Liberty Posted May 16, 2011 Share Posted May 16, 2011 A lot of people here are investing in GOOG, especially at recent prices (down 17% in the past 3 months), yet we didn't have a thread to discuss our favorite ad-company-that-masquerades-as-a-search-company ;) Link to comment Share on other sites More sharing options...
FFHWatcher Posted May 16, 2011 Share Posted May 16, 2011 How do you know that a lot of people here are investing in GOOG? Shouldn't there be some sort of write up/analysis that goes along with the post? (I am lazy). Link to comment Share on other sites More sharing options...
gfp Posted May 16, 2011 Share Posted May 16, 2011 I was surprised to see Glenn Greenberg of Brave Warrior Capital selling a quarter of his position in the recent 13F. He had always been very bullish on Google in various interviews I read. http://www.dataroma.com/m/holdings.php?m=CCM Link to comment Share on other sites More sharing options...
Guest VAL9000 Posted May 17, 2011 Share Posted May 17, 2011 I saw this today: http://www.bloomberg.com/news/2011-05-16/google-plans-to-sell-3-billion-of-bonds-in-its-debut-three-part-offering.html Seems to be in line with the concerns voiced on this board regarding repatriation taxes. Google's such a crazy company to try to value. On one hand you have a great growth trend in a highly profitable business with economics that lend themselves well to the dominant player. There are only one or two real competitors worldwide.. It's a dream come true! On the other hand, you have this: Android Android G1 Blogger Gmail Google Ad Manager Google AdSense Google AdWords Google Alerts Google Analytics Google App Engine Google Apps Google Blog Search Google Book Search Google Buzz Google Calendar Google Checkout Google Chrome Google Chrome Netbook Google Chrome OS Google Code Google Contacts Data API Google Custom Search Google Desktop Google Docs Google Earth Google Finance Google Friend Connect Google Gears Google Groups Google Health Google Images Google Labs Google Latitude Google Local Google Maps Google Mini Search Appliance Google Mobile Application Google Moderator Google News Google Notebook Google Patent Search Google Places Google Product Search Google Profiles Google Reader Google Scholar Google Search Google Search Appliance Google Site Search Google Sites Google SketchUp Google Social Graph API Google Special Searches Google TV Google Talk Google Toolbar Google Translate Google Video Google Voice Google Wave Google Web Toolkit Google eBooks Knol Lively Nexus One Nexus S Orkut Picasa Pubsubhubbub Sidewiki iGoogle YouTube Enterprise Search & much much more. -- Few of which pay their way. Plus investments in clean tech, cars that drive themselves, various random acquisitions, yadda yadda yadda. There's so much failure at Google. You really need to have conviction in the idea that what you're witnessing is the process of innovation unfold in a very public way. These guys have serious cojones to experiment in the market that way. They've done a good job at changing the brand Google from "search" to "smart people who do crazy things". I truly believe that the outcome of this process will be another big hit, but it's hard to say when that will happen or what it will look like. Personally, I would love to own a car that drives itself. I would probably pay a 20-50% premium for a car with that feature. Link to comment Share on other sites More sharing options...
Liberty Posted May 17, 2011 Author Share Posted May 17, 2011 How do you know that a lot of people here are investing in GOOG? Shouldn't there be some sort of write up/analysis that goes along with the post? (I am lazy). This is based on what people have been saying in various threads. I don't have a crystal ball. And yes, an analysis would be best, but I don't have one right now and I figure that the next best thing is to start a thread anyway because it'll probably grow into something pretty useful. Sometimes people just need a canvas before they start painting... Link to comment Share on other sites More sharing options...
