buygoogle.com - google investment news, valuation, business prospects

Google's prospects from a Google user and independent investor

Posts

Contextual dating and leaked Powerpoint notes
Google's Vulnerabilities, its Cash Hoard, and Amazon
Travel is crap?
Forbes: Google is becoming a marketplace
Microsoft is serious about search
If you can go fast, no one will ever catch up
Why is this news?
The program is not responding
Endangered species cookie recipe
Google promotes GWA

Archives

04/25/04 05/02/04 05/09/04 05/16/04 05/23/04 05/30/04 06/13/04 06/20/04 07/04/04 07/11/04 07/25/04 08/01/04 08/08/04 08/15/04 09/19/04 10/10/04 10/17/04 01/30/05 02/06/05 03/13/05 03/27/05 04/10/05 04/17/05 04/24/05 05/01/05 05/08/05 05/15/05 05/22/05 05/29/05 06/05/05 06/12/05 06/19/05 06/26/05 07/17/05 07/24/05 08/07/05 08/14/05 08/21/05 08/28/05 09/18/05 09/25/05 10/02/05 10/09/05 10/30/05 11/13/05 11/27/05 12/04/05 12/11/05 01/08/06 01/15/06 01/22/06 01/29/06 02/12/06 02/26/06 03/05/06 03/12/06 03/19/06 03/26/06

Links

Chris Anderson, Current TV, Google Blog, Google Investor, Inside Google, John Battelle, MSN Search Blog, PVR Blog, Yahoo! Search Blog

Google Web Accelerator is a Big Deal - Part 3 - 5/20/2005 04:46:00 PM

I posted last week and the week before that the Google Web Accelerator was an internet earthquake that could reorder the universe of the web. I argued that Google was sure to know that releasing GWA would send many people into privacy seizures, but that it was so central to their mission that they were willing to put the brand at risk. It's a Big Deal not only for the web, but also for TV and mobile devices.

Last week, Cringely had the only post I could find that recognized the tectonic shift that GWA is. He called it an "inflection point" that will "change things forever." Though he recognized the world-changing potential, he missed the biggest point.

Cringely said GWA will "allow your old PC to last longer," which would cause revenue headaches for Microsoft, Intel, HP and Dell.

I said that GWA is one more piece of the Google Grid which will allow pervasive content serving, sharing and searching across any device. Which means that Google is rapidly moving beyond the web and into the most pervasive information devices -- TV and mobile.

This market is much bigger than the web market. In the US alone last year, the market for TV advertising was about $60 billion -- ten times larger than online advertising for the entire globe. Think about what tapping even a sliver of the global TV market would mean for Google, which last year had net revenues of about $2 billion.

Yesterday, Cringely posted again on the GWA, and this time recognized the mobile angle. He's not with me yet on TV, but maybe next week he'll get there. Here are some insightful clips from his post:

Google just bought land in the Columbia Gorge east of Portland, Oregon -- 30-plus acres with options on additional parcels. What the heck is that for? This is beautiful land outside any major city. Not enough land for a corporate campus, but that's okay, because there isn't much in the way of local housing, anyway....

It is probably for a data center -- a one million-plus square foot data center that could easily be inhabited by a million or more CPUs. The attraction for Google is reliable electrical power since their new property is not far from one of the many dams and powerhouses that make up the Bonneville Power System....

Enter one possible version of the Google Web Accelerator as an intelligent web interface generator for mobile users. There is no other project I have heard of that could -- on-the-fly -- convert web content for this new interface, which happens to be used by more than a billion people worldwide.

If you combine GWA, video search, video uploads, Google Current, TiVo talks and the move to CPM brand advertising, not to mention Google's public statements of their intent, it sure seems to me that Google is laying the groundwork for a major move into TV and other non-web devices. And that is a truly Big Deal.

Google word of the day - 5/20/2005 06:23:00 AM

Are Google's word-of-the-day and quote-of-the-day suspiciously relevant to Google? Or am I just seeing patterns where they don't exist?

Yesterday, Google's personalized search page launched Google's campaign to bring together their diverse services into a coherent whole. Spokesperson Marissa Mayer said,

Does Google have a strategy, or are we just a bunch of mad computer scientists running around building whatever we want? Today this question gets an answer: we've launched our personalized homepage...

And the word of the day? "menagerie - a collection of wild or unusual animals; also, a diverse group." Get it? You know, Google's new service integrates their menagerie of products?

