Google Inc
One thing that Mr. Henage stated about Google, which struck me as incorrect was the relationship between number of paid clicks for advertising and price per click. He states, “Google is manipulating the cost per click to generate more paid clicks.”
This is an erroneous assumption, as the consumer clicking is not directly paying for how much Google charges the marketing department for the traffic. The supply of clicks is not a function of price, unless Google tries to flood their pages with more and more links to get more consumers to click, and thus driving average price down per click down.
The average price per click being driven down is a function of users switching their searches onto mobile phones, which at least in part due to the smaller screen and security issues, convert less frequently. The number of paid clicks grow as the numbers of overall searches increase. However, as more and more of the clicks come from a lower converting platform, the average price per click drops.
That being said, the question is, why are so many on the street willing to pay so much more for a share of Google versus our other two tech behemoths.
Simple. Mainly, because Google has Majorly Disruptive technology in the pipeline, that we know of. The driverless car, a technology that promises to save society, if employed properly, at minimum hundreds of billions of dollars if not trillions. I have begun writing a series about this which has two parts as now and will grow (Part I) and Part II. Chunka Mui also has written some excellent and well researched columns about this topic at Forbes.
If Google takes even a sliver of the net profits brought to society, even if 5+ years away, the stock promises to, conservatively, double.
Secondly, Google Glass, the wearable cellular device is coming out. Though it will be priced much higher than any existing cell phone ($1,500 is one estimate I have read,) it has already proven to work in an elaborate Google demonstration last summer.
Thirdly, if anybody is going to monetize mobile search it is Google. Along with their strategy of giving away Android for free to OEM’s and thus dominating worldwide market share, Big G has plowed vast amounts of resources into this task.
Fourth, people LOVE working at Google. Here’s one of engineer’s Steve Yegge’s many posts of how awesome it is to work for the company. Posts similar in scope appear everywhere. Google goes out of its way to insure they hire the right people, and if they believe they made a mistake, they are known for letting the person go quickly. Google employees are there to create value for the company.
Bottom Line
If this were a car race you’d look at Apple and Microsoft’s shiny cheap multiples and cash as a huge head start in the race for the hearts of investors, but Google has far more under the hood. In this race, it’s Google, then Apple, and Microsoft plodding along waaaayyyy behind.
The article In The Race of The Three Horsemen of Tech- Google Is the Clear Leader originally appeared on Fool.com and is written by Margie Nemcick-Cruz.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
