With its entry into peer-to-peer lending, Google (GOOG) is solidifying its position as a technology powerhouse that has already dominated search engines and, mostly, mobile phones. This new development has helped push Google stock to the top of many investors' buy lists.
The peer-to-peer loan company Lending Club recently announced that Google and venture capital firm Foundation Capital had bought some $125 million of its shares from past investors on the secondary markets. With the stock purchase, Lending Club is now valued at some $1.55 billion, triple the value that investors had estimated the company was worth just a year ago.
Many analysts see peer-to-peer lending as a way of borrowing and lending that will eventually reshape the financial system away from the current bank-centric model and change the way people think about credit and its relationship to investment. The way peer-to-peer lending works is that once an application for a loan is approved, it goes into a portfolio that individual lenders can choose from. The company makes money from interest payments while minimizing the risk that any significant part of the loans won't be repaid.
Google has not yet made a formal comment as to whether its investment in Lending Club is strategic or has a financial component. But analysts see it as Google's latest move to get a strategic placement in businesses that complement its initiatives and existing offerings. In recent years, Google has taken equity positions in tech companies such as online gaming company Zynga (ZNGA), video gaming network Machinima and wireless Internet provider Clearwater Corp. In addition, Google has also invested more than a billion dollars in clean-energy projects since 2011.
By buying a stake in Lending Club, Google seems to be making a bid to position itself as a 'one-stop' shop for crowd-based solutions. Google Venture, the company's corporate investment arm, which currently invests some $300 million a year in early-stage, fast-growing startup tech firms, has recently put money into six crowd businesses, including Space Monkey, Smarterer, Trada, Luminate, CustomMade and Rockbot (formerly RoqBot),
Google's long-term goal with these investments seems to be making money by meeting a unique crowd need. For example, Rockbot is a social networking music platform that allows users to engage with venues that play music such as bars and restaurants through a mobile phone app, letting them request songs, vote on the music being played and then share them on social networking sites such as Facebook (FB). CustomMade is an online marketplace that allows customers to crowdsource custom-made projects such as jewelry, furniture and home décor from independent artisans who produce them on a made-to-order basis.
But these initiatives are not the only reason why investors are once again excited over Google. The company is set to unveil several new revenue streams in the coming months. It has already announced the launch of paid subscription channels for YouTube, with initial content providers ranging from National Geographic, the UFC and British company Acorn TV. Beloved children's TV show Sesame Street is also set to launch a YouTube channel featuring full episodes. However, the site does not yet have any content from the major studios or cable and satellite networks. The service has an initial starting price of $0.99 per month for both mobile and TV access, although there is a 14-day free trial.
Another future moneymaker for Google is Google Glass, the wearable computer that it recently unveiled and plans to formally launch in 2014. Google Glass is one of the first commercial Augmented Reality products, a field that is seen as fueling the next wave of growth in the tech industry. Other technology giants such as Samsung and Apple (AAPL) have already announced that they are preparing to launch their own AR product. However, Google could get a boost by being the first to bring a product to market if it is able to provide buyers of the device with a good experience.
These developments have sent Google stock price soaring. Recently, the stock price reached a 52-week high of $879.66 and although it has gone down slightly since then, the company shows no indication that it is slowing down. Indeed, some analysts believe that the stock price could even reach up to $1,000 in 2014. Thus, investors might want to buy in now while the price is still relatively low.