reinharden

Google: Setting Itself Up for Failure?

Google might have overpaid from a pure revenue metric (AdMob's estimated run rate is around $100 million which is split 60/40 with publishers leaving AdMob with around $40 million). But AdMob's entire revenue stream has come online essentially in the last 3 years. So the growth rate is outstanding.

Unlike some of their other deals, Google did this as an all stock deal. So they didn't really pay anything for the company, their shareholders did. And considering AdMob's alleged $100 million revenue run rate and GOOG's P/S ratio of 7.9, it looks like GOOG paid exactly an amount they considered to not be dilutive to their shareholders.


For the record, for AdMob's most recently reported period, the iPhone accounted for 48% of smartphone ads, but Android accounted for 17%. This was before the launch of the Droid. So Android is slowly building some market presence.

I agree that we've yet to see Google effectively monetize most of their non-core initiatives; however, Google believes that with things like Android, Chrome, and ChromeOS that they're creating incrementally larger markets to serve. If they define things in those terms, it'll always be difficult to establish a firm metric for success versus failure.

reinharden

Google Is Overpriced: Why Acquire On2 in an All Stock Deal?

Alternatively, the tax treatment for the sellers is way better in an all stock transaction than it would have been in an all cash transaction.

reinharden

Internet Still Offers Abnormal Positive Returns

AOL isn't *really* an Internet company. It's original value was that it aggregated a bunch of dial-up customers into a proprietary walled garden. Eventually it opened the garden gates so that those customers could make it to the Internet.

AOL looked to partner with media companies because it knew it wasn't a media company and thought it needed to become one to grow/sustain the business.

Unfortunately, AOL and TW never really combined forces after the "merger". And AOL became increasingly less relevant as it was unable to hold on to its dial-up customer-base as cable and DSL and FioS all came along to take their customers away.

Now AOL is really just a bombed out shell of a company that doesn't know what it is...


What really is an Internet company?

Facebook, MySpace, Twitter, et al, at the end of the day, are simply websites with some users. It's not clear that they've any particular intellectual property providing a moat around their businesses.

CSCO and GOOG are definitely Internet companies. Without the Internet, they don't exist.

Yahoo! isn't sure what it is (it was almost a media company). MSFT wants to be an Internet company, but they're not sure what that means. AAPL is maybe on the verge of becoming something as yet unnamed (but who knows how that'll turn out).

reinharden

Stocks on My Watchlist: Apple, Google, Cardinal Health

To be fair, you should probably back AAPL's $25 billion in cash out of their market cap. Which gives you a trailing PE of 19.4. Personally, for a company that's growing both top line and bottom line in the current economy while maintaining near record margins, I'd think that they'd deserve a higher PE ratio.

If I didn't already hold AAPL, I'd certainly be acquiring it on weakness.

reinharden

Why 'Bing'? Why Not 'Sift'?

Or at least that's what "googol" meant...

reinharden

On May 29 03:42 PM Larrysyr wrote:
> At least "google" meant the number represented by 1 followed by a
> hundred zeroes (inconceivably large before the recent bailouts).
> Naming the search engine "Google" implied you could find any piece
> of information you want in the huge chaos of the internet.

Web Browser Wars: Google Looking Beyond Market Share

You left a few important points out.

1) Chrome and Firefox are indeed open source; however, Chrome is built upon WebKit which is an open source tool strongly supported by Apple (it's the basis of Safari on the iPhone and under MacOS X). Assuming that all of Chrome is maintained in the open source arena, Apple will benefit relatively quickly. As Firefox doesn't use this software, their benefit will be less direct and immediate.

2) Chrome is designed to slide right into Android. So Chrome is Google's Mobile web browser (akin to Apple's Safari on the iPhone). Obviously Apple wasn't likely to do something so potentially competitive with the iPhone and Google would be nowhere with a PhoneOS without a web browser.

3) Google's line of web applications (Google Documents, gMail, Google Reader, etc) are currently hobbled by the absence of some key features in the web browsers. By providing an open source web browser that is optimized for enabling these web applications, Google is better able to compete with Microsoft's (and Apple's) more desktop centric application suite.

In the final analysis, short of buying Opera, Google really had little choice but to develop their own web browser.

reinharden

Why Is Google Entering the Browser Market?

It's true that Google has been supplying much of Mozilla's funding though Firefox; however, it makes little sense for Google to "acquire" Mozilla the company. What would they actually be buying? The Firefox "product" is open source (and Google has already paid for it a thousand times over).

And if Firefox / Mozilla / Netscape remnants were more useful, Google would have used that as the base of Chrome rather than the more Apple-based WebKit. And with Apple and now Google pouring resources into WebKit-based products for Windows, I suspect that Chrome and Safari will happily co-exist on Windows for at least a while longer.

reinharden

Google Reader: Security By Obscurity?

Um, not so much.

Sharing worked before; however, you chose with whom you shared things.

