Google, Inc. (GOOG)

FutureMonkey (73.40) Submitted: 2/14/08 11:48 AM

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Let me get this straight....are you suggesting that internet advertising is a business model that isn't going to work in the future? Are you suggesting that Google searches don't drive revenue towards businesses??? That advertising on TV, radio, print media, or other websites gives a higher return than internet advertising? How do you think people find these businesses? I'll give you a hint...not the yellow pages.

Running a successful business of any size requires a presence on the internet. In order to drive traffic to your web page you must optimize your position on Google.
Google is synonomous with web search (think Kleenex, Xerox). Heck...Google is a verb listed in the American Heritage Dictionary. I don't suggest my clients Yahoo or MSN a topic..."Go Google it."

Advertising on Google works. It does drive traffic. As for big ticket items. Your right I've never heard of anybody routinely using the internet to discover, research, or make a purchase....(sarcasm). I found my last three cars via internet search. I don't know a single realtor that doesn't market/blog heavily on the internet to attract sellers and drive potential buyers to their properties. The very notion that people don't use Google to find, research, and purchase items or that Google doesn't profit from business done on the internet is ridiculous.
Sure internet advert dollars are not going to grow at current rates forever. They may even retreat and normalize, but I guarantee that Google will remain the top dog while the little dogs disappear into the pages of history.
As for Googles ventures into other areas...you are right, that Google Maps function is useless, I've never found it to be helpful or seen it used by any other business. Same for Google office, Gmail, iGoogle, and all those other services that are "not that good." I bet that gPhone will suck too.

Look Google is such a great brand, you put a "g" in front of any common noun and people will instantly recognize it. Short GOOG at $500 at your risk.

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hattyr (87.59) Submitted: 2/21/08 1:42 PM

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i kind of agree with this statement. even if there is room for stable earnings, long term expectations are a bit out of touch.

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Sridhartoronto (88.04) Submitted: 3/17/08 5:17 PM

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Tsk..Tsk..Tsk..Another GOOG zombie foaming at the mouth. Talk facts , swearing is not going to get GOOG back to 700.

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Sridhartoronto (88.04) Submitted: 3/17/08 5:31 PM

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Yes , I'am suggesting that the internet advertising business model is flawed. I know , I operated an internet business for 3 years. 90% of my paying clients I got from "word of mouth" or referrals. 90% of the "gawkers" , I got from click thrus. I still believe that "word of mouth" or "buzz" is the best advertising around. Nothing else comes even close. Social networking sites may be effective but I don't think Google will be able to monetise it.

Just because Google became a verb doesn't mean that it will make money. I use Google to search , email , map and other applications but I don't spend a dime on it.

You mentioned "The very notion that people don't use Google to find, research, and purchase items or that Google doesn't profit from business done on the internet is ridiculous" I disagree. I'am willing to bet my retirement savings that most people do NOT use Google for their purchase decisions except for hard to find items. They use Google to redirect them to sites with the LOWEST price like PriceGrabber , then bookmark those sites. Their future purchase dollars bypass Google.

You said "Short GOOG at $500 at your risk"..I should have done that. I didn't!

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cdelaney08 (< 20) Submitted: 3/19/08 11:46 PM

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I recently did my own research on internet advertising and its effectiveness. There are many reasons why Internet advertising is more effective than other types of advertising. Demographics on education levels and income levels, growing user base, lower costs, etc etc. The list goes on.

Think about this for a minute. Internet advertising has been around a while now, and it is still picking up steam even today. Why do you think that more and more ad $ continue to flow into Internet ads if it is not effective?? There have been countless studies both inside and outside real money making firms to demonstrate its effectiveness, and the results are suprisingly consistent from what I have seen. That's the whole reason it continues to grow. If it wasn't measurably effective, it would not still be growing. And I have used AdWords before for a previous business, and personally noticed the substantial increase in traffic resulting from it. It's definitely real. People DO click on those ads. Maybe not you personally, but many do.

So... I think you are very, very wrong on this subject. Your personal experience with internet ads does not equal worldwide experience. I think there is still substantial upside to Internet advertising although perhaps growth will slow somewhat in coming years. I invite you to research many of the studies and reports out there on the subject, and try to explain why they are all wrong.

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heater15 (41.30) Submitted: 3/27/08 3:44 PM

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Here are some facts for you, rather than just your speculation.

I own a business that sells Internet web hosting services. It is a very competitive industry, especially in the online advertising arena. In the past year, Google has been my #1 source of revenue, and my conversion rate is around 2.75%, which is modest compared to some industries, but is outstanding compared to other advertising sources.

The bottom line for my company is we need Google, and we need online advertising.

One more thing to chew on.....ask a non-techy Internet user what they think of the ads on Google's search pages. I bet their response will be "there are ads on Google?" The have designed their system so well, that most people cannot tell the difference between ads and organic search.

