This column was originally published on RealMoney on Dec. 1 at 3:31 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
More than a year ago, when
rolled out its new Internetsearch engine to much fanfare and selling of
stock, I penned a column called
That was $80 billion of Google valuation and trillions of user searchesago.
With Google at a $120 billion market cap and generating billions ofearnings now,there's no doubt that Softee (and every other company on the planet) nowhas Google fully in its sights. But I still believe investors should"flip it" when it comes to that analysis.
Google still has everyone, including Microsoft, on
heels, andGoogle's on the offensive rather than the defensive. As Bill Gatesput it recently, "Whether it's Google or Apple or free software, we've gotsome fantastic competitors and it keeps us on our toes."
He calls it toes;I call it heels.
As I've outlined throughout 2005, Google is positioning itself to be asource-agnostic gatekeeper to all of the content on the planet, from whitepages in Ruidoso, N.M., to "Andy Griffith" reruns to Charles Dickens'
Taleof Two Cities
. And although the company continues to exploit many newand/orcurrently unthought-of revenue streams, Google's going to continue toexperience
secular growth in Internetadvertisement, as will MSN,
, and any other Internetcompany that reaches a critical mass of users. (That's not to say thosewho haven't reached critical mass won't enjoy secular growth, but it'll beharder to model.)
That is probably the key point to remember when trying to assess thecompetitive threats in industries like Internet search and advertising.
It's all about secular growth within cyclical markets. Sure,competition will heat up and Microsoft might cut prices for advertising onits networks and search results. But Internet advertising accounts forless than 10% of all advertising sales now. That percentage will begoing to 20% in the next few years and will eventually hit 50% and more inthe decades to come.
The risks to this stock are certainly higher at today's price than theywere when Google was trading for one-third today's quote. But I continue tobelieve that Google's on offense, and Microsoft,
and so many othercompanies are the ones backpedaling.
Hundreds of billions of dollars are at play here, and there will belots of winners. Google has been and most likely will continue to be one.
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At the time of publication, the firm in which Willard is a partner was net long Google, Microsoft, Apple and Yahoo!, although positions can change at any time and without notice.
Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney.
He also produces a premium product for TheStreet.com called
The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns.None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback --
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