Tuesday, December 1, 2009

At a Crossroads with Google




I love Google (Ticker: GOOG)!  Come on, who doesn't?  Their search engine finds everything, their maps are the best in industry, Youtube is synonymous with "online videos", I use their Chrome browser exclusively (except when some sites employ bad programming and don't adhere to standard HTML code), I own an HTC Magic smartphone that is powered by Google's Android OS, even the ads on their search results are good...they're about the only ones I click on because they actually help me find what I'm looking for, and most obviously, I use blogger (you're on a blogspot site right now...enough said).  Lastly, their stock has risen more than 100% in less than a year, which makes me a happy guy because about 50% of my portfolio is made up of Google.

Future Prospects
I have very little doubt that Google will be the first $1 trillion company (by market capitalization).  It's not going to be Microsoft, Exxon Mobil, Walmart or any of the Dow Jones Industrial Average component stocks.  Out of all of the mega-cap stocks, Google has the most momentum.  Analysts have raised their price targets to $650 and beyond, and considering the stock was at $263 less than a year ago, it's not bad at all.

Here are a few things that are going well with Google:

  1. Youtube is becoming profitable.  When Google bought Youtube a couple of years ago, it was a cash sinkhole.  Bandwidth and storage costs a lot of money and Youtube had no way of monetizing all that traffic that it was getting.  Two years later, Google is claiming that Youtube is on the verge of being profitable.  If Google was able to rake in huge amounts of cash with Youtube being a sinkhole, imagine what it means when Youtube becomes profitable.  Just to put things in context, Google ranks #1 as the most used search engine.  Yahoo and Microsoft take 2nd and 3rd place, but if you actually break out Youtube's search results from Google's search engine results, it is actually the real second place holder, sitting above Yahoo and Microsoft.  So, you can imagine how much money it can generate for Google.

  2. Android is making a quiet, but sure invasion into the smartphone market.  Until the Motorola Droid debuted on Verizon's network, most Americans had no idea what Android is.  Now, it's the new buzz...the new iPhone killer, etc.  I don't think the Droid or Android itself will kill the iPhone, but it will be a worthy challenger.  I own an Android powered phone and I love it, but I'm a little on the geeky side, so that's expected.

    In any case, the Android Market works similarly to the App Store on the iPhone.  Google keeps a portion (albeit smaller portion than Apple's) of the revenue when someone purchases an app.  Android is expected to grab about 20% of the smartphone market in a couple of years.  However, Google's real money maker is not in the app revenues themselves.  With a Google powered OS, users will most likely use the Google search engine and, in turn, click on Google ads.  Additionally, with the recent purchase of the mobile ad company, AdMob, Google is even better positioned to monetize from smartphone users.

  3. Chrome - Chrome is another little heard of product from Google.  Originally, it was a browser Google released a little over a year ago.  Google's mission was to deliver a browser that was fast, especially when running code like Javascript.  This is because Google is banking on cloud computing to slowly replace programs that reside on harddrives on PCs.  The faster a browser can be, the better performance cloud computing will have.

    Continuing along with the same philosophy, Google has announced Chrome OS recently, an operating system that would run netbooks.  Google really has vision in this department.  People are scoffing at Chrome OS, saying that it would never replace a real PC run by Windows.  And they are right...to a certain degree.  Computers with Chrome OS would never be designed to do serious number crunching or gaming because the processors on them will be relatively weak, but a major shift in personal computing will eventually render powerful PCs as archaic.  Whether one likes it or not, cloud computing is the future of computing.  If you don't believe it, when was the last time you sent something to your webmail account (whether it be gmail or yahoo mail or hotmail)?  Probably very recently...and why did you do it?  It was because you wanted to access that file while you were away from your computer at home or work.  That is the driver behind cloud computing.  People want to be mobile and want to access their information any and everywhere they will be.

    How will Google monetize from Chrome?  I have no good answer.  Perhaps Google Apps (the applications Google currently offers on the cloud) will work better on Chrome, and by adopting Chrome, people adopt Google Apps, which is eventually going to be a money generator, whether via ads, subscription fees, or something else.  Regardless, I am confident that Google will grab a large piece of the cloud computing pie.

So What's the Problem?
Sadly, we can't have the cake and eat it too.  There is one problem with Google.  It's management leans quite heavily to the left.  It has repeatedly voiced its support for same sex marriage (http://www.lifesitenews.com/ldn/2009/oct/09102912.html), which as you know, is contrary to the Catholic (or shall I say thousands of years of human society's) definition of marriage.

Google is known for their motto, "Do no evil," but I do not believe they really know what "evil" is.  To them, evil is equivalent to doing harm to others, such as stealing, murder, etc.  By opposing anti-same sex marriage legislation, they believe that they are encouraging love and toleration.  Because Catholics oppose homosexuality does not necessarily mean that we discriminate against homosexuals.  The age-old definition of marriage is between a man and a woman, and I believe that by changing the definition itself, we are undermining the basis of human society.  It is not that much different from changing the definition of the word "table" to mean "chair".  It just seems silly, because a table may look like a chair with 4 legs, but ultimately, it is not a chair.

I will not go into why same sex relationships are morally incorrect according to Catholic beliefs (you can read about that here http://www.catholic.com/library/Homosexuality.asp and here http://www.catholic.com/library/gay_marriage.asp), but the fact that Google supports same sex marriages is problematic for us Catholics.

Torn
I have to confess that I still hold Google stock and I'm trying to be totally honest to you, my readers and myself.  I love the company and what they do, but I have a concern for their social/political views.  Buying and using a product of Google is likely not that problematic (e.g. imaging you know a store owner who is homosexual, would you not buy from him just because he is homosexual?  That would almost be intolerant), but owning shares of it mean that one approves of the actions of the company and is supporting it.

I am torn...please pray for me.