Google in 2012

Greetings, once again, from the future. I'm writing to you from 2012 with a report on what Google (Nasdaq: GOOG  ) is up these days.

Since you're still in January 2009, you may not care. You've seen Google's stock shed more than half of its value since peaking in the fall of 2007. You've witnessed analysts talk down the search engine leader's earnings prospects in recent months, after spending the previous years bumping estimates higher.

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The bad news is that Google isn't back to those November 2007 highs here in 2012. Did you really expect 30% to 35% in annualized compounded share price gains over the past three years? Thankfully, it's heading in the right direction at least, trading nicely higher than where it was in early 2009.

Google is still the leader in online advertising, but that means so much more these days. Now that most television and radio content is delivered online, Google is the gatekeeper to all forms of media monetization. Investments that may have seemed iffy at the time, like YouTube and dMarc Broadcasting, are paying off nicely.

The bumpy road to 2012
Things didn't start well for Google. The same Google that would routinely top Wall Street's profit expectations with ease was huffing and puffing through 2009. Advertisers may have migrated to the fully trackable and instantly accountable allure of paid search, but folks just weren't in an ad-clicking mood as the economy crumbled around them.

It also didn't help that antitrust regulators weren't about to let Google get any bigger. The company's purchase of DoubleClick wound up being Big G's last major acquisition. It wanted to buy TiVo (Nasdaq: TIVO  ) , mostly for the patents, but that didn't fly. It tried to wrestle Research In Motion (Nasdaq: RIMM  ) away by outbidding Microsoft (Nasdaq: MSFT  ) in 2010, but regulators quickly nixed those advances. Rumored interests in Adobe (Nasdaq: ADBE  ) , Salesforce.com (NYSE: CRM  ) , and Akamai (Nasdaq: AKAM  ) -- logical moves to gain an overnight foothold in publishing, enterprise software, and content delivery networks, respectively -- never materialized.

In a nutshell, Google's growth would have to come organically. The company came to embrace that goal with aplomb, once it realized that all of its acquisitive pursuits were dead ends by 2011.

Diversification, begone!
Google is primarily an online advertising company in 2012, though that accounts for more like 90% of the revenue mix pie, as opposed to the 98%-99% slice it commanded in 2008. The balance of Google's income statement these days consists of business services, subscription products, and hardware sales.

Google is an even bigger player abroad in 2012. It's not the top dog in every country; Baidu.com (Nasdaq: BIDU  ) is still the top dog in China, while Yandex is still the search engine of choice in Russia. However, Google has grown its reach even in those markets, especially as the outsourcing solution for third-party search engines and content sites.

Google AdSense is also everywhere these days -- even on Wikipedia, believe it or not. That surprising move coincided with Google axing its Knol alternative.

Ultimately, Google is a survivor. As dark as things got early in 2009, the dot-com rock star was simply planting the seeds of online advertising that it would harvest in the future. No one receives a daily paper anymore. They download it, often with matching Google ads. No one adheres to the same television programming schedule. The on-demand beauty of digital delivery provides flexibility there.

Google rocks in 2012, even if it seems stuck between a rock and a hard place in 2009. See you later.

Rick is taking a tour of several companies from his fictional 2012 vantage point. He looked at Netflix Monday. He'll be back with a new entry later this week.

Microsoft is a Motley Fool Inside Value recommendation. Google, Baidu, and Akamai Technologies are Motley Fool Rule Breakers recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of Google, in both 2009 and 2012. He is a TiVo shareholder, at least in 2009. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy needs 1.8 gigawatts for its flux capacitator.


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  • Report this Comment On January 15, 2009, at 2:47 AM, iCantInternet wrote:

    I really love this article, love the way you wrote it, and will feature it on my blog http://www.icantinternet.org too!

    Keep on doing this great stuff!

    PS: any ideas on Yahoo! in 2012?;-)

  • Report this Comment On January 15, 2009, at 5:08 AM, Andi1975 wrote:

    Great article. Not sure how correct you will be on the diversification issue though. I think google will figure out new streams of revenue by 2012, although ads will always be the major part.

    Like the style it was written in.

  • Report this Comment On January 16, 2009, at 3:55 PM, jrgreenfield1 wrote:

    "The bad news is that Google isn't back to those November 2007 highs here in 2012."

    Really??? If they didn't change anything from now till then they're going to have revenues from search only in the ballpark of 30 billion dollars.

    They're also going to Crush the phone market and I bet once the current broadcast spectrum gets opened up, they're going to own internet service too. I also see .org figuring out the energy crisis, curing the worlds health problems, etc.

    Go ahead, sell your GOOG shares and buy a bunch of AAPL, see how that works out for you.

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