GOOGL - Google

[Ross812]

This just sounds like justification for the company to throw more money at the wall and see what sticks. Now they can say - you are not investing in Google, you are investing in alphabet and alphabet is a technology venture capital group. This is not a positive.

 

A positive would be a spin off of several trackers or independent companies. Have alphabet hold 10% of Google and have google turn into a dividend monster. Let alphabet use that to throw money around.

[merkhet]

This just sounds like justification for the company to throw more money at the wall and see what sticks. Now they can say - you are not investing in Google, you are investing in alphabet and alphabet is a technology venture capital group. This is not a positive.

 

A positive would be a spin off of several trackers or independent companies. Have alphabet hold 10% of Google and have google turn into a dividend monster. Let alphabet use that to throw money around.

 

I'm not 100% sure I understand the structure you're proposing, but it seems like what you're proposing will incur a significant amount of tax leakage.

[Ross812]

This just sounds like justification for the company to throw more money at the wall and see what sticks. Now they can say - you are not investing in Google, you are investing in alphabet and alphabet is a technology venture capital group. This is not a positive.

 

A positive would be a spin off of several trackers or independent companies. Have alphabet hold 10% of Google and have google turn into a dividend monster. Let alphabet use that to throw money around.

 

I'm not 100% sure I understand the structure you're proposing, but it seems like what you're proposing will incur a significant amount of tax leakage.

 

 

Thus far, an investment in google has been an investment in their search engine and you have to just accept the crap they area going to do on the side. They havn't had much success investing. Now they want to change their mission statement and say they are a multifaceted conglomerate that invests in technology. This sounds really exciting except they haven'y really made a tremendous amount of money do this so far. If they wanted to start a new standalone company that google spins off with a cash pile and IPO it to investors that's one thing. Creating an investment company with access to unlimited search cash flows when investors bought a search company is another.

 

At any rate, I still really like the Google search business, but this headline didn't make the Co. 6% more valuable. I sold this morning. I'll buy again when the market freaks out that revenue per click is falling or they buy something stupid and are punished for it.   

[merkhet]

I'm just pointing out that spinning off a standalone with a cash pile for the standalone company is very tax-inefficient. Think about Liberty Interactive's structure. QVC funds Liberty Ventures and Liberty Ventures' tax losses shield part of QVC's income and therefore also help to fund itself. If the two were separate entities, then you lose that tax shield benefit.

[Guest longinvestor]

I believe separating the product brand from the investment brand is what is happening here. May not be a bad approach, should something take the product brand down, the investment brand is not taken down the gutter with. I believe that GOOG has allowed too much product brand confusion already. Besides, search/ads for google, as dominant as it is today, is not something that has it's place carved out under the Sun for all time to come. Google's brand is not untouchable.

 

Besides BRK, two comparables (successful ones) that come to mind, in brand separation are: Danaher and Softbank. Softbank is perhaps the closest model in terms of context relevance.

[VAL9000]

This is probably a change for the better.  Google was operating just as Alphabet is going to operate and investors should know this.

 

The primary difference is that the results will be segmented out for financial reporting, so you'll be able to see more easily how amazing Google is and how unimpressive Nest is, for example.  Seems like an improvement for investors.

 

[portfolio14]

Search is a fantastic business, and Google has been diluting it with all kinds of other stuff because they don't have reinvestment opportunities in their core business to use all the cash it generates. This is like Visa or Mastercard buying movie studios and shrimp farms, to use the old Coke story...

 

This stuff might be good for society (R&D), and I'm not against it on that level. But I don't think it's very good for shareholders. The chances that these moonshots will ever be anywhere near as good businesses as search+advertising is very slim, so it's diworsification from a shareholder's point of view. Enough years of reinvestment in inferior businesses and at some point they become bigger than the fantastic core. For shareholders, they'd be much better off focusing on search and a few ancillary things that strengthen search and then doing buybacks and/or dividends with the cash.

 

But since I'm not a shareholder and it's not my capital, I'm glad they are doing R&D in clean energy and self-driving cars and medical science and all that. I love it! :)

 

IMO the best solution would be: If Larry and Sergey want to do moonshots, they can use some of their personal billions to do venture investments rather they use a public company as their piggy bank. Heck, if they had Google use its FCF to mostly do buybacks and dividends, they could fund their venture investments just from the divvys...

 

I had exactly the same line of thought this morning! I have never been able to convince myself to buy Google because of this issue.

