Maybe Google (GOOG) is not so different from Facebook

By: ispeculatornew
Date posted: 07.08.2010 (4:00 am) | Write a Comment  (3 Comments)

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Many investors have been beating down Google because of its slowing growth  and even we wrote last week about Facebook’s value compared to a slower growing Google. Is that the exact truth though or is there more to it? To be certain, when we compare revenue growth, there really is no comparison. Google’s revenues have been very steady and hardly what you would expect from a high growth technology company. Now granted, I might have fallen for Google but I still think that Google does have a lot of growth, maybe just not in its bottom line just yet.

Where is the growth?

In case you did not remember, Google hardly started as a money making machine. It built a search engine that was far superior to anything else. Then, it let it go for a long time simply trying to get as many users hooked as possible. Only later, once the domination was almost complete did Google get serious about making money off of it. Could it be waiting to do the exact same thing with some other products? Let’s take a quick look in the pipeline at products that are gaining market share without contributing to the bottom line… yet.

Youtube: Truly one of Google’s most valuable assets and certainly a big part of the upcoming Google TV, Youtube is far far above any other competitor as the top. It is among the top 5 most visited websites (with Google.com also in that list) and growth in visitors has been incredible. Google has tried to monetize the website but has either not found the right way or put enough energy into it just yet.

Google TV: The product is not launched yet but there is already a lot of hype about what this will mean for customers all around the world as Google tries to gain access to American’s living rooms. To be sure, this initiative is a major threat to cable companies as it could redefine how cable and television is distributed (on the internet vs through cable).

Google Voice: The product was launched out of beta just a few days ago but already has made headlines thanks in part to Apple blocking its application from the Itunes. The product is another way for users to gain a phone number and line without going through a carrier as well as be more efficient with all of their numbers.

Android : The mobile operating system has been gaining market share very quickly. It is currently getting 1 6 0,000 new users per day  (according to Google CEO Eric Schmidt)  and is set to become the world’s #2 operating system in 2012. This will be a more source of power for the booming application business. Already, app developers are more and more convinced that Android will soon be the top operating system according to Business Week.

Gmail: Google’s email’s service has been gaining on rivals and considering how difficult it is to get users to change their email, that is mighty impressive. You can already see the day where Gmail will overtake Hotmail at #2

Google Earth: What was once deemed an experience has now helped Google gain huge knowledge about the world in order to provide maps, GPS and many other local services all around the world. It remains a unique service and will continue to go without much competition for the moment.

Google Docs: Think this business is not big? Ask Microsoft about it. They are scared to death and have been redesigning the way Office is built and distributed to better compete with Google Docs in the cloud business. Up until now, the service has mostly been free in order to quickly gain market share but over time Google will certainly extend paid services across this product.

Digital Stores: Google will be launching an Ebook store, a Music store and is now selling an increasing amount of Applications from its Android App Store. How significant can the business become? Right now, Google is quickly catching up with Apple in what is quickly becoming a billion dollar business with great margins (since the main costs are incurred by developers).

Google Chrome: It might not be as difficult as getting users to switch their email provider but getting them to switch browsers remains a big challenge and Google is managing to pull it off gaining market share almost every month. It still has miles to go with Google Chrome but like the other products, few doubt the end outcome…

When will the time be right?

Some products such ass Youtube would seem to most to be ready for “paid services”, more ads, etc. But Google has maintained that growth was the priority and to its credit, it has stayed on course. Too often, tech companies turn the switch too quickly to meet short term expectations. Google is in all of this for the long run and right now gaining market share is the top priority for all of its services (apart from search probably).  I don’t actually think the time is right for any of these products and do not expect Google to generate that much revenue as of now. But that will come of course.

Does that mean growth will take off again?

That is the million (or maybe billion) dollar business of course. Search is such a huge volume that these other businesses would need to have a very significant impact to create much growth for Google. Will that happen? Difficult to say for now but my bet is that Google’s growth will accelerate somewhat in the next 3-5 years. What are your thoughts?

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3 Comments

  1. Comment by The Financial Blogger — July 8, 2010 @ 9:16 am

    See, this is what I like about Google. They run their company for themselves, not for the stock market. They don’t mind if their stock goes down, they manage their business to establish a sustainable growth, not just to meet next Q’s prediction!

  2. Pingback by How to Survive Bankruptcy and Foreclosure — July 9, 2010 @ 3:08 am

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  3. Comment by IS — July 9, 2010 @ 6:20 am

    @TFB- I agree 100% although I think that makes it more of a long term buy since they do not care much about quarterly profits. Yesterday, it was announced that Google had gained 4% in Android market share.. Could reach #2 soon!

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