And yesterday's quote also seemed to be foreshadowing Big Deals at Google:

If we have learned one thing from the history of invention and discovery, it is that, in the long run - and often in the short one - the most daring prophecies seem laughably conservative. - Arthur C. Clarke

Maybe those were just coincidences. But look at today's quote:

The people I distrust most are those who want to improve our lives but have only one course of action. - Frank Herbert

Seems like that quote presages Google's product strategy, as the company defies conventional wisdom by enabling user-created content, provides links to arch-rivals, and strives to get the user off the Google site and onto relevant content provided by others. Google's competitive advantage is the users' trust that Google will provide the best information possible, not just self-serving information or ad-driven content. Very different from Yahoo, AOL and MSN, which try to lock the user in to their own branded and sponsored content, whether it's better info or not.

And today's word of the day? presage: an omen; also, to predict.

Google personalized - 5/19/2005 03:24:00 PM

Google announced its new personalized home page today at their factory tour. Nothing revolutionary here that I can see, works much like My Yahoo. But it is, as spokesperson Marissa Mayer put it, "Googley." Clean, simple, colorful, and no ads.

And it's not obvious at first glance, but you can drag and drop the components on your homepage - something My Yahoo can't do.

I've never been one to use a home page (mine's been set to "blank" for years). Maybe I have a Google bias, but I'll change my long-time habits and use Google's personalized page.

In addition to summarizing Google News, Gmail, New York Times, Slashdot, stock quotes, weather and driving directions, it also gives a word of the day and a quote of the day.

It's probably no coincidence that today's word is "menagerie - a collection of wild or unusual animals; also, a diverse group." Google's new service integrates their menagerie of products - get it?

And today's quote is:

If we have learned one thing from the history of invention and discovery, it is that, in the long run - and often in the short one - the most daring prophecies seem laughably conservative (Arthur C. Clarke).

If you think about Google's ambitious mission to extend beyond the web into "all the world's information" and on "every device," we may find this quote is more of a foreshadowing than a coincidence.

Google to target the enterprise - 5/19/2005 08:33:00 AM

The Wall Street Journal reports (sub req'd) that Google will "dramatically increase" the products and services it aims at business customers, starting with the Google Search Appliance, Google Mini, and yesterday's release of desktop search for the enterprise.

Google crowed about the 1,000+ customers it has for these offerings (which is really next to nothing, less than 1% of revenues today). From the WSJ:

In an interview, Mr. Schmidt said Google was targeting corporate users partly to ensure that they view advertisements Google displays on its own and partner Web sites. "They have higher incomes, they buy more, and they're better advertising targets," he said. Mr. Schmidt played down the idea that Google's move would generate increased competition with companies that sell software and hardware to corporations. "The stuff they do is so different from what we do," he said.

In my opinion, Google has a long way to go to sell effectively to corporate IT departments. Google has an awesome brand, but I think their ad-supported model and perception as a consumer brand will be a hard sell to customers accustomed to buying from IBM, Oracle, SAP, Cisco and Microsoft. I'm happy to be proved wrong, but I don't see enterprise desktop search gaining much traction in big companies, especially if Microsoft has a "good enough" alternative.

On the other hand, there have been rumors of Google developing a secure collaboration tool, perhaps melding Gmail and Blogger capabilities, which would be a sorely needed product in the corporate world. Microsoft already recognized this opportunity in their acquisition of Groove Networks in March.

Collaboration would seem to fit with the blossoming Google Grid strategy, and could be the killer app to break into the corporate IT market.

Microsoft spreads rumors of Google's death - 5/19/2005 07:35:00 AM

Microsoft's CEO Steve Ballmer says that Google is a "one-hit wonder" that will be largely irrelevant in five years. Slashdot discussion points out that when Microsoft was a 7-year-old company, they too were a one-hit wonder (DOS).

Microsoft is certainly a formidable competitor who's not going away soon, even though some people sense a whiff of decay in Microsoft's empire. With smaller, more innovative competitors, Microsoft is very adept at spreading FUD until they can acquire or develop a credible offering. Microsoft certainly seems to be trying to talk the competition to death -- they recently predicted the demise of the iPod and the death of Linux.

Google is big and agile enough that they should give Microsoft a run for their money. To mangle Mark Twain, rumors of Google's death may be greatly exaggerated. Game on.

Google's capital expenditures ramp up - $600M - 5/17/2005 05:10:00 AM

Less than a month ago, Google quietly disclosed that it would invest a staggering $500 million this year in new capital expenditures. On the earnings conference call, the CFO said the vast majority of this number represented new computing capacity. Yesterday, Google upped the ante 20% to $600 million. From their 10-Q quarterly report filed with the SEC (read it in context on page 17):

We expect to spend over $600 million on property and equipment, including information technology infrastructure, to manage our operations during 2005, however, we may spend less depending on the availability of suitable property and equipment. As a result, our spending between periods may fluctuate significantly. Management of this growth will continue to require the devotion of significant employee and other resources. We may not be able to manage this growth effectively.

