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Why Google Can Gain Momentum before Q3 Results

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Alphabet Inc (GOOG) has seen a lot of price volatility throughout 2019. The parent company of Google started the year at $1,054.68. The share price was at a yearly peak of $1,296.20 on April 29, 2019. In the next month, it faced an overall decline in price to $1,038.74 on June 3, 2019. It was the first time the US tech company reported a decrease in revenue growth.

Revenues were below the 20% threshold, the first time in three years. Ban on Huawei was one of the reasons that slightly affected the company in May 2019. When President Trump had called for the ban on Huawei phones, Google restricted business dealings with the Chinese mobile phone manufacturer. To make matters worse, the European Commission also handed a $1.7 fine for ambiguity in its ad policies.

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Alphabet rebounds from Q1

After a nightmarish month in May 2019, Alphabet stock was on a rebound right from the first week of June 2019. One could say that the expectations of Q2 results drove the price upwards. The company released the Q2 earnings in July 2019. The second-quarter results were very favorable.

All the financial statistics like sales, net income, and earnings per share were higher than Wall Street estimates. With the second-quarter results announcement, Alphabet stock jumped by over $100 in a single day. The stock rose to $1,245.22 on July 26 from $1,135.94 a day before. Since then, the stock has been fluctuating around $1,175 with a standard deviation of $25.

Google crossed the $1,200 threshold again on September 5 and had remained over it till September 22, 2019. Do you think the sudden confidence in the share price is because of the soon expected Q3 results?  There are several reasons why Google might report another favorable quarterly earnings. Here are some ideas why we feel Q3 results could outperform market expectations.

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Google Shopping

Alphabet is targeting the e-commerce domain. Amazon (AMZN) is a global brand name in the e-commerce sector. Jeff Bezos reinvented shopping with Amazon. With many registered sellers, delivery logistics, and global outreach, Amazon has built a strong market presence worldwide. Google is also considering venturing into this space.

Google Shopping will allow users to search for products and compare them across different websites. Currently, users can compare product prices and features using Google Shopping. Google has already tested the e-commerce shopping platform in some countries. However, the company does not want to expand into warehousing and logistics. Instead, Google Shopping will direct customers to retailers.

Google Gallery Ads

Google announced its launch in May 2019. The company launched a beta version of Gallery Ads in August 2019. Gallery ads will make use of visual imaging to improve the CTA (call to action). It is an improvisation over the text ads. Additionally, Gallery ads will feature up to eight images along with captions.

Viewers can merely swipe the images to find out about the product. Since all the photos will have a CTA linked to them, the response rate of Gallery ads could be astonishing. Gallery ads will target mobile audiences. Over time, Google might expand the product and create desktop versions or embed it with other Google products.

Gallery ads are much more efficient than text ads. Initial surveys and testing showed that Google Gallery ads are 25% more productive than text advertisements. The visual impact encourages a viewer to engage in the CTA.

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Google Discovery Ads

Google announced Discovery ads in May 2019. Discovery ads is a new ad campaign that will reach out to people and suggest new products. However, Discovery ads are unlike traditional keyword-based search ads. Advertisers can feed the information about their logo, product images, and specifications as well as the landing page for the ad.

Discovery ads will employ machine learning and prompt viewers with different product recommendations. With Google Discovery, there is a much better possibility of introducing quality ads that a viewer would click. And, even Youtube and Gmail will feature Google Discovery ads. Google Discovery is an evolution of Google Feeds. With the brand new campaign using Discovery ads, Google could add a sizable figure to the company revenues in the third quarter.

Local campaigns use Maps

Google local campaigns are ad services which support local business. And SME businesses can advertise their businesses using local campaigns. Users will see local campaign ads when they search using the keywords – near me. In addition, users can access local campaigns using Google Search, Google Maps, and Youtube. Local campaigns, when clubbed with Google Maps, has unlimited potential.

And, advertising local businesses on Google maps will have a substantial effect on consumers. According to Brian Nowack, an analyst from Morgan Stanley, Google Maps could contribute over $11 billion to the total revenue by the year 2023. Although there are no immediate announcements for the third quarter of 2019, the product surely has a lot of juice in it.

Deep linking to apps

Deep linking mainly caters to mobile viewers. It enhances the user experience by opening website hyperlinks on a mobile app. Deep Linking connects the website and the mobile app platform and improves the ease of transacting. For example, if the viewer sees an ad on a website about a product listed in Amazon, deep linking the ad will open the product in the Amazon mobile app. Early tests on deep linking showed a 200% increase in conversion rates.

Google always comes up with innovative solutions to business challenges. In my opinion, all of the above streams of ad revenue could lead to significant value creation for Google.

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