Google Bets On New Business Lines

| About: Alphabet Inc. (GOOG)

Google (NASDAQ:GOOG) is reshaping human life. With its innovative products and services, it is becoming an important part of people's everyday lives. The reason behind GOOG's success is that it gives importance to users and puts their needs first. GOOG believes that offering high-quality products and services will help to increase operations, which will further lead to long-term growth. This is the reason GOOG invests in projects that help it to achieve its goals. Google's investment in Motorola and high-speed internet are good examples.

Revenue growth:

GOOG's recent earnings reports clearly reflect its efforts to improve billions of people's lives across the globe. In the first three months of 2013, GOOG posted $13.97 billion in revenues, a 31 percent increase from the previous year. As you know, most of Google's revenues come from advertising, which is 85 percent of its total revenues. Despite the rapid shift to smartphones and tablets, GOOG has proved its strength in its advertising business. This shows that GOOG has successfully transformed its internet business to a rapidly changing technology landscape, in which consumers are increasingly accessing the Web using mobile devices instead of PCs.

The drastic jump in other revenues - from $420 million to $1.05 billion in the first quarter of 2013, or a 150 percent increase - clearly indicates that GOOG is making bets on other lines of businesses to achieve diversification benefits and isolate its dependency on advertising revenues. The company's bets on the new Android notebook, GOOG Fiber and GOOG Glass are the latest examples.

Google Android Notebook:

Google recently announced the launch of a new notebook, powered by its Android operating system. The new laptop may include touchscreen technology. Users will have access of all Android apps on their laptops, just like Android phones. Although Google's Chromebook growth is slow, as the competition is quite intense in the laptop market, I believe that the bet on the new notebook will help GOOG to win a substantial laptop market share.

Google Fiber in Provo:

GOOG has just announced that Provo, UT will be the third city, after Kansas City and Austin, with access to Google's high-speed fiber-optic internet and television network. This is Google's latest step to build a nation-wide high-speed internet network. The biggest advantage GOOG will have in Provo is that it does not need to develop the infrastructure and will acquire a $39 million pre-developed fiber-optic system at just $1. GOOG will just need to invest a few millions to upgrade the existing system. Currently GOOG is charging a $300 installation fee for a 5 MB internet connection that is then free for seven years, $70 per month for a 1 GB internet connection and $50 per month extra for HDTV cable.

Google Glass:

GOOG believes that Google Glass is the next breakthrough in technology, running on Android, which is why GOOG called it "Technology of the Future." GOOG is betting on this technology by initiating mass production. Though it's a very risky bet, I think the price will be the game changer behind its success.


I think the above-mentioned projects are decent initiatives by GOOG to diversify its business line because they will not only reduce its revenues' dependency on a single line of business, they will further enhance its revenue stream. These initiatives will also boost its advertisement revenues as GOOG's new notebook and Google Glass will run on the Android operating system, which uses GOOG-based apps and search services. Though GOOG is the strongest platform for advertisers to post their ads, the competition is rising. Facebook (NASDAQ:FB) is attracting advertisers with its new Facebook Home, and Yahoo (NASDAQ:YHOO) has recently launched two mobile apps to attract advertisers. Despite being a market leader in the advertising platform, it is a good opportunity for GOOG to tap the growing markets as it has the potential, resources and abilities to achieve success. My recommendation for this stock is buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.