As a long term investment pick Google (NASDAQ:GOOG) has repeatedly shown its value through the innovative culture and visionary thinking inherent throughout the company and its business practices. The very same reasons that have demonstrated the company's value on the markets have also allowed it to continuously and permanently changed the fields of technology, advertising, e-commerce, and others. Now Google is, again, entering the entertainment industry and might just have what it takes to help shape the future of how this industry interfaces with its consumers.
The World of Today - Business of Tomorrow
In the world of today there are more visionary thinkers than any one person can follow. Many them have philosophies regarding the plethora of data we create and the velocity with which we are creating it. The problem many visionaries perceive with trying to use this vast data reservoir that has been created in the digital world is that if you take the time to sort through it all by the time you reach any meaningful conclusion your conclusion is based on outdated data. Even the recently created field of 'data mining has a hard time fighting this as it works to extract valuable facts and insights. Twenty years ago making decisions based on six month old facts might have been acceptable. In the world of today, however, we are increasingly receiving and seeking instant gratification as a society and this has a profound impact on data relevancy; in fact, it makes even six month old data obsolete in many cases.
Many of today's landscapes change rapidly and almost overnight. One visionary thinker, Eddie Obeng, drives this point home his statement, "the rules were re-written and . . . it happened at midnight while you were asleep, so you didn't notice and have carried on the same way." Mr. Obeng and many other visionary thinkers/philosophers believe that the world is changing faster than we can learn about it; this philosophy is not only correct, but also a sign of the times in which we live. The times are also upon us when news travels the span of the globe multiple times in a matter of seconds and when almost everyone can reach a virtually unlimited audience without crossing physical borders. With an expanding global population and increasingly rapid changes in technology I believe that every executive and entrepreneur today can and should take meaning from the philosophy Mr Obeng and his foundation preach - this is a philosophy that Google has harnessed.
The Google that Is Today, was Yesterday, and will be Tomorrow
Through a number of successes and countless failures Google been known to be a technology company, advertising firm, an enabler, and an innovator. Most of the world knows Google as the search engine that brings results from their ever growing index that is by their account over 100 million gigabytes. Each year a larger portion of the world is discovering Google as a reliable highly available competitor to Microsoft Exchange (NASDAQ:MSFT), Microsoft Office, Open Office, and a host of other applications that have often historically been localized to the computer one was working on. These same applications also historically have a high license cost to both the consumer and business. Other people are discovering Google as a provider of public DNS servers that often are more reliable and resolve host names quicker than your ISP's DNS servers. Google Chrome is often touted as more secure than Microsoft's IE and has a large number of innovative plugins, apps, to aide in productivity and enhance your experience - I keep my computers light on background software, but even I have plugins to Google Chrome that enhance my work productivity and personal internet experience. YouTube arguably has brought the most video ever available in one location straight to you and at the same time has become a medium from which both individuals and businesses from around the globe bring their video messages straight to you. The Andriod OS is what it is today because of Google. ReCaptcha was purchased by Google and now harnesses the collective intelligence of the global population as a way to counter cyber-security related issues and digitize books - Google has found a way to put you to work and you probably never even realized it. These are just a small number of visible successes, contributions, and innovations that Google has made in the technology world.
One thing which has enabled Google to be successful in all of its endeavors is that it has a history of is building on what it has learned so far, this is truly an amazing feat for a company of this size. For this reason that I look for really good things from Google's newest innovation - Chromecast. For those of you who have not heard Chromecast is the world's newest incarnation of streaming TV boxes; it has a tiny footprint by plugging straight into your HDMI port and using WiFi instead of Ethernet.
How is this building on what it has learned before? For starters there is Google TV; Google TV was initially designed to interface with existing boxes and then later embedded into TV's (currently available via both options); in this case Google partnered with hardware distributors and continuously refined its product. Then there's the ongoing Google Fiber project that is delivering symmetrical bandwidth at Gigabit speeds to residential homes (often only business connections T1 and higher deliver symmetrical bandwidth) - along with typical cable TV content for a price that no cable company wants to match (yet); Google has the ability to learn about entertainment content and what the consumer is willing to pay for (under current models). Google has already forged some relationships and made inroads into the distribution side of the entertainment industry and if Google can mine its own data to bring worthwhile statistics regarding pirating and cord cutting to the table I would say the road ahead might be rocky for Chromecast, but I would also wager it is not impassable and probably very bright on the not so distant horizon.