I wrote last month that the $500 million was a "gigantic number:"

To put it in perspective, it's more than Google spent in the last 2 years combined. And it's even more significant when you consider that hardware is at least twice as powerful now as it was two years ago.

Just this quarter, Google spent more on new computer hardware than it did in the last half of '04.

That gigantic number just increased 20%. Reading the Google tea leaves, this either means they underestimated how much their projects would cost this year, or they're ahead of plan on implementing some massive new initiatives.

Google has three big competitive advantages: (1) the Google brand and the trust it has developed; (2) a deep engineering talent pool and an innovation cycle that Microsoft can no longer match; (3) the largest and most efficient, distributed, global computing infrastructure. It looks like Google is continuing to widen the gap between them and their nearest competition.

Should Google split its stock? - 5/16/2005 04:39:00 PM

There was a lot of howling during Google's IPO about its high stock price, as if a three-digit value for a share made the company expensive. Now that the shares are trading at $230 and change, the chorus is rising again. The stock may well be expensive, but it's because the company is worth north of $60 billion, not because the price of a share is over $200.

At last week's shareholder meeting, two different investors asked if Google will be splitting the stock. As I explained before the IPO, the per-share value should be meaningless, because to value the company one must multiply the per-share value by the number of shares outstanding. So 10 shares at $1,000 per share is no different than 200 shares at $5 per share. A stock split is only an accounting transaction, and doesn't affect the value of the company one iota. (See this definition on the SEC's site for more.)

The CEO answered that there were no immediate plans to split the stock. And Sergey Brin mumbled something about avoiding splits to watch the value grow. I think Brin's onto something here.

The founders quoted Warren Buffett in their letter to shareholders, and Buffett has praised Google. Buffett has never split the class A shares of his company, Berkshire Hathaway, which closed today at $82,500 per share. Buffett has a reputation for being a plain-spoken yet savvy businessman, focused on the intrinsic value of companies and not accounting tricks, similar themes that the Google founders have reiterated.

In fact, Buffett said one of the main reasons he's never split the stock is to filter out "people who think that a stock split is a wonderful thing. It doesn't have anything to do with the value of the business, like having a pizza that's cut into eight pieces instead of four pieces." And you can see how the value of Berkshire has grown under Buffett's leadership just by looking at the price of a single share.

A high and rising share price for Google could promote a virtuous circle. As clear evidence of the company's success, a high share price could generate millions of dollars worth of buzz, news and free airtime that Google's competitors have to pay for. Not only that, but stock splits still have some emotional taint from the dot-com bust.

Small investors shouldn't worry about getting priced out of participating in the Google juggernaut since there's no longer much advantage to buying round lots of 100 shares. So as long as individual investors can afford a single share, Google should focus on building real value, filtering out ignorant investors who have no business investing in a high-risk stock, and just let the share price run.

Internetworks and Google TV - 5/16/2005 01:38:00 PM

From Thomas Hawk and the Seattle PI:

Internetwork: n. A new type of internet based niche video broadcaster focused on producing and delivering video programming over the internet as opposed to traditional television networks ...

"the internetworks compete to broadcast diverse and important long tail micro content with traditional television networks"

"In the next few years, platforms from companies like TiVo and Microsoft (through their Media Center Edition software) will make these new networks increasingly available in your living room. Other companies will pop up to complement the internetworks and offer great business opportunities in the world of search and other ancilary businesses like closed captioning to make the content available on internetworks more manageable."

This is a time of tectonic change, when winners and losers aren't necessarily determined by their current market positions.

The question for the Google investor is how Google will play outside the Web, in the living room. Google's video upload service and Current TV partnership may be embryonic steps toward doing more than just indexing others' content -- this could be the the beginning of Google TV. Or perhaps Google isn't moving fast enough, and could be outflanked by Micrsoft's Xbox 360, Media Center, or new competitors.

In any case, it seems that Google will need a presence in the living room if they're to achive their stated goal of Googleizing "all devices." That could be through a partnership with or acquisition of TiVo, or a "media search tool" for Media Center or Xbox, or an extension of the Google Mini. Whatever the device or tool, it seems likely that it would leverage Google's global computer network, the likes of which no competitor can match.

buygoogle.com