The investing world is a flutter with the opportunity that Alphabet Inc’s (NASDAQ:GOOGL) new Pixel phone will bring for the search and software giant. But while it is the new, shiny hotness for Alphabet … the biggest opportunity for GOOGL stock right now might be something a little older.
I’m talking about Google Maps.
Google Maps has become standard issue on most smartphones these days and has millions of daily users. Just like YouTube, Gmail and Google Docs, Maps has the ability to become a major revenue driver for the tech firm. And Alphabet is just starting to monetize the opportunity.
For investors in GOOGL stock, the growth in Maps’ locally generated revenues could be the next biggest thing under Google’s massive umbrella of search related ad sales.
Google Maps might be old and boring to users, but it can still be exciting to us.
Alphabet Lays the Ad Groundwork In Maps
Most people use Google Maps as a GPS system — we need directions, and Google provides them. But when we search for the local Outback Steakhouse or a conference center in another city, we’re actually providing Google with a wealth of data — exactly what the company needs to bring its brand of advertising to the surface.
Google already has started planning for a Maps ad future. The company started a program over the summer that it dubbed “promoted pins.” It’s simple: As someone walks or drives along their route, logos for businesses will pop up, and sometimes will include a coupon or special offer.
Looking to grab a bite to eat on your way to Albuquerque? The new promoted pins app might show you a Chipotle Mexican Grill, Inc. (NYSE:CMG) five minutes away and give you a coupon for a dollar off a burrito. Those advertisers with promoted pins will be at the top of the search stack, too. According to Google ads vice president Jerry Dischler, “A ‘Promoted Pin’ for a restaurant or gas station would convince someone to stop to eat.”
The “pins” aren’t personalized for the initial rollout. But this is Alphabet we’re talking about. The same deep reach it has into our emails, pictures and search habits, it has for Maps — and rest assured that they’ll be tailored to our own preferences soon enough. You’ll get offers for certain restaurants and stores based on your habits.
That’s when the real money will roll in for Google.
A $5 Billion Business
Preliminary results look good. Google has already seen great things with its “store visits” metric on AdSense in the short time it has been around. In fact, it’s so successful that rivals like Facebook Inc (NASDAQ:FB) have scrambled to expand providing similar location-tracking information to its advertisers.
Google’s other plan for maps includes localized food delivery/ordering services as well as the ability to book accommodations right from the road/a prompted pin.
That should strike fear into the hearts of and GrubHub Inc (NYSE:GRUB) and even Priceline Group Inc (NASDAQ:PCLN). Analysts have already proposed that the integration of ads in Maps will take away market share from rivals like Yelp Inc (NYSE:YELP) in a big way.
GOOGL stock analysts from Morgan Stanley estimate that Maps could help Google generate an additional $1.5 billion in sales next year. Analysts at RW Baird estimate that Maps will be Google’s next YouTube in terms of ad potential, and by 2020, it could generate more than $5 billion for the search firm.
Google could even push that further depending on how it plays its hands with its delivery/services booking additions to the app.
Bottom Line on GOOGL Stock
Google Maps will be a great revenue driver for GOOGL stock. Also promising is how this new technology shows that Alphabet isn’t just looking outward for improvement — it’s looking inward. Adding real-time location ads to Maps, based on our preferences, is almost a no-brainer. And it’ll get better at predicting what we want, when we want or need it.
“We couldn’t help but notice your Google connected car is running low on gas. Here’s a coupon for that gas station over there.”
Having Maps as the standard on all those new Pixel phones certainly won’t hurt, either.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.
