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Google Inc (NADAQ:GOOG) Ad Business Attacked by Apple Inc. (AAPL) iOS 9

Alphabet Inc (NASDAQ:GOOG)

Google, Inc. , made $12B from mobile search ads in 2014 based on a report released by Goldman Sachs in May. In FY 2014, Google reported $59B in ad revenue as reported in its 10K-filing and about 20% of that money came from mobile search ads. Now, Google’s search ad business might suffer a big blow as Microsoft starts to steer users towards its new Edge Browser for Windows 10 while Apple Inc   launches iOS 9 with support for ad blockers tomorrow.

Google Inc (NASDAQ:GOOG)

VentureBeat reports that Microsoft Corporation  is now using its Bing search engine to coax users to try the Edge Browser that was released with Windows 10 instead of getting Google Chrome or Mozilla Firefox. It was reported that a search for Google Chrome or Mozilla Firefox on Bing will display a “stern” note saying, “Microsoft recommends Microsoft Edge for Windows 10.” Then, you’ll see a “Learn more” button.

Microsoft and Apple are hitting Google where it will hurt

Microsoft has a “reason that sounds good” for wanting users stay with the Edge Browser. The firm says, “Microsoft Edge was designed exclusively for Windows 10 with features and functionality that enhance the browsing experience such as Cortana, Web Note, and Quick answers”. Yet, the real reason is that Microsoft wants a piece of the search ads action for itself and a revamped browser is the right tool for stealing market share from Google.

Apple is also throwing a punch at Google ,  ad business – Apple might not be after Google’s ad business but keeping ads at bay in the iOS ecosystem is a smart way to keep users loyal. Apple will unveil its iOS 9 tomorrow and it appears that the new OS will allow developers build ad-blocking apps on Safari. Interestingly, the ad-blocking apps will only work on the Safari browsers and not within apps running on the OS. Hence, Apple can continue taking its 30% cut from revenue that iOS apps make.

Google’s loss might widen

The WSJ notes that about 6% of global Internet users use ad blockers and there is a 40% increase as 198M users ran ad blockers between June 2014 and June 2015. Sean Blanchfield, chief executive of PageFair says, “Apple is going to create a massive consumer appetite for blocking ads”. A report published by Adobe holds that ad-blocking apps will cause firms that live on ads to lose almost $22B in ad revenues this year.

The introduction of ad-blockers on iOS 9 might cripple Google’s mobile ads business because Apple is a key driver of its ad revenue. Of the $11.8B that Google made in mobile search ad income in 2014, iOS devices delivered $8.8B and $4.4B of that money was a function of Google’s “default search” deal on Safari.

Microsoft’s pushing of Edge at the expense of Chrome and Apple’s support for ad blockers won’t kill Google ,  search business, but Google will now lose a slice of its search ad business.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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