Alphabet Makes The Case For Its AI Products At Google I/O Event

Alphabet Inc GOOG GOOGL expounded on its model to productize and monetize artificial intelligence and machine learning at last week’s Google I/O Conference ━ and effectively won over Deutsche Bank analyst Lloyd Walmsley.

“Given Google's long standing expertise here from core search, we see the company poised to innovate more rapidly on consumer product[s] with a stronger relative competitive position,” Walmsley wrote in a Monday note.

Mobile Boosts

He was particularly impressed by the company’s accelerated mobile pages ad product, which eliminates the need for web-hosting services by enabling content hosting on its search results page. The AMP model promotes video and carousel ads with lower launch times and accommodates Moat analytics.

“Though only a limited percentage of Google ads thus far, AMP has shown compelling early results since its 2015 launch (relative to their non-AMP counterparts),” Walmsley wrote.

Using the piloted model, 90 percent of publishers reported improved click-through rates, 70 percent increased viewability and 70 percent heightened effective cost per mille. Weighing these factors, Walmsley expects Google’s product to attract and retain publishers, including many of which pulled out in the height of the recent YouTube ad controversy.

Virtual Reality

The analyst was less convinced by progress on Google’s virtual reality platform, Daydream, which was unveiled at the 2016 conference. So far, the technology works on eight smartphone models and is enhanced by a standalone headset co-developed with QUALCOMM, Inc. QCOM, but it’s not necessarily enough.

“While the infrastructure appears promising, a relative dearth of VR content strikes us as a limiting factor near-term,” Walmsley wrote. “Google noted a need to offer free VR content trials to bolster consumer willingness to buy (few VR content providers offer such due to the content’s high expense), an introduction that we believe could unlock seemingly pent-up demand [...] and yield a compelling game to catalyze engagement and spur further demand.”

Walmsley predicted a virtual reality market three times the size of that for two-dimensional apps, with a 32-percent spending increase per active user. However, he will not commit to bullishness before assessing content progress.

Considering the company’s position to dominate the AI product field, Walmsley maintains a Buy on the stock with a $1,250 price target. At the time of publication, GOOG was trading around $939.50, while GOOGL was at $962.41.

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