• Jeff Matthews

So How Far Does This Google Thing Go?

I suppose you can make a case that Google is a low value-add search provider ready to get its clock cleaned when Microsoft wakes up and does whatever it wants to do to wipe Google off the map.

Personally, I’m not sure how Microsoft will ever get its act together, given an operating system under perpetual virus attack, and a founder who spends two weeks a year sitting by a lake in a cabin Thinking Big Thoughts About Technology (see “Bill’s Hideaway” from March 28, 2005) while anonymous engineers in Mountain View are dreaming up slick and useful new technology like Google Maps. Besides, as I have pointed out here before, Microsoft’s M.O. is to give away something—like a database or a spreadsheet or a web browser—along with its operating system in order to undercut the Borlands and Lotuses and Netscapes of the world. But, since Google doesn’t charge the user for search, Microsoft can’t undercut free.

Yahoo, meanwhile, appears to want to be the Warner Brothers of the web—owning and charging for content—which makes sense given its CEO’s previous gig at Warner Brothers.

I’d argue Google could eventually displace Microsoft as the most important, and profitable, technology-based company. Before you spit out your coffee at that, consider this: it took Microsoft 15 years from inception to reach $1 billion in sales. It took Google 5. And it took Microsoft 18 years to reach $3 billion in sales; Google 8.

Unlike the early internet companies during the dot-com boom that generated fake sales via non-cash swapping of services, Google’s business is cash-based, quite real, and being taken from newspaper, radio and television advertising media of all stripes. For example, in the first quarter of 2005, Google’s revenues hit $1.256 billion, versus $249 million the same quarter of 2003. Meanwhile, at the New York Times, revenues in the like period jumped a non-whopping $21 million, from $784 million to $805 million. For Dow Jones, the increase during the same period of time was a modest $54 million, including acquisitions. The thing I admire most about Google is that everything the company does is intended to drive more traffic on its highway. That single-mindedness—which is perceived as a weakness by skeptics of Google’s business model—is, in my opinion, management’s best quality.

It reminds me of Wal-Mart, which has one mission in its corporate life: to get customers into the stores. And it leads me to believe Google will succeed in fending off perceived threats to its dominant position, whether from the Evil Empire in Redmond or the Yahooligans in Sunnyvale.

One group that poses no threat to Google are the Overstockians based in Salt Lake City, and tomorrow we will see how many of those steal-of-a-lifetime diamonds Patrick and the crew sold this quarter.

Jeff Matthews I Am Not Making This Up

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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