Google (GOOG) looks like a very attractive long term purchase right now because of its potential. It got crushed big time because of its troubles with the Chinese government but it remains the king of the internet and apart from the US government, I doubt any institution has more data and knowledge to work with. It might even be ahead of the government because it is so much better at using this data.
But Google’s (GOOG) stock is also suffering because the growth in revenues and profits has slowed down quickly from even a few years ago. The company has many different sectors but too many, it remains a one trick company, with search as that one trick. Google dominates search in most major countries (apart from a major problem in China) and thus is the starting point for most users on the internet and a major portal to gather data about internet users.
It might have been second to Facebook in March visitors for the first time but if you add up visitors to other Google properties such as Gmail and Youtube, it’s not even close.
Market share is one thing, how about profits?
Of course, it seems like worries about growth originate a lot more from stock analysts than from the company itself. The company is doing the same thing it did with search; build a superior product, improve it more, gain market share and then make money off of it. So the main question that many analysts have is; What is Google’s next big business or what is Google’s next billion dollar business?
There are many possibilities and we will go over a few but I will offer 3 related to finance over the next few days, which I think are not too far fetched. For now, let’s go over the more “obvious” possibilities.
1-Youtube; it continues to dominate video, perhaps as much as search. Youtube remains a huge source of traffic and an impressive possibility for future growth. Investors seem to be focused on revenues but Google not as much. There are however signs that revenues are growing. Youtube has been more attention from advertisers, especially on its main page and embeded on videos. As Youtube will now likely become a bigger part of regular tv’s accross the world, the possibilities for revenues will expand. Youtube is rumored to be trying to clean up the comments sections generated by users to make it easier for advertisers to associate their content.
2-Android: the operating system is gaining market share the fastest on mobile devices but there seems to be growing aspirations for Android to be used on pc’s (smaller netbooks at start) and for tv’s. It remains unclear though how Google will generate profits from Android, it is still in the very early stages
3-Open source Software: a cloud-powered world would mean power for Google as one of the top providers. It continues to price its product at such a low price that the objective continues to be market share. But once the share is high enough, prices could easily raise with most customers acknowledging they would pay more for the high quality services.
4-Nexus one; the “Google phone” has had a slow start so far as it struggles against its main rivals Apple (AAPL) and Research In Motion (RIMM) but it remains a priority for Google and only time will tell on this one.
So those are the main ones, I will go into more “innovative” possibilities tomorrow!