The #1 reason Google has dominated the advertising industry is their ads are relevant, and they are non-obtrusive.

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AlexFoley (35.22) Submitted: 4/16/08 10:55 AM

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I would be very careful before signaling the impending doom of the online advertising market. I used to work for a firm that got 90% of its leads from Google searches and paid over 2 million dollars a year to Google for those searches. Just because you don't do something a certain way does not necessarily mean that no one does it that way. I've tried to address your points here in hopes that we can resolve some of these claims.

1. How many times have you actually bought stuff after clicking on a 'Ads by Google' link on a third party website? How many of the websites that you visit explicitly ask you to support them by visiting their sponsors?

Whether or not you buy something is irrelevant. As long as the click is made, Google makes money, and as long as that business is making money in the aggregate using Google it will continue to do so. And many, many companies make a whole heap of money using Google.

Isn't any advertisement on a webpage basically an explicit request to visit a sponsor?

2. How much money do you actually spend on stuff that you use Google to search suppliers for?

I use Google to research every product before I purchase it.

3. When it comes to expensive high margin stuff (like a car or HDTV) do you rely upon Google to find the supplier for you or do you take a specialist publication?

Searches for "plasma", "lcd", and "hdtv" have been among some of the most-searched terms on Google recently, I would imagine.

4. How many suppliers that you do business with have you heard exclusively from Google and not from other sources like TV, other websites?

It's not like the number of searches per minute on Google is going down any time soon...

1. Google is not good at that. It hasn't succeeded even once in monetizing any of it's other products / sevices.

Google's entire product model, at present, is based on advertising. Its other products were never meant to be monetized - they merely exist to create more opportunities for people to click links. SaaS is the future, and Google Docs is two years or more ahead of Microsoft's entry into that market with a serious competitor.

2. There are other nimble players out there which can beat Google. Google might not have the power of it's high flying stock or it's cash reserves to finance too many of these acquisitions.

It is increasingly hard to "beat Google" as they begin to get their hands into the infrastructure of the future. Google's foray into the mobile market is the surest indicator that, although you think they are behind the times, they are definitely thinking about the strategic future.

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patdennis (79.74) Submitted: 4/17/08 6:47 PM

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I think you misunderstand the reason that Google's business model is so effective. Perhaps their method of delivering relevant adds may not provide many clicks for when people are looking to buy things like TVs and the like (although I'm not sure this is the case). Regardless, their advertising model really shines when it comes to more obscure things. How is a company who makes things such as water cooling systems for PCs going to effectively target the <1% of the earths population who would be interested in such a thing? How is a person who wants to water cool their PC supposed to find a supplier? The answer to both is Google. Multiply the above example my millions of obscure products and you have a business model that can win over the long term.

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smiley2008 (91.84) Submitted: 4/29/08 12:37 PM

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What google needs to do is put links to Amazon to buy stuff from their on line ads.
You are right I have never bought anything off the Google ad links but I buy 90% of all the stuff I buy from Amazon, Walmart or Costco.

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DP1980 (42.61) Submitted: 5/05/08 5:31 PM

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Type in a search on google for a cheap LCD tv. Look at the "sponsored links" on the right. You'll find Amazon there. Click on more sponsored links and you'll find Walmart, Sony, Target, Crutchfield, Circuit City, Comp USA etc... I couldn't find Costco, but I didn't keep clicking... my point, everyone of these companies has paid money to be a "sponsored link". You don't buy anything from Google, you buy from the companies that advertise there, like Walmart, Amazon every big company out there.

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liqwidsilver (< 20) Submitted: 5/08/08 11:54 AM

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Exactly right DP1980 they pay google per click they receive. If Walmart comes up on a sponsor they then have to pay google whatever they agreed on. Ill give you some info on where I work how they do it. We have a manufacturer named Exmark its ride on lawnmowers. They have a contract with google to be a sponsored link and they pay google .20 cents per person that clicks to go to there site. Last year alone they had over 2 million clicks. That is $400,000 for 1 year off of 1 company now how many companies does google have sponsored links for. I'd say thousands of them. Internet advertising is just starting its only going to grow.

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VATROSLAVJG (< 20) Submitted: 5/19/08 12:49 PM

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Google maybe a high use search engine, but has no one learned from the stock plummet of the late 1990's that a company that survives without producing anything of material value is at the whim of the market. This stock will fall hard and soon once everyone realizes that the current price of the stock is inflated speculation.

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HeatVision (99.11) Submitted: 5/19/08 3:41 PM

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My call is that Google is headed back to $747 , and will hit that price sometime this year. Remember all it takes is a couple good earnings calls, and we're back up to the $700's . Nothing can stop Google except one and only one entity. Microsoft. Microsoft is slowly becoming yesterday's leader, and quickly becoming tomorrow's laggard. Which is why Microsoft is desperately out to destroy Google and retain their leadership position in the marketplace.