Myth465 Posted May 17, 2011 Share Posted May 17, 2011 Personally, I would love to own a car that drives itself. I would probably pay a 20-50% premium for a car with that feature. These would sell like crazy in Texas. No more drunk driving. Link to comment Share on other sites More sharing options...
alpha231616967560 Posted May 17, 2011 Share Posted May 17, 2011 I saw this today: http://www.bloomberg.com/news/2011-05-16/google-plans-to-sell-3-billion-of-bonds-in-its-debut-three-part-offering.html Seems to be in line with the concerns voiced on this board regarding repatriation taxes. Google's such a crazy company to try to value. On one hand you have a great growth trend in a highly profitable business with economics that lend themselves well to the dominant player. There are only one or two real competitors worldwide.. It's a dream come true! On the other hand, you have this: Android Android G1 Blogger Gmail Google Ad Manager Google AdSense Google AdWords Google Alerts Google Analytics Google App Engine Google Apps Google Blog Search Google Book Search Google Buzz Google Calendar Google Checkout Google Chrome Google Chrome Netbook Google Chrome OS Google Code Google Contacts Data API Google Custom Search Google Desktop Google Docs Google Earth Google Finance Google Friend Connect Google Gears Google Groups Google Health Google Images Google Labs Google Latitude Google Local Google Maps Google Mini Search Appliance Google Mobile Application Google Moderator Google News Google Notebook Google Patent Search Google Places Google Product Search Google Profiles Google Reader Google Scholar Google Search Google Search Appliance Google Site Search Google Sites Google SketchUp Google Social Graph API Google Special Searches Google TV Google Talk Google Toolbar Google Translate Google Video Google Voice Google Wave Google Web Toolkit Google eBooks Knol Lively Nexus One Nexus S Orkut Picasa Pubsubhubbub Sidewiki iGoogle YouTube Enterprise Search & much much more. -- Few of which pay their way. Plus investments in clean tech, cars that drive themselves, various random acquisitions, yadda yadda yadda. There's so much failure at Google. You really need to have conviction in the idea that what you're witnessing is the process of innovation unfold in a very public way. These guys have serious cojones to experiment in the market that way. They've done a good job at changing the brand Google from "search" to "smart people who do crazy things". I truly believe that the outcome of this process will be another big hit, but it's hard to say when that will happen or what it will look like. Personally, I would love to own a car that drives itself. I would probably pay a 20-50% premium for a car with that feature. It's an interesting list, because I checked a few, and most of them do lead to some sort of revenue for Google, or they will in the future. Whether it is a click ad, an opportunity to sell data about users to corporate clients, a licensing fee, a royalty or some other stream of revenue, these folks are the world's experts on how to monetize a website / application, etc. They are becoming the most intelligent (savvy) company in the world as far as user behavior goes (remember that other companies have been paying big bucks for this for a long time). So I have no problem with Google casting a few lines. They have a lot more opportunities to monetize their services than they are actually taking, and for most of these, they lead to a stream of revenue somewhere down the click path. Link to comment Share on other sites More sharing options...
claphands22 Posted May 17, 2011 Share Posted May 17, 2011 Google is interesting. Adjust for cash per share and using analyst estimates for 2012, GOOG has a cash adjusted P/E of 11.37 Not bad for a business that has a strong moat, high ROIC, reasonable growth prospects and lots of free options with all their other projects. That all being said, I'm currently reading In The Plex, the google book Munger recommended..I'm not finished with the book yet, but I'm not too keen on Larry Page at this point. Link to comment Share on other sites More sharing options...
prunes Posted May 17, 2011 Share Posted May 17, 2011 http://gregmankiw.blogspot.com/2011/05/google-plays-yield-curve.html Link to comment Share on other sites More sharing options...