 

What would've happened if Google were run by Tim Cook? ;-)

[jawn619]

http://www.theverge.com/a/sundars-google/sundar-pichai-interview-google-io-2015

[Liberty]

Interview with Eric Schmidt. Some interesting anecdotes:

 

https://medium.com/cs183c-blitzscaling-class-collection/cs183c-session-8-eric-schmidt-56c29b247998

[giofranchi]

I am reading [amazonsearch]How Google Works[/amazonsearch] by Eric Schmidt. And I find it very interesting.

I have a question for those who think Larry and Sergei engage in value destroying activities: is it simply because they are not good at what they are doing, or is it because technology works that way? I mean, isn’t technology much like venture capitalism? You bet on 10 small things, 9 go to zero, while one becomes really huge?

 

Thank you,

 

Gio

 

[Haasje]

I think the bear view of Page's investments is 1) acquisitions are done at high prices and add very little to earnings power right now. I think everyone interested should look into whether that is true or not and determine for themselves what they think of some of the major investments. how you judge it is quite subjective because acquisitions like YouTube, Android and the DoubleClick one do not contribute that much directly but its hard to argue they are not contributing indirectly. The Motorola one, obviously looks like a pretty big failure. Finally much of the acquisitions value is still tied to future cash flows. 2) Google likes to hire extremely expensive talent which it uses to build scaling auto solutions to diverse problems. I think it is very well possible the founders are overestimating the returns that this strategy yields on average, and where the return will go, for various reasons including not unimportantly their own success.

 

long Google  :D

 

 

[Patmo]

Search is a fantastic business, and Google has been diluting it with all kinds of other stuff because they don't have reinvestment opportunities in their core business to use all the cash it generates. This is like Visa or Mastercard buying movie studios and shrimp farms, to use the old Coke story...

 

This stuff might be good for society (R&D), and I'm not against it on that level. But I don't think it's very good for shareholders. The chances that these moonshots will ever be anywhere near as good businesses as search+advertising is very slim, so it's diworsification from a shareholder's point of view. Enough years of reinvestment in inferior businesses and at some point they become bigger than the fantastic core. For shareholders, they'd be much better off focusing on search and a few ancillary things that strengthen search and then doing buybacks and/or dividends with the cash.

 

But since I'm not a shareholder and it's not my capital, I'm glad they are doing R&D in clean energy and self-driving cars and medical science and all that. I love it! :)

 

IMO the best solution would be: If Larry and Sergey want to do moonshots, they can use some of their personal billions to do venture investments rather they use a public company as their piggy bank. Heck, if they had Google use its FCF to mostly do buybacks and dividends, they could fund their venture investments just from the divvys...

 

I had exactly the same line of thought this morning! I have never been able to convince myself to buy Google because of this issue.

 

What would've happened if Google were run by Tim Cook? ;-)

 

It would suck

[giofranchi]

I think the bear view of Page's investments is 1) acquisitions are done at high prices and add very little to earnings power right now. I think everyone interested should look into whether that is true or not and determine for themselves what they think of some of the major investments. how you judge it is quite subjective because acquisitions like YouTube, Android and the DoubleClick one do not contribute that much directly but its hard to argue they are not contributing indirectly. The Motorola one, obviously looks like a pretty big failure. Finally much of the acquisitions value is still tied to future cash flows. 2) Google likes to hire extremely expensive talent which it uses to build scaling auto solutions to diverse problems. I think it is very well possible the founders are overestimating the returns that this strategy yields on average, and where the return will go, for various reasons including not unimportantly their own success.

 

long Google  :D

 

Ok, thank you!

 

Cheers,

 

Gio

[TwoCitiesCapital]

Search is a fantastic business, and Google has been diluting it with all kinds of other stuff because they don't have reinvestment opportunities in their core business to use all the cash it generates. This is like Visa or Mastercard buying movie studios and shrimp farms, to use the old Coke story...

 

This stuff might be good for society (R&D), and I'm not against it on that level. But I don't think it's very good for shareholders. The chances that these moonshots will ever be anywhere near as good businesses as search+advertising is very slim, so it's diworsification from a shareholder's point of view. Enough years of reinvestment in inferior businesses and at some point they become bigger than the fantastic core. For shareholders, they'd be much better off focusing on search and a few ancillary things that strengthen search and then doing buybacks and/or dividends with the cash.

