GOOG Alphabet Inc

   (FROM THE WALL STREET JOURNAL 2/1/16) 
   By Steven Russolillo 

In the continuing battle for world domination, a cool $15 billion separates Google parent Alphabet Inc. from Apple Inc.

That is the difference between the two in terms of market capitalization. Yet investors gauging whether Alphabet's run to market-cap supremacy has legs may be better off sizing up the search giant against a smaller force: Facebook Inc.

Wall Street has cheered Facebook's recent mobile success. Last week, Facebook said some 80% of total fourth-quarter advertising revenue came from mobile, well ahead of estimates and up from 23% three years ago.

Next up is Alphabet's fourth-quarter earnings report, out Monday. Analysts estimate earnings of $8.10 a share, up 18% from a year earlier. As with Facebook, a key question around Alphabet's Google is how successful its search and advertising businesses are on mobile.

Google last year said search traffic on phones surpassed desktop traffic world-wide. According to an eMarketer estimate, Google had roughly 33% of global mobile Internet ad revenues in 2015. That is ahead of Facebook, which the firm estimates had around 17% of the total.

But Facebook has been quicker to pivot toward mobile, which could help it gain ground on Google. For example, eMarketer estimates that Google's net mobile Internet ad revenue will rise to about 70% of total net ad revenue by 2017, up from just under 50% in 2015. That is a brisk pace, but not as brisk as Facebook's. Agility is important given debate over whether the future of mobile will be through the web or apps.

Meanwhile, Google's growth in total advertising revenue has leveled off.

Some could argue investors are assuming Google will do fine. The stock is up by more than one-third in a little over six months. Its valuation, at around 22 times forward earnings, isn't far off highs of the past five years.

Gains have come in part thanks to a new emphasis on cost control, hopes for capital returns and transparency the company is promising. Maintaining progress, though, will depend on being fleet of foot in mobile.

(END) Dow Jones Newswires

February 01, 2016 02:47 ET (07:47 GMT)

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