DCG Posted May 17, 2011 Share Posted May 17, 2011 I saw this today: http://www.bloomberg.com/news/2011-05-16/google-plans-to-sell-3-billion-of-bonds-in-its-debut-three-part-offering.html Seems to be in line with the concerns voiced on this board regarding repatriation taxes. Google's such a crazy company to try to value. On one hand you have a great growth trend in a highly profitable business with economics that lend themselves well to the dominant player. There are only one or two real competitors worldwide.. It's a dream come true! On the other hand, you have this: Android Android G1 Blogger Gmail Google Ad Manager Google AdSense Google AdWords Google Alerts Google Analytics Google App Engine Google Apps Google Blog Search Google Book Search Google Buzz Google Calendar Google Checkout Google Chrome Google Chrome Netbook Google Chrome OS Google Code Google Contacts Data API Google Custom Search Google Desktop Google Docs Google Earth Google Finance Google Friend Connect Google Gears Google Groups Google Health Google Images Google Labs Google Latitude Google Local Google Maps Google Mini Search Appliance Google Mobile Application Google Moderator Google News Google Notebook Google Patent Search Google Places Google Product Search Google Profiles Google Reader Google Scholar Google Search Google Search Appliance Google Site Search Google Sites Google SketchUp Google Social Graph API Google Special Searches Google TV Google Talk Google Toolbar Google Translate Google Video Google Voice Google Wave Google Web Toolkit Google eBooks Knol Lively Nexus One Nexus S Orkut Picasa Pubsubhubbub Sidewiki iGoogle YouTube Enterprise Search & much much more. Not really sure what you mean by 'on the other hand' they have those things. Adsense/Adwords is their core business. A lot of the things you listed there are small things like browser add ons. Yes, they have made some mistakes (Google Wave & Buzz), and I question how freely they spend $ sometimes, but a good majority of things on that list are great products, many of wich they either monetize through Ads or helps direct people to their core business, or at the very least has helped build the Goole brand. Things like Android, GMail, Google Maps, Google Analytics, Google Alerts, Google Talk, Google Voice, Picasa and others are all outstanding products. What I don't like seeing Google continuing to try to get into is commerce. Google Shopping is very good, but when they've tried to handle selling products themselves, they've struggled. Them trying to sell the Nexus One themselves was a mess, as they completely overlooked the fact that people will need tech support and customer service that they were not prepared for. While Android is very good, the Android Marketplace continues to be a bit of a mess. I don't have much confidence in their ability to sell things like books and music. Even their Chrome App & Extensions store is pretty damn confusing. Link to comment Share on other sites More sharing options...
rkbabang Posted May 17, 2011 Share Posted May 17, 2011 Personally, I would love to own a car that drives itself. I would probably pay a 20-50% premium for a car with that feature. Me too, but I think this has the potential to be a bigger idea than just selling driverless cars for personal use. I think of all the things Google is doing this has the potential to be the most game changing. If, of course, they can pull it off. The A.I. would have to be rock solid and just simply work. Imagine if you could just send your 10yr old off to grandma's 60 miles away alone in the car? This may even create other options which make the need for most private car ownership uneconomical in comparison for most people. Imagine a subscription service for everyday vehicles and maybe even fractional ownership service "netcars" for luxury vehicles. You would always use exactly the vehicle for the task. If you are going out to dinner with the wife, push a few buttons on your smartphone and a car comes around the corner in a few minutes to pick you up and take you to the restaurant. After the restaurant you call again and another car comes zipping by to take you home. Going to the movies with your 3 kids and 6 of their friends you push a few buttons and a 10 passenger vehicle comes and gets you. Go to the grocery store in a tiny vehicle, come home in one with a large cargo compartment. Without the need of drivers order pizza you get a pin number a vehicle shows up in your driveway that is just a big box on wheels with a number of heated compartments. You punch in your pin and one of the compartments pops open, you take out your order, close the compartment, and the vehicle zips off to either the next stop or back to the pizza place. You need 15 sheets of plywood, you order it online and within 20 minutes a vehicle pulls up in your driveway or jobsite with the wood for you to unload, almost like ordering pizza. Would grocery delivery be cheaper and offered almost everywhere if there was no need to pay drivers? Almost instant delivery of all kinds of things would be more economical. Think of the mobility issues the very young, very old, and the disabled have in our current society and how this would change their lives. If this works and works well, you could see fewer cars on the road and a much more efficient transportation system where everyone gets to where they want to go cheaper and easier than now and everyone gets the things they need delivered to them whenever they want them. This could change almost everything about how we live our daily lives. --Eric Link to comment Share on other sites More sharing options...
