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Google Inc. Message Board

  • Robertororo Robertororo Sep 21, 2004 12:22 PM Flag

    Barrier to entry...

    Search engine barrier to entry is relatively minimal.

    Less than 100 million dollars is needed to come up with a search engine that can compete with Google, Ask Jeeves, Yahoo, etc..

    Microsoft will always have some edge unless barred by the courts as their browsers will always default to their own MSN search engine.

    Regardless, Google's current capitalization of 32+ Billion dollars is ridiculous considering how easy (relatively speaking) it is to come up with a popular search engine.

    Looking back, we have seen search engines becoming popular one day and new ones displacing them in a short period afterwards.

    Google can find themselves butting head against some of the giants.

    In addition, several pieces of software are now available to act as "THE MOTHER OF SEARCH ENGINES", i.e. they can run searches across multiple search engines. This will further dilute this business.

    I still cannot believe GOOGLE's capitalization. Something does not add up!!!!

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    • again, good information.

      i just don't buy it.

      my educated guess ... they are following the conservative guidance philosophy of their fellow internet behemoth, eBay. if that is the case, watch out come 3rd week of Oct., is that right?

    • "good post, but the cost of bandwidth for 1000 more searches is nill compared to building an electric plant to light 1000 more households."

      but population and household growth is not growing exponentially, and bandwidth utilization is, as is the amount of content on the web.

      you want to make all these sweetness and light off-the-cuff arguments, but the fact is (1) goog itself says as much (from the prospectus, �We anticipate that the growth rate of our costs and expenses� may exceed the growth rate of our revenues�") and (2) their own finances from the last few years shows this to be the case. i quote from john hussman.

      "Despite Google's extraordinary growth in recent years, a closer look demonstrates that those revenues have come at rapidly increasing cost. In 2001, the cost of revenues (traffic acquisition costs such as referral fees, etc) reported by Google represented 16.8% of revenues. In 2002, 29.9%. In 2003, 42.7%. In the six months ended June 30, 2004, costs of revenue acquisition represented a full 47.5% of revenues. In short, as Google has penetrated the search market, its cost of doing so has increased rapidly as a percentage of revenues. Google's prospectus puts this plainly: �We anticipate that the growth rate of our costs and expenses� may exceed the growth rate of our revenues� We may not be able to manage this growth effectively.�

      "So, OK, the company pays up for growth. Isn't it still profitable? Yes, the net profit margin for Google in the most recent six-month period was 10.6%, up a bit from the 7.2% net profit margin in 2003, but down from 22.7% in 2002. Assuming (and these are kind assumptions) that aggressive competition and maintenance of future revenue growth don't eat much further into this margin, we'll assume a sustainable profit margin of about 10% of revenues. Again, our own approach would take more into account here, but I'm being nice because Stanford holds a chunk of this thing."

    • scalability


      good post, but the cost of bandwidth for 1000 more searches is nill compared to building an electric plant to light 1000 more households.

      enjoy the evening!

    • "they are web-based. their costs to grow and add revenue, new clients, etc. are next to nill."

      wow, did u just cut and paste that from some screed on "the new economy" from 'the industry standard' circa 1999? you left out your put-down of "bricks and mortar" while u were at it.

      cost to grow is not negigible: they must grow as the internet grows, since they must index the whole friggin' thing; so there are upgrade/maintaince costs on the hardware, plus everything needed for bandwidth as they gain more users; plus the dev/maintainace costs for all the software running their servers, databases, and whatever. plus all those research costs, where they payoff is a big question mark.

      cost to add revenue is non-nil. they are competitng with yhoo and, soon, with msft.

      cost to add new clients is non-nil since ... well, how are they gonna get them?

      "they have no major real estate"

      sure they do, they have corporate locations all over the world and servers located all over the world.

      "maintenance expenses for growth, and other operating costs."

      operating costs are increasing relative to profit, not decreasing. read the prospectus.

      "hey have, what venture capitalists like to say, --- for the life of me i can't think of the word..."

      a one-trick pony?

    • " why is that? " you ask?

      the software IS what churns their revenue. they are web-based. their costs to grow and add revenue, new clients, etc. are next to nill. they have no major real estate, maintenance expenses for growth, and other operating costs. they have, what venture capitalists like to say, --- for the life of me i can't think of the word...

      ---idiot

    • "but i'd be very, very surprised to see a web based company not grow earnings at a faster rate than revenue, over the next several years."

      why is that? economy is slowing, not speeding up. remember, we're not done with the aftermath of the bubble yet; its just been masked. greensperm's reflationary gambit only means that we're likely to have a decade of stagflation rather than the sharp deflationary recession that would have rid us of the excesses of the bubble.

      "something is going on ..."

      yeah, they're not a tiny company growing bigger, they're a huge company growing bigger. and all those phds and bell labs retirees cost bucks, what with the free lunches and personal chefs and masseuses and segways for the young millionaire techies for whom walking is "too last millenium".

    • good reference you gave. thanks.

      but i'd be very, very surprised to see a web based company not grow earnings at a faster rate than revenue, over the next several years.

      something is going on...probably one-time write off's; large capital expenses; stuff like that.

      and you're right, neither is sustainable, if you're looking 20 years. it is sustainable for 3-5.....and that's where the price is at, and is going....

    • M$ is the company to watch out for. If you think that Google or Yahoo has something that M$ cant only duplicate but make better and control thru the O/S you deserve to lose all your money for such stupidity.

    • "Networking was IBM original idea"

      xerox parc (ethernet -> 3com), then academic/government (arpanet, internet)

      networking protocols and apps mostly from sun (networked file system, remote procedure call, etc)

    • Microsoft never had an original idea.
      They took everything from other company

      OS (Old DOS) came from someone that was developing CPM.
      Windows was taken from Apple
      Internet explore from Netscape
      Networking was IBM original idea
      Active directory Novel�s modified version
      Java was from SUN and modified
      Defrag from Norton and later is was Executive�s software

      You want me to go on and on ?????


      I just cannot see MS to be entering in Search+Ads and be successful

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