Google loses market share to Yahoo – Will they adapt?

Google holds an incredibly dominant position in the search market, especially in Europe (Sweden is a good example, where they hold around 96% of the market). In the US, the lead is smaller, although they are still by far the largest. In December, something highly unusual happened: Google’s share dropped from 79.3% of searches to 75.2%. It’s Google’s largest decline since 2009.

The analytics firm Statcounter shows a decline in Google’s market share, with a drop of more than 4 percentage points in December. All indications suggest that Yahoo is the search engine that has captured the majority of users who left Google. As a result, Yahoo now holds its largest share of the market since 2009.

What does Google’s decline mean?

Some argue that the drop in December doesn’t mean anything. Robert Hof writes in Forbes that it’s a temporary dip and might even be a good thing for Google. Many have pushed to break up Google or impose some form of restriction on the company due to its dominance—considered its biggest issue in recent years. A decline in search volume could make it appear that they don’t have as tight a grip on the market as critics claim.

What I personally find most interesting is how Google chooses to respond to the drop—if they respond at all. Two possible paths lie ahead. Fewer searches mean less income, since it’s the AdWords clicks in Google’s search results that bring in the big money. Shareholders naturally get upset when their allowance suddenly shrinks, and that means Google may need to take one of the following two actions.

1. They can increase revenue per visitor

This is something Google has been working on for a long time—boosting revenue per visitor. The easiest way to do this is by simply having ads occupy a larger portion of the search results and attract more clicks. It’s not entirely straightforward, though—more clicks can also lead to lower cost-per-click for advertisers, so Google must also work to push click prices upward.

2. They can ensure more people use the search engine

The other path forward is to get more people to use the search engine. Highly aggressive advertising, like in the first suggestion, might actually have the opposite effect—there’s a limit to how much advertising users are willing to tolerate in order to keep using a search engine. For instance, if all results on the search page were ads, a large portion of users would likely leave.

So perhaps this path would instead lead to a return to cleaner search results, less emphasis on pushing their own products, less advertising, and more space for what made Google the market-leading search engine in the first place—truly good search results.

Or they might do nothing

Of course, there’s always the option to do nothing—it might not even be the profitable visitors who’ve left. Many users don’t even realize the top results are ads—perhaps those users are the ones who’ve stayed, while those who avoid clicking ads have left? Now, Yahoo isn’t exactly ad-free either, so maybe it doesn’t even matter?

Regardless, it will be interesting to see if—and how—Google responds in the coming months.