Guest VAL9000 Posted May 17, 2011 Share Posted May 17, 2011 Not really sure what you mean by 'on the other hand' they have those things. Adsense/Adwords is their core business. A lot of the things you listed there are small things like browser add ons. Yes, they have made some mistakes (Google Wave & Buzz), and I question how freely they spend $ sometimes, but a good majority of things on that list are great products, many of wich they either monetize through Ads or helps direct people to their core business, or at the very least has helped build the Goole brand. Things like Android, GMail, Google Maps, Google Analytics, Google Alerts, Google Talk, Google Voice, Picasa and others are all outstanding products. I meant that it makes it hard to value Google. The ad business is clear enough. But all this other stuff is a net cost and determining what the value is can be tricky. It's harder even to value Google Voice vs. Skype - there's no visibility and the products are partially integrated. There's no cohesive product strategy (yet), and so the vision of the company's many, many offerings are cloudy. I didn't say it was net bad. I think I was pretty clear about what I think we're seeing (process of innovation). What I don't like seeing Google continuing to try to get into is commerce. Google Shopping is very good, but when they've tried to handle selling products themselves, they've struggled. Them trying to sell the Nexus One themselves was a mess, as they completely overlooked the fact that people will need tech support and customer service that they were not prepared for. While Android is very good, the Android Marketplace continues to be a bit of a mess. I don't have much confidence in their ability to sell things like books and music. Even their Chrome App & Extensions store is pretty damn confusing. I see commerce as unavoidable for Google. They aren't very good at it now, but they will figure it out. It's necessary to capture the full spectrum of mobile platform capabilities (e.g. app store purchases, media purchases). Here's a thought, does Google's inability to play well with others hold it back from further commercial success? Nexus and bidding up spectrum are two fine examples in telecom. A lack of music and movie deals are two more. The book search deal still another. They managed to partner with Sony on TV and Sprint on Google Voice, so there are some valid examples of success in that area.. But I'd like some opinions on that idea. Link to comment Share on other sites More sharing options...
Guest VAL9000 Posted May 17, 2011 Share Posted May 17, 2011 rkbabang, Interesting thoughts. I came up with another. I was driving (yes driving!) to work today and got a little irritated with the number of huge 18-wheelers on the highway. Then I thought, hey, if Google could automate driving, they could own the whole trucking / logistics business. Result: cheaper, more efficient transit. There's the power of tech invading yet another industry. Link to comment Share on other sites More sharing options...
Liberty Posted May 17, 2011 Author Share Posted May 17, 2011 Google seems to live by "release early, release often", and if something doesn't work, it doesn't matter too much.. Apple does its beta testing in private and only releases when things are polished enough. These two approaches can be valid. Hardware is more permanent, so it needs to be better from the start. But with software, Google's approach works. And a lot of what they do is just to widen the moat a bit or help the brand's mindshare. Link to comment Share on other sites More sharing options...
rkbabang Posted May 17, 2011 Share Posted May 17, 2011 rkbabang, Interesting thoughts. I came up with another. I was driving (yes driving!) to work today and got a little irritated with the number of huge 18-wheelers on the highway. Then I thought, hey, if Google could automate driving, they could own the whole trucking / logistics business. Result: cheaper, more efficient transit. There's the power of tech invading yet another industry. Absolutely. Although I don't envision Google making the vehicles themselves, more them selling/licensing the software and maybe small control modules at most to vehicle manufacturers of all types. I can't see Google manufacturing an 18 wheeler nor a passenger car. But if they own the market for the automation, they will profit regardless of who makes the vehicles themselves. --Eric Link to comment Share on other sites More sharing options...
Liberty Posted May 20, 2011 Author Share Posted May 20, 2011 I thought this piece was pretty good: http://abovethecrowd.com/2011/03/24/freight-train-that-is-android/ So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it. Link to comment Share on other sites More sharing options...
goldfinger Posted May 20, 2011 Share Posted May 20, 2011 I thought this piece was pretty good: http://abovethecrowd.com/2011/03/24/freight-train-that-is-android/ So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it. Exactly. It has a great business but it needs to spend energy in diversion wars exactly like Microsoft. Link to comment Share on other sites More sharing options...