If microsoft ever manages to takeover Yahoo, then all bets are off. If you're holding Google, look out below !

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Haugurafpeningum (81.52) Submitted: 5/31/08 7:19 AM

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Well, I see your point, but you have to think worldwide. There are many rural areas where buing thru ads by google is a save and sound way of buing stuff. In many cases it is also the only way to buy the stuff. In urban areas it is also timesaving to have UPS to deliver the goods at your doorstep.

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Orangejello (90.09) Submitted: 6/09/08 10:42 PM

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You're missing a very important aspect about the company. The company started by renting out server space. Today that amount has grown tremendously. It's important to remember that internet advertising isn't the only way GOOG profits.

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joshbk (< 20) Submitted: 6/26/08 10:39 PM

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Some good points here. I love Google's free services - they're fun and innovative. They were the first email provider I found that linked up my other email addresses automatically - what a great convenience for customers while stealing them away from other email providers!

But are any of these innovations directly linked to their advertising revenue? Can a website just live on "hits" for its income? I don't know.

Regarding internet advertising in general, it seems a little primitive to judge advertisements by their number of hits. I know that's been the accepted standard, but look at TV advertising - usually it's not about number of product-buys per ad, it's about broader things like promotion and mind-share. Granted, you can't directly measure TV ads by sells per ad like you can with internet ads, but that's not the point, because the ads are intended to increase exposure and to get consumers to identify with a product.

I think the future for internet advertising is in general exposure like TV ads. Go to NBC's website and watch a free episode of Friday Night Lights - there are 4 or 5 TV ads and a little logo for TGIF or some other company on the bottom of the screen.

Bringing things back to Google though, there's not much of a future in ads that just consist of a few words and a hyperlink. But at the same time, no one wants to be bothered by logos and flashing pictures if they don't have to. Google's lack of flashy ads and their neutral homepage are what have attracted people away from Yahoo and Excite, who have lots of annoying ads. Once again - great innovation with the neutral homepage, but not directly tied to revenue.

In the grander scheme of all things internet, these points about Google - innovative but not directly profitable, or, at least, the innovations aren't directly tied to profit - are symptomatic of the internet in general. The problem is that millions of people spend time on the internet because they enjoy sharing and gathering info, along with reading, writing, and discussing things they're into. Well, it's not really a "problem" - I love the internet - but it's not always profitable. Wikipedia is the best example - a wealth of great information, one of the most visited websites out there, and it's not for profit. Tons of people put hours into editing and perfecting it everyday and they do it all for free - because they're just so darn interested in things. And by the way, when's the last time you needed some general knowledge and references and thought, well, maybe I should throw over $85 a year for Brittanica unabridged online?

Anyway, that's the problem I see with the internet. Good labor is given the best reward in the world - intrinsic value. But from a business perspective, that also means that it's dirt cheap. This is particularly a problem for websites that don't sell things, but in the long run, all website businesses might be affected. Amazon for example has spent a lot of time honing their "online community" - I generally go there to get great info (available for free by other consumers) and to judge products, but rarely to buy things. Market penetration is highly rewarded in the short run, and a website's mind share can keep the profits rolling some time, but there's little room market expansion in the long run, because in most cases someone can do it cheaper. Like all market shifts, there's got to be some way to beat this problem of cheap or free labor, but I don't think Google's particularly up for this task.

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MichaelinWA (< 20) Submitted: 7/14/08 1:30 AM

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I'm delighted to hear that not everyone thinks Google is awesome. It means that I didn't buy it too late. Here I thought I was the last person on planet earth to realize what a future this company has.

The idea that advertising is producing "nothing" is odd. Advertising has been a gigantic industry for, well, almost forever. I think this is evident in not only the growth of the company, but the cash it generates.

There is no way I can believe that corporations world wide have been snookered into believing that advertising on Google is a waste. Like they will wake up tomorrow and suddenly Google will have no revenue.

As far as clicking on those ads, people do it without realizing it. I know this because I try to never click on them, but my company's web nanny routinely points out that I HAVE clicked on one.

Aside from the growth of the company, I just think this company knows the internet. It hires very talented people and gives them freedom to be innovative. Management is forward looking. Google has a moat. What's more, I suspect some of the best stuff is yet to come from this company.

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stevemustangred (80.15) Submitted: 7/18/08 2:48 PM

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My 2 cents.

I can't use Google ads because I have changed my HOSTS file to block out unwanted advertising, doubleclick, etc. This allows web pages to load faster and I am not distracted by a bunch of garbage. When I click on a google ad my browser points to 127.0.0.0. To use one of Google's advertisers I have to write in the URL and Google gets no revenue.

When Google starts embedding ads into their applications then they will start making gobs of money. Google maps is great, but they need to start making money off it by turning into the new "yellow pages". For instance you click on a building and you find out what the business is and Google gets two cents.

I own no google.

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