Here we are, two years later, and lots of people still don't get it. "Look at the valuation! Google can't possibly be worth that much!" they say. And: "Nothing built on online advertising revenues alone could possibly stand the test of time!"
Those two arguments go hand in hand, and if you believe in the second one, the first will probably follow. But there are a couple of fallacies involved. The first is assuming that Google will always live exclusively off Web ads. If that were the case, competitors such as Yahoo!
If or when they do, the game still isn't over for Google. You see, it is all about advertising, but it's not all online marketing. Did you notice when the company bought a radio advertising outfit last winter? Or when Google job listings started asking for traditional media skills? The company wants to build "the world's premier IP-based radio media network" and intends to arrive at "the intersection of Internet and television technologies, video-on-demand, personal video recorders, and emergence of next-generation set-top-boxes with IP connectivity." If that sounds a lot like Cisco's desire to run the show in your living room, well, it is. It's just that Google's plan goes a few steps further.
You know that cornucopia of corny services Google keeps adding to? Spreadsheets, financial information, personalized portals, Gmail? The list goes on and on. Almost all of them have one thing in common: "Sign up for a Google ID!" That login stays with you throughout the whole carnival of Googlish tools. It collects data about your online habits, and the services act as a giant funnel that pulls more users into that sinister web of information gathering.
What Google is really good at is presenting relevant advertising to you, based on all of that collected data. Get enough people to sign up for the collection process, and it could develop some sort of direct interface with your TV set. Google could certainly buy TiVo
Get the national television audience to sign in to their Google accounts on that digital cable box, or digital video recorder, or directly into the TV set, and companies like Coca-Cola
It's still a few years away, but the online advertising arm is holding things up in the meantime, continually stumping Wall Street's analysts with stunning report after stunning report. "People forget, even inside our company, that the online model that is working so very well for us today took a couple of years to get really right," says CEO Eric Schmidt. "My guess is that for each of these new major media initiatives, we'll have a few cycles of trying to find the right combination that really takes off."
I'm happy to wait a bit for my treat. But I'd better stop writing about the company so I can buy some stock, because those shares may never look this cheap again. Come hither, sweet chocolate ...
TiVo and Yahoo! are Motley Fool Stock Advisor recommendations, and both Microsoft and Coca-Cola are Inside Value picks. Try a 30-day free trial to either service, or both, to see whether they fit your investing style. Try out Stock Advisor today, and we'll send you a free market report.
Fool contributor Anders Bylund is a Coca-Cola shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like. If you want a real fright, go ahead and Google "Zahrim." That's right -- Google is a verb . Foolish disclosure isn't scary -- it's good for you.
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