txlaw Posted May 21, 2011 Share Posted May 21, 2011 I thought this piece was pretty good: http://abovethecrowd.com/2011/03/24/freight-train-that-is-android/ So here is the kicker. Android, as well as Chrome and Chrome OS for that matter, are not “products” in the classic business sense. They have no plan to become their own “economic castles.” Rather they are very expensive and very aggressive “moats,” funded by the height and magnitude of Google’s castle. Google’s aim is defensive not offensive. They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free). Because these layers are basically software products with no variable costs, this is a very viable defensive strategy. In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it. Exactly. It has a great business but it needs to spend energy in diversion wars exactly like Microsoft. I disagree with this assessment. Android and Chrome/Chrome OS are both moat enhancing and revenue generating projects. The more people use the Internet/web, the more money Google makes. Remember, Google doesn't just provide Google services like search, YouTube, Gmail, and Maps. Google also powers the display of ads on many third party websites. If Google can accelerate every person's use of the Internet, they will accelerate the overall interaction with Google (through use of Google services and websites that use Google ads and analytics) and make more money. Developing Android, Chrome and Chrome OS are ways to accelerate the use of the Internet. That's why Eric Schmidt has said that Android pays for itself. Much of the new ad revenue that has come online, so to speak, and that will come online has made Android a phenomenal investment. Think about it this way. Before iOS and Android, people didn't really use the Internet on anything but their computers. Now, people can use the Internet on multiple devices and for a bigger slice of their time. I'm in the line at the DMV and bored to death, so I might use my Android phone to read some publication, which displays ads delivered by Google. Or I might watch a video on YouTube. Or I might do a search for some product I need to get for the weekend. Very smart. And it's not free, really. Advertisers help monetize the software. And consumers allow Google to collect data on their preferences, either on a personalized basis or in the aggregate. There's value in information. Link to comment Share on other sites More sharing options...
Guest VAL9000 Posted May 21, 2011 Share Posted May 21, 2011 I disagree with this assessment. Android and Chrome/Chrome OS are both moat enhancing and revenue generating projects. I agree with the disagree, but I disagree with both assessments. I see Android/Chome/Chrome OS as mildly moat enhancing and eventually seriously revenue generating. My thoughts on these products being mildly moat enhancing come from analogies in the search market to date. Google was able to dominate search with zero interest in the OS and Browser markets. Google's market share in search hasn't grown since the wide adoption of Android or the introduction of Chrome. Inverting the process, Microsoft's browser has steadily lost market share over time, whereas Chrome and Firefox have steadily gained over time. Switching the default search engine is so much easier than switching the whole browser, and yet while people are abandoning IE, the effect on search choice has been muted. I don't see how Google enhances its moat all that much by introducing client-side applications and operating systems, when it's been shown that you can win without them, and you can lose with them. On the revenue enhancement side, if Google doesn't learn how to make Android seriously profitable for themselves, then it's because they've lost. I come to this conclusion in a few different ways, but the main ones are 1) there's already a profitable and proven business model for Android, 2) monetizing Android only matters if you win, 3) you can't subsidize forever. 1 - iOS exists. It is hugely popular and hugely profitable. You can trace iOS's roots back to the iPod and iTunes, which is how I prefer to see the evolution of this business model. iOS is the king daddy of media delivery, and Apple manages to both make a huge profit on the hardware, and make a huge and passive profit on the software (media). If Google can't replicate this same system with Android, they will always be playing catch-up to Apple's media machine. The scary part is the hold on consumers gets stronger every day: as in, why switch to Android? I would have to repurchase all of my apps, music and movies that I own in iTunes. Scary view of media "ownership", and a very attractive moat for Apple. 2 - The law of the internet seems to be "capture the market, then monetize" (e.g. twitter, facebook, youtube, linkedin). If Google fails at the second part, it's because they're still trying to capture the market with a superior product. View this through the YouTube lens. This purchase had been heavily subsidized for years, ensuring that Google would stomp out all competition. Only now that practically no serious competitors remain are they figuring out how to end the cash bleed on this beast. Android is nascent as a business, but there is at least one model and something will be implemented. 3 - Dovetailing nicely from 2, you really can't continue to subsidize forever. I know that money flows like water In The Plex, so I'll ignore the basic economic arguments here. Instead I'll focus on what happens with competition. If Android is winning with a no-money-made business model, and Apple has a money making business model, well, Apple will win eventually. Apple will be able to pay more to beat Google at development, at marketing, at incentivizing users, and all other things. Google subsidizing Android against all that forever is just not possible. In this case, the economic potentials are really, really, really big. If you can capture 100% of the media delivery platform, then you become effectively the world's global content provider. It's such a big business that I can't even begin to compute what it would be worth. Regardless, the honey pot is enormous, and if you can't figure out a way to make it pay, then you will have it taken away by someone who can. Link to comment Share on other sites More sharing options...
