Winners and Losers in Google's Freshness Update
No one ever accused Google (NAS: GOOG) of resting on its laurels. The ever-evolving search engine has had a few tweaks over the years, designed to keep its results relevant and its users engaged. Most haven't been too earth-shaking, but last week's Freshness update affected a third of all Google searches. When a company relies on Google's traffic to drive eyeballs to its sites, such changes can make a big difference.
Who got top billing and who got buried? Let's take a look at some of the big changes.
Movin' on up
The driving force behind this update is to keep things, well, fresh. Building on last year's Caffeine update, the Freshness update aims to keep searches up to date. For example, searching for Google's latest earnings report should no longer force you to specify that you're looking for the third quarter of 2011. News will be organized with the most recent results first, and reviews of products and services are more regularly refreshed.
That primarily affects companies (like The Motley Fool, for example) that publish a lot of news updates, or those that garner a lot of consumer reviews, either on their own sites or through Yelp and others.
|dominos.com||32.3%||Domino's Pizza (NYS: DPZ)|
|huffingtonpost.com||6.4%||AOL (NYS: AOL)|
|garmin.com||13.2%||Garmin (NAS: GRMN)|
|overstock.com||5.2%||O.co (NAS: OSTK)|
|perezhilton.com||16.6%||A truly awful person*|
*Author's opinion only.
It's interesting that two popular pizza chains are virtually neck-and-neck in the rating race. Everyone has an opinion on the best pizza, but both chains have outperformed the market thanks to strong sales numbers. Domino's took the unusual step of admitting that its stuff wasn't up to snuff, and the stock has been heating up all year. The heat might be on Yum! Brands and Pizza Hut, which lost some visibility with the change.
A life raft for floundering companies?
AOL's properties certainly performed well in the update, with three of its news banners gaining along with chat service AIM. Will that be enough to save the best Internet stock of 15 years ago? Probably not -- it's earned less every year since spinning off from Time Warner. It might be fun to speculate about an attempt by Google to fatten up its scrawny competitor for an ill-fated takeover by another large Internet company, but it's likely that AOL's love of constant content keeps its sites at the top of search results.
O.co (or The Discount Retailer Formerly Known as Overstock) is another hard-luck company that could use a boost. Its revenues are flat to declining over the past eight quarters, net income is elusive, and free cash flow has yet to show enduring positive momentum. At this point, O.co needs more than a life raft. It needs a whole new boat.
Garmin isn't in the same boat as AOL and O.co, but the threat of Google Maps has weighed on the stock since the 2007 crash. Garmin could still use the increased visibility as it pushes its GPS technology into other consumer segments. Every little bit helps when most new smartphones come loaded with free Google-based GPS navigation.
While Google's thus-far fended-off antitrust allegations, one perk of position might have been used in the Freshness update. A few of Google's competitors lost a bit of visibility:
Google Competes In...
|Groupon (NAS: GRPN)||19.1%||Daily deals.|
|American Express (NYS: AXP)||16.9%||NFC payments.|
|Justin Bieber Zone||32.3%||Lovin' the Biebs.|
Groupon already has fairly broad name recognition, but the big drop in the middle of a news-intensive IPO period seems unusual. A longer-term downward trend would be worth notice, but given the bumpy ride Groupon's already had, Google deserves the benefit of the doubt -- at least for now. Isn't one of its mantras "don't be evil"? Similarly, searchers could simply be more interested in the American Express site when they need to pay off their balance, and tracking by week conceivably clusters users at the end of the month, when most bills come due.
Do you think the changes will affect how these companies do over the long run?Add them to your Watchlistto keep an eye on what happens.
Google's made some companies very successful, but not all of them depend on its search rankings. Take a look at The Motley Fool's free report on one small company that'sriding on the broadband Internet waveright alongside Google. Thousands have already discovered what Fool analysts have called thebest stock of 2011.
At the time this article was published Fool contributorAlex Planesholds no stake in any company mentioned here. Add him onGoogle+or follow him onTwitter. The Motley Fool owns shares of Domino's Pizza and Google.Motley Fool newsletter serviceshave recommended buying shares of Google and creating a write covered strangle position in American Express. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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