Facebook Vs. Google: What Morgan Stanley Learned And What's Next

In a report published Tuesday, analysts at Morgan Stanley summarized the Q1 results posted by Facebook Inc FB and Google Inc GOOG GOOGL.

Both companies posted higher than expected top-line numbers. Facebook's advertising numbers beat the analysts' estimates. The company added 46 million new daily active users during the quarter. Many of these were monthly users who have converted to being daily users. The analysts believe that the company is monetizing this conversion well.

In fact, Facebook has witnessed acceleration in new daily active users in three of its four regions across the world. The company has been spending more advertising dollars to grow its user base, which appears to be bearing fruit.

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According to Morgan Stanley, Google's outperformance was driven by Google Websites, specifically YouTube. This is one segment that appears to be accelerating at an appreciable pace. However, overall growth, on a constant currency basis, appears to be decelerating in the company's mature markets of the U.S. and UK.

The analysts believe that investors are currently underappreciating the extent to which search is slowing. There is limited upside to the search estimates for Google, according to the analysts.

In addition, the analysts expect a lack of growth in U.S. advertising through 2015, which would impact both companies.