Google Hits Back at Facebook and Snap on Mobile

Discovering content on the internet is no longer an active pursuit. People simply open an app and passively consume content. Whether that app is Facebook (NASDAQ: FB), Instagram, Snap's (NYSE: SNAP) Snapchat, or any other number of apps, people consume feeds of content curated just for them usually with the help of an algorithm.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google, which used to be the king of content discovery, has fallen behind. (Google's YouTube, on the other hand, is one of the best at feeding content to users.) In order to compete, Google is working on a competitor to Snapchat's Discover and Instagram's Stories features. Recode reports Google is paying publishers to produce content for its new platform, Stamp.

Google is looking for a way to get more people to both install and spend time using its app, and it's going to invest in Stamp as a way to do it.

Facebook is killing Google

Facebook is an absolutely dominant force on mobile. Eighty-one percent of smartphone users in the United States have its flagship app installed on their smartphone. That compares to 61% for Google.

Both companies benefit from pre-installation from Android smartphone manufacturers. The Google app is installed on practically every Android device out of the box, and Facebook is on most. If you consider around 54% of smartphone users in the U.S. use Android devices, the gap between users that voluntarily download and install Facebook's app versus Google's app becomes much more apparent.

The discrepancy also comes up in the time spent by users in various apps. Facebook users spend more than 50 minutes per day on average across Facebook, Instagram, and Messenger. The average Instagram user under 25 spends over 30 minutes per day in Instagram alone. That number jumps above 40 minutes per day for Snapchat users in the same age range. While the comparison isn't perfect (Google is designed to get people what they're looking for as quickly as possible), it shows the opportunity Google is missing out on by not providing a discovery option.

A new traffic acquisition cost

Google paid an estimated $3 billion to Apple (NASDAQ: AAPL) this year to remain the default search engine in Apple's Safari web browser. The move ensures Google will be the site that pops up whenever users type something into the URL search bar. It also helped Google win back control over Siri's search results. Shifting user behavior to use the Google app more instead of relying on traffic from Safari on iOS would give Google more power in its next round of negotiations with Apple.

To that end, Stamp represents an interesting strategy to make the Google app a habit on the likes of Facebook or Snapchat, instead of a home-screen app that goes unused for hours or days at a time. Google isn't spending a huge amount of money to draw in content partners. One described payments from Google as "de minimis," according to Recode. The payoff could be significant, however, if it cuts Google's traffic acquisition costs and provides another opportunity for Google to display ads to users.

That said, it's more likely to fail than succeed. Facebook has had a lot of success copying Snapchat with Instagram Stories. It had practically no success with previous efforts to copy Snapchat. Facebook's effort to copy YouTube, in which it's investing $1 billion in content, is off to a slow start.

Changing user behavior requires more than just throwing money at a problem. And with users already spending hours per day in other apps discovering content, Google may have a tough time. It will take some luck and strategy to make it all work out. But it's not a bad bet for Google to make.

10 stocks we like better than Alphabet (C shares)When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Alphabet (C shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of September 5, 2017

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.