Reports suggest that Alphabet's subsidiary
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Virtual Reality Advertising Could Be The
In September 2015, Facebook rolled out a video creation tool which allows publishers to post 360 degree clips to their pages, which can be viewed on Android phones, tablets, desktops and iOS and Samsung gear devices as well. Virtual reality is believed to be the most compelling and effective digital advertising since it is immersive and experiential. Brands such as Coca Cola, HBO and Nissan have ventured into virtual worlds and as this technology becomes more affordable and easily available, an increasing number of advertisers are likely to invest in virtual reality ads. For Google to maintain its leadership position in the search ads business, investment in this future trend is essential. According to our estimates, the search ads business accounts for more than 70% of Google’s valuation and one of the key drivers of this business is the company’s mobile search market share.
Google’s strategy is to build cheap VR devices that can be used by a large number of people on their smartphones to view content. It should work to its advantage. As video content moves onto a virtual reality platform that can be viewed by millions with the affordable mobile compatible devices built by Google, the company will have a competitive edge in the virtual reality advertising space. Apart from Facebook’s Oculus Rift, players such as Samsung (Gear VR $99), Microsoft (Holo Lens $3,000), Freefly (VR Headset, $79) have launched various VR devices, as well. But Google’s Cardboard stands out in terms of its pricing.
Better Monetization Of YouTube
Google can also benefit through its investment in the virtual reality space by better monetization of its video streaming service YouTube. Officials at YouTube believe that virtual reality is on the cusp of a major breakthrough into the main stream in 2016. YouTube has been pushing into 360 degree and 3D videos and with the shift to virtual reality it will become a far more immersive experience. According to our estimates, YouTube accounts for less than 5% of the company’s valuation, at present. But with the launch of the subscription service and plans to stream movies and TV series along with original content, it could be a key revenue driver in future.
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