 

But since I'm not a shareholder and it's not my capital, I'm glad they are doing R&D in clean energy and self-driving cars and medical science and all that. I love it! :)

 

IMO the best solution would be: If Larry and Sergey want to do moonshots, they can use some of their personal billions to do venture investments rather they use a public company as their piggy bank. Heck, if they had Google use its FCF to mostly do buybacks and dividends, they could fund their venture investments just from the divvys...

 

I had exactly the same line of thought this morning! I have never been able to convince myself to buy Google because of this issue.

 

What would've happened if Google were run by Tim Cook? ;-)

 

It would suck

 

This got a chuckle out of me.

 

#Andriod>Apple

[DavidVY]

As the risk of sound like a neophyte, Google has progressively permeated my life.

 

1) 1st thing i load when i search for something. Its also the synonym for "search". Id like to google "x". Just like Kleenex is for facial tissue, or Uber for ride-share taxi, or "bandage" aka Johnson and Johnson or Q-tip ala Johnson and Johnson.

 

2) They really spread their influence or mindshare by embarking on these projects. Search led to Maps and Google Mail. These use data points which enhance user experience. Its a true network effect.

 

Winner take all effect. You-tube was hailed as being tremendously expensive but its been proven to be a relatively inexpensive transaction. With Youtube Red, it might even be a long-term winner.

 

3) Most of search is automated and PPC/google ads runs itself. This will continue to dominate and revenues grow over a fixed outlay. I see greater operational leverage in search

 

I think google is fine and the "irrelevant" moonshot projects are just icing on the cake. I applaud their efforts and I think its free marketing PR which will in turn attract the hottest talent.

 

Bell Labs was also known for "moonshot projects" and a lot of great innovation and profit came out of it. It takes a long time to seed a concept and watch it grow to fruition. When it does it can be a total gamechanger.

[rkbabang]

As the risk of sound like a neophyte, Google has progressively permeated my life.

 

1) 1st thing i load when i search for something. Its also the synonym for "search". Id like to google "x". Just like Kleenex is for facial tissue, or Uber for ride-share taxi, or "bandage" aka Johnson and Johnson or Q-tip ala Johnson and Johnson.

 

2) They really spread their influence or mindshare by embarking on these projects. Search led to Maps and Google Mail. These use data points which enhance user experience. Its a true network effect.

 

Winner take all effect. You-tube was hailed as being tremendously expensive but its been proven to be a relatively inexpensive transaction. With Youtube Red, it might even be a long-term winner.

 

3) Most of search is automated and PPC/google ads runs itself. This will continue to dominate and revenues grow over a fixed outlay. I see greater operational leverage in search

 

I think google is fine and the "irrelevant" moonshot projects are just icing on the cake. I applaud their efforts and I think its free marketing PR which will in turn attract the hottest talent.

 

Bell Labs was also known for "moonshot projects" and a lot of great innovation and profit came out of it. It takes a long time to seed a concept and watch it grow to fruition. When it does it can be a total gamechanger.

 

I agree.  There are only a handful of companies that I use daily or almost daily that I can't imagine living without, for which there is no good replacement.  These are, off the top of my head: Google, Apple, Amazon,  and maybe Netflix although I don't use it daily there is no good replacement ... I've paused for a minute and I can't even think of another one, maybe facebook, but I can imagine living without it quite easily.

 

With google I use gmail (I love the new "INBOX" app), drive and documents (I don't even use Office at work anymore since my company went all google recently), calendar (again for home and work), youtube, maps, and, of course, search.

 

All google needs to do is hit it out of the park with one of its moonshots for all of them to have been worth it.  Time will tell.

 

 

[LongTermView]

There are only a handful of companies that I use daily or almost daily that I can't imagine living without, for which there is no good replacement.  These are, off the top of my head: Google, Apple, Amazon,  and maybe Netflix although I don't use it daily there is no good replacement ...

 

I agree with respect to Google.  I use Google Search and Gmail virtually every time I'm online.  Long Google.

[Jurgis]

There are only a handful of companies that I use daily or almost daily that I can't imagine living without, for which there is no good replacement.

 

Nah. Everything is replaceable. I would not miss any companies mentioned if they disappeared overnight.

[valueinvesting101]

Yeah you would most likely to use search in future...will it be google search?

 

What if you delegate your searching to Siri? Will it go to Bing? Google? Apple Search? Everything?

