Liberty

Here's a few reasons why I think competing with Google is incredibly hard: First, I start with the assumption that to effectively compete, you need to offer at least feature-parity, if not a better product. So right from the start, if you ever hope to offer something similar to Google you need millions of servers in large data centers all around the world. Within the industry Google is known for having some of the lowest, if not the very lowest, costs of computing ($/FLOPS). And Google is making its offering more computing-intensive all the time, so that increases barriers to entry (Google Instant means that every search is actually multiple searches, not just one, and once you get used to instant - especially on mobile where every keystroke can be painful - other search engines feel slow. Google Search by Image and Google Goggles allow to send a picture to Google and it'll find similar pictures, translate text in the pic, tell you where the pic was taken if it can figure it out.. You can also search by voice both from mobile and desktop. Both these things are extremely computing-intensive. Search results contain geo info from maps, youtube videos, news items, real-time twitter stuff, applications like translation between 2000+ language pairs, financial graphs and realtime quotes, math unit conversions, etc. Also, if you are logged in they personalize your search by giving you results that they think will be more relevant to you based on previous searches and other account info.. That's also very hard to do. They also re-index websites very often - stuff I publish on a site with a pagerank of 8 is indexed within seconds.) So very few companies can afford this, and no company of the right scale is 100% focused on search & advertising. Good startups will be acquired, probably by Google, who's the buyer of choice to most entrepreneurs in that space and has a good track record for acquisitions. I don't expect that what Google did to Altavista/Excite/Lycos/Yahoo will be done to Google, in the same way that what Microsoft did to IBM probably won't be done to Microsoft... These were one-time events in immature industries. But the low-cost hardware is just the start. You need thousands and thousands of incredibly smart people, and there Google has the benefit of being mostly focused on search while to most other companies it's a side thing (maybe an important side thing, but not where 90%+ of resources go). Google has had great success attracting genius engineers, and even now that there's more competition for hiring, they're still probably a dream job - along with Facebook and Apple - for most of the technical people who don't want to do a startup. Part of the success there comes from being a company that is run by engineers for engineers, with 20% of the time spent on personal projects, free gourmet food (so you can spend all evening coding), contributing a lot to the open source community (where most programmers hang out and spend their formative years, predisposing many to like Google and want to work there), hosting Tech Talks and just having a great geek-culture, etc. And then, even if you have all this, you still need to monetize it. Google Adsense/Adword has relationships with millions of advertisers/publishers. Advertisers are more likely to buy from Google because they know almost everybody uses it, so they'll reach their target audience, and publishers put adsense on their site because they know Google has the biggest inventory, so it's more likely that relevant ads will be available, leading to higher clickthroughs and CPC rates. Adsense itself is another technical barrier to entry: Every page of every web site with google ads needs to be analysed by Google (requiring lots of computational power and bandwidth to crawl it all) so that the most relevant ads can be served. Even small improvements in the targeting there can lead to big increases in CTR and CPC, so Google is very focused on squeezing the most out of this. And the recent acquisition of DoubleClick (banner ads) increases their reach to many more sites and types of advertisers (more "branding" buys)... I also feel that because Google sells ads using an auction mechanism, with different prices for each keywords, changing day-by-day, that their pricing power is actually easier to use than other businesses where prices are more stable and increases are easier to spot. I could go on like this or a while, but I'll add just one more thing: Mobile. It's growing like crazy and about 400k Android devices are being activated every single day, and they have a Google search field on the home screen. On top of that, there are also many many Apple devices being activated, and while Apple hates Google right now and might tend to favor Microsoft (who they don't exactly love either), it's very very likely that a majority of Apple users use Google as their main search, and there's probably a correlation between the number of searches you do in a day and the likelihood that you use Google (in my experience, Google wins the power-user market hands down). Even with more casual users, Google has great brand and mindshare (definitely one of the most valuable brands in the world). If I gave a smartphone (Android, iPhone, RIM, even Windows) to my father, or to almost anyone I know, they wouldn't ask: "Where's the search engine on this? I don't care what it is...". They'd ask: "How do I Google something on this?". That's very powerful, and it's not exactly like Apple or RIM or anyone can block Google or make it hard to use it on their device, not without pissing off many users and making them feel manipulated. (and I'll add quickly that Google has tons of very valuable geo-data that they've been gathering for years for Google Maps, Google StreetView, and Google Earth that will be very valuable on mobile). I could also talk about why I think Chrome is brilliant, or the Cloud strategy, or GMail (people tend to spend all day in their email, and having TWO different ways to do Google searches at the top of the screen has great value), etc, but you get the idea... The way I look at Google, they are the best narrow artificial intelligence company in the world (as opposed to 'general artificial intelligence'), and their main weapons are their brains and the niches they picked (search and advertising). Like a good insurance company, they're turning smarts into cash.

