Google downgraded on threat from Facebook
- 06 October, 2011 05:29
A brokerage and investment banking firm downgraded Google from "buy" to "hold" because of the growing threat from social media companies like Facebook.
Jordan Rohan, an analyst with Stifel Nicolaus, wrote in a note to clients that Google is "weakening" and interest is shifting to Facebook , which increasingly is a competitor to Google . Calling Facebook a "key gravitational force on the Internet," Rohan said the social network now occupies 30% of the total time people spend on the Internet.
"The Internet's center of gravity is shifting from Google to Facebook," Rohan wrote.
Search, Google's claim to fame, isn't the business attribute it used to be, he said.
"Search is an effective and efficient marketing channel, particularly for direct response advertisers," added Rohan. "Advertisers have fully embraced search, as it represents over half of U.S. online advertising ... But as social and mobile media emerges, there is reduced advertiser enthusiasm to spend more on Google. Further, our checks indicate that the growth of search advertising has decelerated recently in some areas.
"Search just isn't the bright shiny object that it was when Google became a public company in 2004," he said.
Google did not respond to a request for comment on the downgrade.
Google has been trying to get a piece of the social networking pie by launching its own network, Google+ . Launched this summer, Google+ has quickly gained users , already entering the ranks of the top 10 global social nets.
Zeus Kerravala, principal analyst with ZK Research, said he doesn't agree with the lack of confidence in Google.
"I don't buy the argument that search is losing its value," he said. "Nor do I buy the fact that Facebook will take eyeballs away from Google. The fact is while people spend more time on Facebook in total minutes, search is one of the most important Internet tools. Both are important to consumers but a Google search is where people start."
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin or subscribe to Sharon's RSS feed . Her e-mail address is firstname.lastname@example.org .
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