What did Google mess up on? In a word, nothing. This is a great time to buy a company with a lot of potential still ahead of it.
What a lot of people were not expecting was the effect of Google Check Out. That is what hit revenue and the bottom line. Some analysts will say taxes were favorable, but that is out of Google’s control, and I do not think it to be the case.
These ‘Check Out’ expenses will not be reoccurring, and current weakness should be used to buy the stock. Here is the potential that I am seeing:
1. Video Ads (revenue shared with users and content providers)
2. Mobile Search Ads
3. Video Game Ads
4. A leader in the still fast growing Search Ads and Ad Placements
These may seem obvious, but numbers 2 and 3 will likely be key to Google’s success abroad (especially in China).
A recent New York Times article, originally published on 02/05/07, stated that Chinese users are under 30 and play video games and use mobile phones. Now Google is in the position to benefit from these areas of focus.
Google can now target the largest web users in China. A recent partnership with China Mobile (CHL), the largest mobile operator in China, validates #2. And with a recent acquisition of a video game ad placement company, GOOG will be moving into this space, too.
Too many positives have developed in the last few weeks to bash the company and its prospects. With 4th quarter earning under Google’s belt, and a depressed stock price, GOOG is interestingly priced, and should be bought.
GOOG 1-yr chart
Disclosure: Author is long GOOG.