Welcome to the board, thanks for writing!

Some speculation about MSFT and DELL: http://www.bloomberg.com/news/2011-06-21/rim-takeover-beckons-microsoft-with-cheapest-multiple-real-m-a.html

That's not what I said. XBOX is quite good, but SONY also dropped the ball somewhat in the same period, so the comparison between XBOX and Playstation isn't the same as Google Search and Bing, because Google isn't going the way of Sony right now. When your competitors shoot themselves in the foot, that has to be taken into account in the calculations...

XBOX is probably right, though that's partly because SONY has been going downhill for a long time and there's no competitor of the caliber of GOOG of AAPL in that field. But to me Bing is a distant second and my experience has been that the quality of results is poorer than with Google (not to mention that it's slower and has fewer features). I also think it looks bad that they've been caught copying results from Google (despite denying it): http://googleblog.blogspot.com/2011/02/microsofts-bing-uses-google-search.html

What has Microsoft copied and made better in the past 10 years? Honest question. I can't think of anything...

The image section of Bing doesn't have any obvious way to do a search by image (either to drag and drop an image, or upload it, or send an image URL) the way that Google's new Image Search does. Maybe it's because I'm in Canada..? Can anyone in the US confirm that Bing allows image search in the way that Google now allows?

Could you point me to where that's possible? I haven't found voice search or search by image on Bing. Thanks. Google has those features live on its site, I've used both today.

Google's way ahead of you. Voice and image searches, for both mobile and desktop: http://googleblog.blogspot.com/2011/06/knocking-down-barriers-to-knowledge.html

Indeed, but sometimes they're right...

I also wish they had the whole newspaper articles, but it would probably have been hard to get the rights to them, hence the "fair use" snippets.

Had problem for the past few days, but it seems better right now. It comes and goes...

Nibbled on some GOOG today. I agree with Charlie Munger on the size of their moat, and I think they'll also do pretty well in mobile and cloud services. Their ad platform is basically infrastructure now, and I don't really see what could kill it in the next decade, so they should keep capturing a good fraction of the growth in advertising online and on mobile (with nice margins) for the foreseeable future.

Down close to 10% YTD, but feeling very comfortable with my portfolio and I'm kind of glad to be down since it means that stuff I like is cheap enough to keep buying.

I've got more ideas than cash right now. About half of my 8 portfolio stocks (my fave businesses right now) are cheap right now (other half are about fairly valued), and I'm getting tempted to add GOOG as a 9th if it keeps going down like that :)

http://www.reuters.com/finance/stocks/GOOG.O/key-developments/article/2345579

I'd like to second oec2000.

Hi all, I have the impression that Canadian real estate has a good chance of getting into trouble within a few years, and I figure that REITs might be a good place to look for bargains when that happens. Problem is, I don't know much about how to evaluate REITs, so I've decide to try to learn enough so that I'm ready to act if an opportunity presents itself (or I might decide not to touch this stuff once I know more about it). Anyway, I'd love some pointers on what matters when trying to evaluate a REIT, which are the most important metrics. Is it even possible to get a good sense of quality from the numbers, or do you absolutely need to have deep on-the-ground knowledge of the local RE markets in which they operate? At a quick glance I think RioCan and H&R look better than the others I've seen, but I know this doesn't mean much since I don't know if I'm looking at the right things...

http://blogs.wsj.com/marketbeat/2011/06/15/berkshire-hathaway-shares-creeping-closer-to-book-value/ (mostly repeats what we've said here)

Thanks for posting!

I just listened to the Q1 call. DP is on track, exchange rate putting some pressure, but they estimate it at around 650/ton shipped, and 1900/ton as a 'sustainable' price for DP, so that's an excellent margin. They looked at acquisitions for non-woven wallpaper but didn't find anything that had the right equipment, so they're looking at expanding some more within Dresden. Nothing specific about a new DP acquisition, except that they're still looking, but a quebec paper quoted the mayor of LSQ saying that an announcement could be made bout the Domtar plant there within about a month, and the rumors are that FTP is the potential acquirer. we'll have to wait and see..

3 for 1 share split passed. Looks like they want to do some buybacks: http://www.theglobeandmail.com/globe-investor/news-sources/?data-ipsquote-timestamp=20110615&archive=ccnm&slug=201106150705095001

Q1 results: http://www.marketwire.com/press-release/fortress-paper-announces-first-quarter-2011-results-tsx-ftp-1526836.htm Conference call tomorrow morning.

Anyone has an estimate of how much they made on it? Thx.

Quarter results coming tomorrow after market close. Selling at 28.85 right now (410m market cap), seems VERY undervalued based on current info, but we'll see what they say on the conf call on Wed...