Google Steps Up Social Search

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- Google(GOOG), which competes with Microsoft(MSFT), Yahoo(YHOO), AOL(AOL) and Facebook in the search advertising market, has been working to increase its penetration in social networking.

It started with Google's foray into social applications like Google Wave and Buzz, which did not meet initial expectations. Google then made a number of acquisitions for the development of its major upcoming social networking project named Google Me.

Now, Google has modified the incorporation of social search results to make them appear more prominently in Google search. Google originally began incorporating social search results within traditional Google search in 2009, but those results were relegated to the bottom of the page.

One of Google's more prominent competitors, Microsoft Bing, has also begun an aggressive push into this market. Below we analyze Google's initiatives to grab a share of this market, and highlight a key metric to observe regarding outlook for the company's value.

We currently maintain a $603 price estimate for Google stock, which is about 5% below market price.

The major threats to Google in the search advertising market are likely to be Microsoft and Facebook. While Google is still the dominant player in the search advertising market, with a share of around 68%, both Microsoft and Facebook have also increased their market shares, mainly at the expense of Yahoo and AOL.

A few months back, Microsoft partnered with Facebook to incorporate more personalized results and leverage Facebook's substantial base of 500 million users.

However, with the recent social search update, Google has woken up to the fact that it needs to do more in the social search market to compete against the Microsoft-Facebook combo.

Google's new social search functionality integrates information from Twitter, Flickr and Quora within the traditional search results. Additionally, new privacy settings will allow users to determine and adjust the link between their Google account and social media profiles.

Google has been trying to tap the fast growing social networking market despite perceived failure of its projects Buzz and Wave. Google is likely to launch Google Me during 2011, and made a number of acquisitions in 2010 for the the project's development. These acquisitions include Jambool, a social gaming site, Metaweb, a semantic search engine, and Angstro, a social networking startup that pulls data from Facebook, Twitter, LinkedIn, etc.

Will these initiatives drive a pickup in Google's search market share? Drag the trend line in the interactive chart above to see the affect of various market share scenarios on Google's stock value.

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