[innerscorecard]

A lot of the assumptions here are based on presentism and one's situation. Most people who use the internet now don't use PCs - they do it on mobile. And many of those people never use their browser. They are always in apps. They never use search. Many of those people don't use Gmail either, because they don't have an e-mail at all.

 

And just as some ways of doing things have spread from core markets to periphery markets, the reverse could happen as well. Facebook and other Western apps are already cloning features from WeChat.

 

Google Search is perhaps the last command line people use. That's not at all a natural way of doing things for people. Not everyone is an educated engineer, as much of this forum is!

 

This isn't a call on whether Google is or isn't fully valued. But I think many no-brainer assumptions really aren't.

[TwoCitiesCapital]

A lot of the assumptions here are based on presentism and one's situation. Most people who use the internet now don't use PCs - they do it on mobile. And many of those people never use their browser. They are always in apps. They never use search. Many of those people don't use Gmail either, because they don't have an e-mail at all.

 

And just as some ways of doing things have spread from core markets to periphery markets, the reverse could happen as well. Facebook and other Western apps are already cloning features from WeChat.

 

Google Search is perhaps the last command line people use. That's not at all a natural way of doing things for people. Not everyone is an educated engineer, as much of this forum is!

 

This isn't a call on whether Google is or isn't fully valued. But I think many no-brainer assumptions really aren't.

 

I think even in an App world, they're well positioned. They own the biggest app advertiser. Beyond that, if you look up top 10 most downloaded apps globally, YouTube and Google Maps make the list. On slightly more expansive lists that I've seen that I would assume are limited to the U.S. and/or other Western countries; Youtube, Gmail, Inbox, Maps, Chrome, Drive/Docs/Sheets are generally included.

 

I can personally say the Google Now app is incredible and is pretty much the sole reason I stuck with the Android platform after BB10 came out - I wanted that seamless experience from Google Now that I came to expect on an Android phone and I couldn't be certain I'd get that if I had to port over apps manually and run them on a non-native OS.

 

Anywho, the future isn't today and Google's search may not be as great going forward, but they're not poorly positioned for an app revolution and will still massively benefit as more television/programming/videos etc. go digital via YouTube.

[DavidVY]

@innerscorecard- that is not true. The future of search is likely to stay google. I say that not because of present-ism but because of their increasing revenue and data-usage.

 

Hell MSFT is giving you $$$ for using bing and its still barely getting any traction.

 

Android is the entry into mobile that Google uses. I don't see that changing.

[LongTermView]

Hell MSFT is giving you $$$ for using bing and its still barely getting any traction.

 

Yeah, MSFT has lost billions and billions of dollars on bing over the years.

[innerscorecard]

Totally agree that web search will continue to be dominated by Google, except in jurisdictions where it is outright blocked, like China, or otherwise outcompeted, like Russia. I'm just saying that other paradigms could end up making web search irrelevant. I've met a lot of people using the internet who never use their browser and thus never search for things on the web.

 

I personally LOVE Google products and use them extensively. But I think that is an atypical experience, when viewed globally across the entire population that is online. Of course, in the most profitable areas like the US, people do use Google and web search. But I'm simply musing that maybe that could change. It's not completely a given that it couldn't. Search is a command line function which is quite technical. Operating systems aren't like that anymore. Maybe the "job to be done" that search solves will be solved a completely different way for people.

[rkbabang]

Totally agree that web search will continue to be dominated by Google, except in jurisdictions where it is outright blocked, like China, or otherwise outcompeted, like Russia. I'm just saying that other paradigms could end up making web search irrelevant. I've met a lot of people using the internet who never use their browser and thus never search for things on the web.

 

I personally LOVE Google products and use them extensively. But I think that is an atypical experience, when viewed globally across the entire population that is online. Of course, in the most profitable areas like the US, people do use Google and web search. But I'm simply musing that maybe that could change. It's not completely a given that it couldn't. Search is a command line function which is quite technical. Operating systems aren't like that anymore. Maybe the "job to be done" that search solves will be solved a completely different way for people.

 

How do you use the internet without a browser?  Say you want to buy a certain product, I don't know, a new blender or vacuum cleaner, etc.  Do you open the Amazon app and just pay Amazon what they are offering it for without using a browser to search other sites?  How do you even research which one you want to buy in the first place?  How do you research info on anything for that matter without a browser.  I find it hard to believe that people use the internet for facebook and pandora, but never need information on anything.  Maybe a teenager, but even they will be doing research for school. I don't buy it.