Google’s threatened pawn and Apple’s plotting queen

Everyone is watching Google this week with its stock surging above $600, primarily because it is getting traction in mobile and online display advertising. Google teased analysts a bit by releasing one-time-only data that its mobile revenue is on a $1 billion annual run rate, noting “mobile search queries have grown five times over the past couple of years.” Apparently with a spike in revenue, Google wants to lock in the perception that it will go gangbusters in mobile, but it will decline to break out mobile results separately in the future.

But total number of searches is down — way down

Beneath this rosy cloud rolls some thunder, though. Google needs to break through in mobile and display because its core engine, search marketing, is poised to decline. Nielsen reported in August that year-over-year U.S. total Google search volume — the number of times you punch in a term at — slid a whopping 17%. Search is being replaced by friend recommendations in social media, and if the trend continues, Google’s bread basket will shrink. This is one reason why Google has been tweaking its search interface, such as with Instant Search, to try to push more obvious — and thus more costly to advertisers — top terms in front of users to maximize the yield on the shrinking consumer search usage window.

And then there’s Apple chomping at the ad bit. On the same day Google announced banner, um, banner results, news emerged Apple will move its iAd mobile app advertising platform over to video, too. Apple already secured about 50% of U.S. annual mobile ad spending with its iAd commitments; if it can overlay ads onto the videos consumers will be watching on iPhones, iPods and iPads, it could circumnavigate the old world of network and cable advertising. Anyone with children or teens in the home knows they are as likely to watch video on computers as traditional TV sets; as the trend expands, huge dollars will flow to the companies that learn how to intercept new video transmissions with advertising.

Think of this as a chess game. Google’s search-engine pawn is under threat, so it is edging two moves ahead with a mobile-advertising knight and banner-ad rook. But opponent Apple is planning three moves ahead, with a video-advertising queen aimed at the center of the board. If rich media keeps getting richer, if phones keep getting better cameras, and if consumers continue to embrace mobile-tablet-online video, who claims checkmate?

Image: Alejandro Hernandez

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