The only time I’ve written about Google on this site was a couple months back, when my broker sold several of my positions against my wishes (complicated story involving margin calls and an argument over offsetting option protection), and in the process sold off about a third of my Google shares. I have owned Google for several years, with most of my shares picked up in the $180-$250 area, and when that sale went through I put in an order for replacing part of that position at a much lower price … just in case.
Well, the pessimism surrounding Google hit a crescendo recently, with the claim that all tech stocks are dead in Barron’s over the weekend (though those were all semi and hardware stocks, for the most part), and with the recent dispute over Google and Yahoo’s tentative advertising alliance. That further dip hit my order point, and I’ve now picked up a few more shares.
My long term conviction about Google doesn’t require that gmail, Google Earth, YouTube, or their new web browser end up being profitable, or even that they are able to take market share from Microsoft with the Documents package. I think that they can remain an advertising company and still continue to grow significantly, both through their expansion of display ad capability with the DoubleClick acquisition and through organic growth in search and outsourced website advertising (much like that which appears on the free StockGumshoe.com site). The other stuff is gravy — and so far, it’s expensive gravy, with Google continuing to spend hand over fist for huge increases in their workforce and big R&D efforts in all kinds of associated businesses, along with some flightier stuff that gets press attention, like their space initiatives.
If other areas outside of advertising work out, and if Google’s “cloud computing” capability to serve applications, video, documents, or general storage for corporations and individuals ends up being a profitable business, then certainly there’s more potential — but Google is nearing a monopoly position in effective web search, and in web advertising, without generating nearly as much resistance as you might have guessed for such a dominant brand and service. And while the argument is continually posed that Google could be replaced by the “next big thing,” that becomes less likely every year — more likely, ...