Liberty Posted May 21, 2011 Author Share Posted May 21, 2011 I don't see how Google enhances its moat all that much by introducing client-side applications and operating systems, when it's been shown that you can win without them, and you can lose with them. I think it's a defensive move, and might widen the moat even if it doesn't actually increase their market share much. They don't want to lose control over the layer that separates them from their customers. They don't want Apple or Microsoft to somehow say "screw you google, on our hardware/OS, your products will now be hard to use and not the default choice" or "something's not working? you have to go through us to fix it and we'll take our sweet ass time". Unfortunately for them, they haven't found a way in Facebook's walled garden yet... Right now a lot of people will still switch back to Google, but over time I think such tactics could erode the moat and brand... Link to comment Share on other sites More sharing options...
goldfinger Posted May 21, 2011 Share Posted May 21, 2011 If Google can accelerate every person's use of the Internet, they will accelerate the overall interaction with Google (through use of Google services and websites that use Google ads and analytics) and make more money. Developing Android, Chrome and Chrome OS are ways to accelerate the use of the Internet. That's why Eric Schmidt has said that Android pays for itself. Much of the new ad revenue that has come online, so to speak, and that will come online has made Android a phenomenal investment. Look I have been in this business for 2 decades. I have retro-engineered some Google products for some tactical reasons in the past. A lot of companies want to directly or indirectly increase internet use. Maybe a third of the Silicon Valley is dedicated to that or some of that to some extent somewhere in business models. What makes users go back to Google products? A combination of psychological presence, functional presence and completeness, product relevance, technological excellence and accessibility. When I speak of diversion wars I mean maintaining relevance and completeness. However, for many things, I can switch out of Google now. Recently I complemented some searches I made with Bing. I was truly impressed by the results. Many users I know spend their time on Yahoo (legacy) and Facebook (new exciting stuff). That is it! If they get access to search from any of the two and are led to believe that the results are close to as good as with Google they will just not think twice. I am not attacking or criticizing Google. I am just saying that competitive pressures are higher than estimated most of the time. Link to comment Share on other sites More sharing options...
txlaw Posted May 21, 2011 Share Posted May 21, 2011 My thoughts on these products being mildly moat enhancing come from analogies in the search market to date. Google was able to dominate search with zero interest in the OS and Browser markets. Google's market share in search hasn't grown since the wide adoption of Android or the introduction of Chrome. Inverting the process, Microsoft's browser has steadily lost market share over time, whereas Chrome and Firefox have steadily gained over time. Switching the default search engine is so much easier than switching the whole browser, and yet while people are abandoning IE, the effect on search choice has been muted. I don't see how Google enhances its moat all that much by introducing client-side applications and operating systems, when it's been shown that you can win without them, and you can lose with them. There are two ways that these projects are moat enhancing. First, as Liberty argues, establishing a beach head on all devices that need an OS layer is vital to ensure that companies like Microsoft don't have the ability to break GOOG's services or displace them by replacing with their own easy to access services. Remember, MSFT notoriously tried to: (1) implement a shitty version of Java that would cause Java itself to be abandoned; and (2) dominate in the browser market by taking advantage of the QWERTY factor (see the browser wars). MSFT did this because they were afraid that these two technologies would eventually displace or lead to the decreased profitability of the MSFT ecosystem. "Embrace, extend and exterminate" was the motto at Mr. Softee. GOOG engineers are keenly aware of this threat and need to make sure that their products are not broken or fail to reach full potential due to not being in the OS layer at all. Second, developing these projects are moat enhancing because the core Google service, search/augmented reality/AI, is enhanced by playing a large part in the OS layer due to the virtuous cycle aspect of the service. The more information you soak up, the better your service gets. The better your service gets, the more information you soak up. And having client side apps helps too. Take Google Maps/Google Earth. Location data is fundamental to AR and AI, and it's obvious that these services make Google more intelligent. On the revenue enhancement side, if Google doesn't learn how to make Android seriously profitable for themselves, then it's because