Shares of Google Inc. slipped Wednesday after a Stifel Nicolaus analyst downgraded the online search leader, saying that the company is starting to lose focus and that its recent acquisition of Motorola Mobility could distract senior executives.
THE SPARK: Jordan Rohan downgraded Google to "Hold" from "Buy" and said that the planned $12.5 billion Motorola acquisition could lead Google into the "intensely competitive hardware business, and keep Google from returning capital to shareholders."
In addition, Rohan said that, with about 30 percent of all minutes people spend online spent on Facebook, "the Internet's center of gravity is shifting from Google to Facebook." This is translating to marketers pushing to keep spending growth in search advertising low and shifting spending to social and display ads instead.
THE BIG PICTURE: Google makes the bulk of its revenue from search advertising, the text links placed above or alongside search results. Display ads, which include ads on YouTube, are a smaller but growing slice of its business. Facebook, meanwhile, relies on display ads for most of its revenue and can help advertisers target these ads based on the personal information its users share on the site.
According to research firm eMarketer, Facebook will have 16.3 percent of the U.S. online display ad market this year, ahead of No. 2 Yahoo Inc.'s 13.1 percent and No. 3 Google with 9.3 percent.
Still, when it comes to overall ad spending Google is still king. EMarketer estimates that the company will bring in $12.8 billion in U.S. ad revenue this year, compared with Facebook's $2 billion.
THE ANALYSIS: "(Third-quarter) search ad revenues show marked deceleration, with consumers shopping around more before purchasing," Rohan wrote in a note to investors.
The analyst added that large acquisitions such as Motorola Mobility "may become more frequent and could distract Google's senior management team."
SHARE ACTION: Google's shares fell $10.72, or 2.1 percent, to $491.20 in late morning trading. That brings the stock closer to its 52-week low of $473.02. It is down 17 percent year-to-date.