How Mobile Apps Threaten Search for Google, Yahoo, Microsoft

By Clint Boulton  |  Posted 2010-01-02

News Analysis: There are several opportunities to make money from pairing ads with search engines on smartphones and other mobile computing gadgets, but applications that take users directly to e-commerce sites and other Web service destinations threaten search providers, according to BroadPoint AmTech.

Mobile Web search and queries are on the rise and will continue to soar once consumers begin to leverage more location-based mobile services such as Foursquare and Gowalla. It's no wonder Google swore its allegiance for the space by bidding $750 million for mobile ad maker AdMob.

BroadPoint AmTech said 10 percent to 30 percent of the mobile searches consumers trigger for, eBay and the like go through the Google, Yahoo or Bing search box on their iPhones, Google Android devices and other smartphones. Ads served with these navigational queries cultivate decent click-through rates.

But many vendors are making it even easier for consumers to visit their sites and make purchases. For example, Amazon, eBay and other e-commerce players have mobile apps that mirror the way users can access their sites from desktop computers.

Consumers who download these mobile apps right to their smartphone deck can go straight to the source Website and buy what they need without opening a browser, entering queries in a search box, said BroadPoint AmTech analyst Ben Schachter.

Moreover, it isn't just the big companies that are creating mobile apps to drive e-commerce to their Websites.

For example, instead of using Google, Yahoo or Bing to search for movie times and buy tickets online, users can download the Fandango mobile app and buy tickets. Google, Yahoo and Bing lose out because if users don't navigate to their search box, the search engines can't serve them ads. Schachter wrote:

"While the emergence of these types of Apps is clearly a positive for consumers, we believe they pose a risk to the established search engine model. Search engines such as Google and Yahoo have become a critical component of the typical Web user's product shopping/browsing/researching process online. New e-commerce apps may increasingly exclude the established search players from this product 'discovery process,' resulting in fewer product-related queries."

Indeed, Schachter suggested that perhaps the battleground for the mobile Web has shifted to the smartphone deck. Users may have 15 to 30 or more apps on their phone, but likely use the ones sitting most prominently on their phone's application deck.

This presents Google, Yahoo, Bing and other mobile search engine providers with an interesting quandary, or intriguing options, depending on how they choose to approach this new turf war.

These providers can secure search toolbar distribution deals with phone makers such as Apple and wireless carriers such as Verizon Wireless, grabbing the scraps from the tables of mobile app providers.

Or these Internet companies can build their own mobile apps for prominent placement on smartphone decks. For example, Google has recently released two powerful apps, the Google Maps Navigation turn-by-turn GPS program and the Google Goggles visual search app.

Both are currently available only on Android. Google hasn't discussed how it might make money from these free apps, but serving local ads with its GPS app and its visual search app seems to be such an intuitive task that it would be surprising if Google did not undertake it.

In any case, Schachter believes Google is headed in the right direction with the impending Nexus One smartphone, a fast-performing HTC device based on Android 2.1:

"With Google scheduling an Android press event for January 5 (where it is speculated the company will formally introduce its own mobile handset), Google seems to be focused on making sure it can guide the development of the mobile Web while protecting and expanding its own business model."

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