Google is Still All About Cost Per Click with Android Announcements

Not content with its dominance of the internet search market and the smart phone market, Google wants to be everywhere. Google wants to dominate your car, your living room, and your wearables. Google claims that there are one billion users of Android devices.

At the seventh annual Google (GOOG) I/O developer conference in San Francisco, Google introduced a lot of new goodies, but none of them solve the real immediate problem.

Ahead of the presumed iWatch from Apple (AAPL), Google has made the first Android Wear watches available now. G Watch from LG and Gear Live from Samsung, both running Android Wear operating system, present a unified approach to wearables. These watches are not stand alone but require an Android phone to function.

On June 25, I wrote on Forbes.com that Microsoft (MSFT), in an attack on Google, was offering 15 GB of cloud storage for free and reducing the price of 200 GB of storage from $11.49 to $3.99 per month. Now Google has responded with $10 per month unlimited cloud storage. The only limitation is that the file size cannot exceed 5 terabytes, a size that is so large that most consumers will never need it. In a further move to attract Microsoft customers, Google is making it easier to edit Office documents and save in Word format.

After its previous failed attempt at TV, Google is at it again with Android TV. Android TV will encompass a range of smart TVs and set top boxes that will respond to voice commands.

Google claims that 25 car brands will ship Android Auto, which will bring Android functionality to a touch screen in a car.

Google Fit is designed as an open platform to help consumers manage their fitness.

The next version of Google Android will have a new flatter look and a tighter integration with the web.

Google is doing many things, but its bread and butter remains Internet searches. Google’s search revenues are under attack. The one key parameter to watch is cost per click (CPC). Quarter after quarter, average CPC has been declining. Google has taken several measures to rectify the situation, but it hasn’t succeeded because the tide is against it.

There are two fundamental trends that are resulting in lower CPCs that Google simply cannot fight. First, there is mass migration towards mobile searches; mobile ads bring lower CPCs. Second, the Internet is expanding at an explosive rate, there is simply an abundance of inventory of available online ads.

Investors /4/consider paying close attention to CPC trends when Google reports earnings next month. If Google succeeds at arresting the decline, the stock /4/have an explosive move up.

Follow me here, write me at [email protected] or find me at The Arora Report.