennox Yieke.
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