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Stock of the Day
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Google (GOOG)
Google Searches for a Change
As most people already know, Google is the juggernaut of the internet. It has the most popular search engine in the world, and is responsible for building one of the most successful online advertising networks to date. A crucial component of Google's ad network is its "Paid Search" program, which allows advertisers to buy advertising space on the search results page based on user search queries. This is a service that both publishers and advertisers alike have become quite reliant on. However, Google has recently made a revision to its search engine functionality that may completely reshape the landscape of online search and advertising. What has Google done to its search engine and why?
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The primary focus of Google's search engine adjustment pertains to online news articles. In order for Google's search engine to index a news article in the past, the content publisher had to allow the search user to read the entire article. Otherwise the article would not be indexed. The content publisher was not allowed to show part of the article and then direct the user to a sign-up form. This tactic was considered to be "cloaking", and was not tolerated by Google. As a result, most content publishers were faced with a difficult decision: restrict its articles from Google and lose out on a substantial amount of online traffic OR give Google its news articles for free and lose out on subscription revenues. Most publishers chose the latter and allowed Google to index its articles in entirety for free. Although Google may have been happy with this arrangement, content publishers were becoming more and more disgruntled as their online content subscription revenues struggled. Google finally caved into the pressure and adjusted how it catalogues news articles.
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Google has now modified its search engine so that a user may view up to five articles from one publisher in its entirety. After the five articles, the user will be directed to a subscription sign-up form if he or she wishes to read more articles. In addition, Google will catalogue preview articles that only display a brief snippet of the content to the user. These types of articles will be classified as "subscription" so the user will know that it is only a preview. Overall, Google's search engine refinement may be a fair compromise, but it also has the potential to disrupt its "Paid Search" revenues. An avid Google search engine user may easily stumble across five or more articles in a day from a certain provider. Ultimately, the user may decide to subscribe to the content provider directly and skip using Google for those types of searches. Over time Google may experience a drop in traffic from users that typically searched for subscription based content. While this is a niche market, it may have a considerable impact on Google's "Paid Search" revenue. Google may lose out on a consistent, dedicated, and highly focused source of traffic if these users begin subscribing to the content providers directly. There is much more of an incentive for people to use their subscription based service that they are paying for than Google's free search engine, especially for topics related to its subscription provider's subject area.
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It would seem that Google's eventual decision to change its news article indexing was inevitable. Especially after News Corporation (NWS: Charts, News, Offers) began negotiations with Microsoft to make the media titan's content exclusive to the Bing search engine. The user allowance of five articles is rather generous and probably will not affect most casual Google searchers. However, the more extreme and avid Google users may be turned off by the article limit and opt to just subscribe directly to the content. Although, Google seems optimistic that the five article limit and new "subscription" listings will not impact the search engine's functionality, there is a possibility that its "Paid Search" revenue may suffer. Google is hoping that its minor tweak does not bring about big changes with its advertising network.
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