they've lost. I come to this conclusion in a few different ways, but the main ones are 1) there's already a profitable and proven business model for Android, 2) monetizing Android only matters if you win, 3) you can't subsidize forever. Android is already profitable. Android has brought in revenue that would not otherwise have accrued to Google. That's why Eric Schmidt has said that Android pays for itself. And that's what makes Android so difficult to deal with. Mobile device manufacturers get to use Android as the OS for their new devices and they get part of the rev share that results from that. It's a win/win for manufacturers and Google, who have to compete with Apple. Additionally, we have to remember that there is a temporal element to the monetization of search and other Google services. Google benefits if you can interact with Google services at any time with ease. In fact, any time you need to do something, if Google can help you out with that, they have a share of your attention, which they may be able to monetize. Android, Chrome, and Chrome OS help increase Google's time share on a per capita basis by helping consumers take full advantage of the Internet. I wouldn't be surprised if MSFT eventually switches to the same biz model for Win Phone. 1 - iOS exists. It is hugely popular and hugely profitable. You can trace iOS's roots back to the iPod and iTunes, which is how I prefer to see the evolution of this business model. iOS is the king daddy of media delivery, and Apple manages to both make a huge profit on the hardware, and make a huge and passive profit on the software (media). If Google can't replicate this same system with Android, they will always be playing catch-up to Apple's media machine. The scary part is the hold on consumers gets stronger every day: as in, why switch to Android? I would have to repurchase all of my apps, music and movies that I own in iTunes. Scary view of media "ownership", and a very attractive moat for Apple. I would agree that Apple's media platform, ITunes, strengthens Apple's moat. However, I would not characterize iOS as tracing its roots to iTunes. Rather, I see it as a consumer-facing OS layer that traces its roots to OS X, and that represents Jobs and Co's understanding of how things are evolving in a world where ubiquitous connectivity is the norm. Take a look at Lion, the next version of the MacOS. You will see that iOS and OS X are converging. ---- The biz model is simply different for Apple. Both iOS and Android are profitable for their companies. Link to comment Share on other sites More sharing options...
txlaw Posted May 21, 2011 Share Posted May 21, 2011 If Google can accelerate every person's use of the Internet, they will accelerate the overall interaction with Google (through use of Google services and websites that use Google ads and analytics) and make more money. Developing Android, Chrome and Chrome OS are ways to accelerate the use of the Internet. That's why Eric Schmidt has said that Android pays for itself. Much of the new ad revenue that has come online, so to speak, and that will come online has made Android a phenomenal investment. Look I have been in this business for 2 decades. I have retro-engineered some Google products for some tactical reasons in the past. A lot of companies want to directly or indirectly increase internet use. Maybe a third of the Silicon Valley is dedicated to that or some of that to some extent somewhere in business models. What makes users go back to Google products? A combination of psychological presence, functional presence and completeness, product relevance, technological excellence and accessibility. When I speak of diversion wars I mean maintaining relevance and completeness. However, for many things, I can switch out of Google now. Recently I complemented some searches I made with Bing. I was truly impressed by the results. Many users I know spend their time on Yahoo (legacy) and Facebook (new exciting stuff). That is it! If they get access to search from any of the two and are led to believe that the results are close to as good as with Google they will just not think twice. I am not attacking or criticizing Google. I am just saying that competitive pressures are higher than estimated most of the time. I don't disagree that competitive pressures are high. There is room for more than one big dog in the search/AI/AR space. In fact, in the past I have characterized Google search as Coke, Bing as Pepsi, and Wolfram Alpha as Dr. Pepper. Facebook, no doubt, will be gunning for Google as well. And there's room for other competitors for other Google services. However, the pie is greatly expanding for this market. To quote Patrick Byrne (aka Wacky Patty): “It’s like swimming around in Lake Michigan and asking did you bump into each other. The world is so much bigger than anyone gets. It’s so enormous.” Android is helping Google capture market/time share, and this market/time share is already being monetized. Therefore, to say that Android, Chrome, and Chrome OS are merely defensive products is incorrect. That's why I disagreed with the article. Link to comment Share on other sites More sharing options...
