Last week, Google Inc. (GOOGL) announced to owners of Google stock — and to the world — that it would be launching kid-friendly versions of its services sometime in 2015. Specifically, the web-search giant said it would be tweaking YouTube, Chrome, and Gmail for the under-13 crowd.
The reaction has been mixed, of course. On the one hand, anyone who’s holding shares of Google stock has to be thrilled with an initiative that draws more customers into the fold.
On the other hand, concerned parents have doubts that the internet can be truly safe for unsupervised children no matter how many safeguards Google puts in place.
Regardless of the (completely legitimate) worries, this is ultimately a good thing for the value of Google stock, as most parents would rather delegate the safety role to Google’s potentially-flawed overarching plans than try to piece together a protective web experience for their kids.
Staggering Child Internet Usage Statistics
The details of the initiative have been scant so far. Indeed, the only official mention of the plan is still relatively unofficial — Google Vice President of Engineering Pavni Diwanji mentioned in an interview with USA Today last week that the search engine company was looking to develop a suite of web products safe for children 12 years of age and under.
There wasn’t even a timeframe for a launch of these products offered, though presumably it could all happen in 2015.
Still, knowing what a child-friendly collection of web products could look like and mean for the company, Google stock owners have good reason to be excited. See, the under-13 demographic is bigger, and more potent, than one might realize, and they’re already on the web in surprisingly large numbers. In some cases, the statistics are downright staggering.
For instance, despite the fact that nobody under the age of 13 is supposed to become a member, an estimated 5 million users of the popular social networking site Facebook (FB) are under the age of 10.
While Facebook may be the most prolific offender, it’s hardly the only one. Though the site is only intended for users 16 years old and older, 40% of WhatsApp users ignored those rules and joined while under the age of 16 anyway. Plenty other social media sites also have an alarmingly large number of underaged members.
If parents and schools can’t quell kids’ usage of the internet, at least they can agree that it needs to be filtered.
And that’s where GOOG comes in…
How Google Stock Stands to Benefit
So what’s at stake with this group, and for Google? It might surprise some investors to learn that nearly half of the zero- to 11-year-old segment of the consumer market are regular internet users.
The specifics: Children’s market research group KidSay reported in a study published in March of this year that 24.3 million (almost half) of U.S. children aged zero to 11 used the internet frequently. About 39% of this group went online several times per day, mostly to play games, but also to watch videos.
But make no mistake — these kids have money to spend.
According to date provided to marketing website MarketingSherpa by C&R Research, U.S. children between the age of 8 and 12 spend an average of more than $1400 of their own money every year. That’s in addition to what parents spend on these kids. All told, the so-called “tween” market in the United States drives $260 billion worth of consumption every year.
This isn’t to say Google will capture all of that business. Indeed, it can only capture a fraction of it. But a fraction of $260 billion and/or a fraction of the billions of dollars spent on attracting those young consumers — some estimates in the past have pegged the annual figure around $17 billion — is still a good-sized piece of pie. For perspective, GOOG generated $59.8 billion in revenue last year.
Even without the immediate revenue opportunities at hand, there’s a long-term upside for Google stock in view — a child-friendly suite of services familiarizes consumers with Google early on in their life, upping the odds they’ll become lifelong fans of the company’s services and products. That alone maybe worth Google’s effort.
Bottom Line for GOOG
The parental pushback on the recently-announced initiative isn’t without merit. While all parents want their kids safe when on the web and all parents know they can’t feasibly keep their children from getting online, it’s also unlikely Google can absolutely guarantee a child won’t stumble across something they shouldn’t while online.
Nevertheless, Google has the reach and technological wherewithal to do what kid search engines like KidRex and KidzSearch couldn’t do: It can attract a large enough following to make these special search engines not only commercially viable due to their wide offer of video and web search, but also a much-used public service. That scale will be a long-term boon for Google stock.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