Google unilaterally changed the sharing model so that anything you had previously shared with a very small, self-selected group of people was instead shared with everyone who was in your Contacts list.

Be they friends, family, or business contacts.

Google would have been fine had they even simply warned people that the functionality was changing. Instead, they changed what it did and "publicly" revealed everything to everybody.

I don't much care since I'd never "shared" anything using Google Reader (why would I want people to know what I was reading?)...but I certainly understand why people were angry when the functional model changed without warning.

reinharden

Google Mobile: Winners and Losers

Let's not forget Symbian (and by extension the owners of Symbian).
04.5% - Samsung
08.4% - Siemens
10.5% - Panasonic
13.1% - Sony Ericsson
15.6% - Ericsson
47.9% - Nokia
Their investments in Symbian have arguably decreased in value due to the gPhone consortia.

UIQ and the various companies that invested in UIQ similarly are definitely square in the sights of the gPhone.


There's no doubt that Windows Mobile / Windows CE / whatever the other Windows-based phone OS's are are losers in the sense that they'll be negatively impacted. But it's definitely not clear whether or not they're losers in the sense that they've lost. So I agree that this has yet to be determined.

reinharden

Google's Venture Capital Misadventures

I suppose what, perhaps, confused me is your re-inclusion of your four earlier points, of which, seemingly, only the latter is directly relevant to the situation under consideration. The first three might arguable me relevant; however, they're already mitigated because everybody at Google is allowed 20% time, everybody's 20% project has to be approved of, and the same rules apply to everyone's results. But certainly all these 20% projects, especially the ones that see the light of day, can be distracting to analysts because it's quite likely that the ones that even Google thinks are going to stick are not necessarily the one's the get embraced by the public.

The next issue, to me, then becomes one of what is Google's true core competency? Search results, eyeballs, advertiser relationships, or the networking effect created by the combination of each?

I believe that we'll end up having to disagree because I believe that Google needs to broaden it's base as well as increase its depth.

From my perspective, Google has worked on ways to make eyeballs sticky to Google sites in order to reduce its Traffic Acquisition Costs and simultaneously sell more adds. Thus Blogger, Gmail, Picassa, Reader, and all the other portal like components. Each of which makes eyeballs hang out on Google sites a little longer and (eventually) each click on a Google site allows one to three more ads (or at least salts the earth for Microsoft and Yahoo). This also explains Google's experiments with broadband (highly localized search results which will undoubtedly prove valuable if the iPhone or other Portable Internet Devices take off) and cellular (similar to broadband, but sufficiently different to require different technologies).

Google already has quite a large group working on maintaining their search algorithms. And another large group working on optimally monetizing their advertiser relationships. Considering the depth and complexity of what they're doing already my suspicion is that throwing too many more resources at those areas would run afoul of the mystical man month syndrome.

So, I, as one Google shareholder, would much rather see them attempting to broaden their base as well as deepen it. 'cause Microsoft and Yahoo are already broad and they're not going to give up on trying to get deep. And in fighting those two organizations, especially Microsoft, any territory you surrender without a fight will just be used to provide resources to your enemies.

reinharden

Google's Venture Capital Misadventures

Ummm...but Google isn't doing Venture Capital or anything similar to venture capital.

Google is either acquiring firms (d'Marc) or homebrewing new technologies (orkut).

So how do these activities have anything to do with your original thesis vis-à-vis venture capital?

d'Marc makes what seems a natural attempt to leverage relationships with advertisers to other media. I wouldn't be surprised to see Google making a play into the electronic billboard arena either. In fact, I'd be disappointed if they didn't. Will this diversification work? Who knows, but it's a small enough outlay that it makes sense to try. I'd content that it'd be irresponsible to not try and extend this relationship.

And while orkut has arguably not seen the same success as gmail and has not had the press coverage of Google Documents, orkut has proven quite sticky for several million users (allegedly 49 million) and is annoyingly popular in Brazil and the Middle East (I say annoyingly based upon the amount of Brazilian spam I get there). So if nothing else, it's a fertile playground for technology, innovation, and internalization. Now if only we could see some monetization (although one hopes there's at least some small relationship to using orkut and using Google).

reinharden

Why I'm Incapable Of Buying Google

Let's see. WMT started 1991 around $7.50 and is currently at $47.81. So, if GOOG does the same *and* is considered a value stock in 15 years (2021), you're saying that GOOG will be trading a touch under $3250?

I suppose it's possible that GM will restore itself to its former luster...but I don't see a lot of reasons to believe that it'll rebound so strongly that it'll be a six-banger. GM's all-time high was a touch under $94 and frankly I don't see Toyota folding its tent and heading home.

reinharden

PS: I'm not convinced that GOOG will necessarily be a six-banger. But I can certainly envision scenarios where that might happen. I can't even *imagine* a realistic scenario where GM *might* have similar performance.