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Alphabet Inc. Message Board

  • bo_rare bo_rare Feb 13, 2005 2:05 PM Flag

    open your eyes !

    Also from SI

    Some news today in the Washington Post indicates TWX is going to be selling its 5-million-share GOOG stake soon:

    washingtonpost.com/wp-dyn/articles/A52853-2005Jan31.html

    Time Warner Cable, which along with Comcast Corp. is bidding on the cable assets of Adelphia Communications Corp., could expand service with an acquisition, giving AOL a chance to sell advertising across a bigger cable operation. Miller said he also can envision similar deals between AOL and other cable television firms.

    So TWX needs to raise cash for the Adelphia buyout - quick way to do that would be to sell its 8% GOOG stake. That's the kind of news that can send a stock reeling - especially one priced to perfection and already shot to the moon as is and has GOOG.

    I remember when B2B was widely expected to revolutionize the way America does business; those stocks crashed. Now we hear that GOOG is going to revolutionize advertising. But to sustain its expected growth - read the Sage Capital essay - it's going to have to within five years exceed the 2004 revenues of General Electric and Berkshire Hathaway - COMBINED. Or, some $210 billion in 2010 revenues. Put another way, GOOG would have to earn revenues of more than FOUR TIMES the ENTIRE UNITED STATES ADVERTISING INDUSTRY'S 2004 SALES. These are the kinds of expectations currently priced into GOOG.

    sagecapital.com/Archiv/c271.pdf

    The investment world fully expects Google to double its sales and profits every year, from here to eternity. So, assuming it does, we reckon that sometime around late 2010 our man will recoup the whole of his original investment and still own the company, simply by pocketing the cumulative annual net income his new acquisition had earned him. Not bad for a five year return! By then, of course, Google�s revenues would be approaching $210 billion. This is equal to what General Electric and Berkshire-Hathaway - together - do today. Moreover, it will be around four times the US advertising industry�s combined 2004 total sales and more than 10 times the revenues of today�s market leader, WPP Group.

    While so far prevailing Stateside, e.g. the GEICO case, GOOG is losing most of its Adwords litigation overseas, against Le Meridien and Louis Vuitton, though GOOG is appealing. During Tuesday's CC, I didn't hear a single word about the risks of that litigation on GOOG revenues, when the Adwords program forms a major part of GOOG revenues. At the same time, GOOG did say it expected rapid growth from overseas investments.

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    • "But to sustain its expected growth - read the Sage Capital essay - it's going to have to within five years exceed the 2004 revenues of General Electric and Berkshire Hathaway - COMBINED. Or, some $210 billion in 2010 revenues. Put another way, GOOG would have to earn revenues of more than FOUR TIMES the ENTIRE UNITED STATES ADVERTISING INDUSTRY'S 2004 SALES. These are the kinds of expectations currently priced into GOOG."

      LOL! I'd say that about sums it up....

      • 1 Reply to fwiw2005
      • Do Not Buy the Google Hype
        While earnings came in ahead of expectations at "the GOOG," Google's achieved growth with one-time gains that will never materialize again.

        hotjerky [VC] | POSTED: 02.01.05 @20:07
        The story of Google's earnings have made their way through the internet like a widefire since its announcement earlier today. Unfortunately, Google's growth was driven by business optimization that are largely on-time gains.

        1) Google grew earnings via AdSense which is now close to half of its revenues.
        AdSense has the highest click fraud rate of any CPC product. In fact, many marketers refuse to use contextual advertising because of publishers clicking on their own ads which leads to low ROI.

        2) Google grew earnings via Adware
        Adware is like crack. The first hit is always free and gives the user a nice short term boost to polish up earnings. Unfortunately, Google turns a blind eye to distributors and and resellers who resell Adsense feeds. Ever see Adwords mysteriously popup on your computer in a separate window? Now you know why.

        3) Google's growth came from non-repeatable acquisitions
        Google's most significant acquisition to date has been Blogger because it brough on several hundred million page views per month to its service. Google's traffic growth is actually flat. The growth that Eric and George spoke about was due to Blogger.

        4) Growth in margins was due to large renegotiations of revenue share contracts
        Google's most significant partner is AOL. Renegotiation on that deal took time and the improvement in margins from it are largely one-time. There are no more AOL type contracts to renegotitate.

        And that is skinny on the Google quarter. I expect long term growth rate to be 30% per year vs the 50%+ growth rate that analysts are citing. Do not buy the Google hype.

 
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