Many are touting Chromecast as a waste of time due to limited viewing options, however there are a few things to think about here before we write it off. Google is welcoming developers to produce apps for this device which will open it to innovation from the masses. The device is local, but uses content from the internet opening up innumerable possibilities of uses. The device sold out, I believe, within hours of being made available for sale - there was no false advertisement about Chromecast capabilities which means the consumer has spoken. The device also has coined a word exclusive to it, in technology, that within a very short period of time has become popular: cast. Then there is a whole culture of makers and hackers that is rising today and in this article one of them even states that you can use Plex with Chromecast. As of right now there are over 13 million results from a Google search for "chromecast" and Google Trends shows searches for it are being conducted around the globe. Given these facts I would say that Chromecast has already been a success.
Competition in the Streaming TV Space
Currently there are two major competitors to Chromcast, a handful of lesser competitors, and the ongoing development of the Smart TV. The major competitors are Roku and Apple (NASDAQ:AAPL) TV; WesternDigital (NASDAQ:WDC) also has a commercially available product on the market (loaded with Google TV). If one judges by the satisfaction stars given by consumers/end-users on Amazon (NASDAQ:AMZN) Roku warrants 5 stars 67.5% of the time as compared to Apple TV's 65.5%; at the time I performed these calcualations the variance in total reviews for both products was less than 10. In terms of features and benefits both of these companies are light years beyond the Chromecast at the moment, but the question begs to be asked: Do either of them have the developer following that Google does for all of its other products? Do developers find their SDKs and APIs as easy to work with as the familiar ones from Google?
With regard to the lesser competitors I do not have much pertinent to say, except this lesson about the possibilities that are created when the need exists. I created a streaming media server on a Raspberry Pi using open source XMBC Media Server, network storage, and VLC along with some other open source programs for functionality. This little joy has a small footprint behind my TV and uses network resources - while I consider this great fun with awesome functionality I do not believe most of the general public will find this an enjoyable project. The total cost of this media server (Raspberry Pi & SD card with XMBC) was less than $40 (minus my media storage). The downside to this scenario is that under current business models mainstream broadcast media will not be available for this (legally) and the hardware is slow. The take-away from this in relation to Chromecast is that a growing number of the public have the desire to develop ways to bring entertainment into the house without a huge set top box or large cable bill; because this exists so does the demand for developers to add functionality.
The Smart TV is the only thing that makes sense for the way of the future as far as streaming TV is concerned. Many of us have had the rats nest of wires, some of us have paid good money to hide them, but why have any of this when the only thing really necessary is not the cable box, but an Ethernet cable from the router straight to the TV or a module in the TV delivering 1080p (or higher) to our living room. What we are witnessing right now I believe is a battle over who is going to provide the platform to many of the screen (television) manufacturers in the not so distant future and Roku CEO Anthony Wood confirms this in an interview at this year's D11 conference. Today's television manufacturers are doing good on their own and continuously improving the Smart TV, but they are still missing a few key components which I believe will only come about when the cable and broadcast industries realize that the "world changed while they were sleeping." As Google and developers build out Chromecast's cloud based capabilities it has all the makings of a product that can fill this gap either when industry changes to meet the needs of the consumer or the consumer re-writes the industry.
To Invest or Not to Invest in Google?
What does this mean for investments? It means that if you want to be part of a company that has the ability to grow, influence the development of technology, lead the way into the future, has a formidable footprint in the world today, and is only getting larger each passing day that Google is a good investment. Google's stock however, is currently priced out of reach for most retail/individual investors and I personally would not outright purchase it at the current price point regardless of technical and fundamental reasons to do so - a round lot would cost close to $100k. There are however an innumerable number of equity instruments that contain Google - if you look for the right assortment you can probably find one that meets your investment objective.
I would also keep an eye out for Roku and an IPO. There have been rumors about this over the past year. This space is large enough for a few dominant players and our markets only work well if there is competition.
Additional disclosure: I am not long GOOG directly, but I am long in several funds that include GOOG. I have no influence over GOOG within these funds. I do not have any intentions of outright purchasing GOOG within the next 72 hours.