goldfinger Posted May 21, 2011 Share Posted May 21, 2011 If Google can accelerate every person's use of the Internet, they will accelerate the overall interaction with Google (through use of Google services and websites that use Google ads and analytics) and make more money. Developing Android, Chrome and Chrome OS are ways to accelerate the use of the Internet. That's why Eric Schmidt has said that Android pays for itself. Much of the new ad revenue that has come online, so to speak, and that will come online has made Android a phenomenal investment. Look I have been in this business for 2 decades. I have retro-engineered some Google products for some tactical reasons in the past. A lot of companies want to directly or indirectly increase internet use. Maybe a third of the Silicon Valley is dedicated to that or some of that to some extent somewhere in business models. What makes users go back to Google products? A combination of psychological presence, functional presence and completeness, product relevance, technological excellence and accessibility. When I speak of diversion wars I mean maintaining relevance and completeness. However, for many things, I can switch out of Google now. Recently I complemented some searches I made with Bing. I was truly impressed by the results. Many users I know spend their time on Yahoo (legacy) and Facebook (new exciting stuff). That is it! If they get access to search from any of the two and are led to believe that the results are close to as good as with Google they will just not think twice. I am not attacking or criticizing Google. I am just saying that competitive pressures are higher than estimated most of the time. I don't disagree that competitive pressures are high. There is room for more than one big dog in the search/AI/AR space. In fact, in the past I have characterized Google search as Coke, Bing as Pepsi, and Wolfram Alpha as Dr. Pepper. Facebook, no doubt, will be gunning for Google as well. And there's room for other competitors for other Google services. However, the pie is greatly expanding for this market. To quote Patrick Byrne (aka Wacky Patty): “It’s like swimming around in Lake Michigan and asking did you bump into each other. The world is so much bigger than anyone gets. It’s so enormous.” Android is helping Google capture market/time share, and this market/time share is already being monetized. Therefore, to say that Android, Chrome, and Chrome OS are merely defensive products is incorrect. That's why I disagreed with the article. Understand now. Your points make total sense. You are right! Link to comment Share on other sites More sharing options...
Guest VAL9000 Posted May 21, 2011 Share Posted May 21, 2011 Like I said, I think that this stuff is mildly moat enhancing, but I don't think that the examples that have been brought up are terribly significant in terms of defending AdWords and AdSense (which I consider the castle). I give credit to preemptively defending against technical restrictions and adding to the pile of data that Google can mine to improve its search. But I can't say that I agree with the idea that aggressively pursuing the mobile operating space is really about making search/context that much better, or defaulted to Google on those devices. The payoff is tiny compared to what's possible. And to be sure, Android's "profitability" is a joke. This isn't a business worth caring about in its current state. What I can tease from Schmidt's cryptic statement is that if you assign the ads clicked on by Android users to the Android business unit, then it's profitable. This seems like a weak attempt to appease people that you shouldn't need to appease. However, I would not characterize iOS as tracing its roots to iTunes. Rather, I see it as a consumer-facing OS layer that traces its roots to OS X, and that represents Jobs and Co's understanding of how things are evolving in a world where ubiquitous connectivity is the norm. Take a look at Lion, the next version of the MacOS. You will see that iOS and OS X are converging. iOS isn't anything without the App Store, so you can't really break them up. The App Store is iTunes for software. Hence, I trace the business model roots back to iTunes (not the software roots, which I think is what you're getting at, which on that we can agree). iOS and OS X converging makes a lot of sense and will further strengthen the ecosystem as well as Apple's moat. I think the major difference we have is not in what Android does.. I agree that it does all of the things you say that it does. My main point is that Android isn't a moat. It's a castle. If Google misses the opportunity to make Android hugely profitable then it will be a loss for everyone. Part of the reason why I hate myself for buying Apple devices is because I can see the hole that I'm digging myself into. Pretty soon I'll have more to lose by switching from Apple than to gain - even if the go-to-device were free. The world needs a serious competitor to the Apple ecosystem, otherwise the freedom that we enjoy today on our PCs will be seriously jeopardized in the "post-PC era". Link to comment Share on other sites More sharing options...
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