In the aforementioned series of posts we published last February (please use the Next Inning search engine to locate these), we documented GOOG's FCC application for an antenna farm in Iowa where it could pull down TV programming just like cable companies do today. We also documented license applications made in both Kansas and Missouri that would allow GOOG to deliver the programming across the 1Gbs fiber optic network it is building out on both sides of the state line in Kansas City. However, that isn't the real story for GOOG â¿¿ it's just the tip of the iceberg.In addition to documenting the fundamental moves GOOG is making, we also explored how GOOG is positioned to "channelize" content from sources like YouTube, Google Earth, and Google Streetview that people can already use to tour historic sites around the world, as well as 151 museums in 40 countries. However, that's only the start â¿¿ it's the leverage of these assets that makes the story interesting and potentially a very high profit and disruptive model for GOOG. Unfortunately, not a single analyst on GOOG's April 12, 2012 conference call asked about these ventures or what GOOG has in mind for them going forward. Hollywood understands where GOOG is heading and is totally on board. In a front page story in the USA Today Money section Hollywood agents stated there is a "seismic shift" going on in show business, and explains how agents who used to focus on headline stars for their client base are now representing the new crop of YouTube "stars." YouTube has already channelized, and some of the content from some of its up and coming "stars" whose "programs" are already more popular than prime time network TV shows. This trend, however, has just started. To see what's happening you need to flip conventional thought on its head and follow the money. Shows like Survivor, American Idol, and Dancing with the Stars aren't popular because consumers have suddenly developed an interest in ballroom dancing or even the scant costumes worn by the participants (OK, the latter doesn't hurt, but if you stop thinking there you will miss the larger picture). What draws eyeballs, devoted interest and, of course money, is the social aspect of these shows and that is precisely what GOOG is positioned to not only enhance, but take to whole new levels.
Look across the bottom of the screen when these shows are playing and listen to the commentators encourage viewers to participate with Facebook and Twitter. Now, think about being able to do that directly on the TV screen using a GOOG social networking portal. Think too about having our friends "virtually" in the room with you and interacting in real time. With those features and capabilities everything changes.GOOG data by YCharts
What GOOG has today is a huge fulcrum that not even Apple (AAPL) can easily duplicate, and what GOOG is building out now are the levers to lay across that fulcrum. If GOOG does this right, it will develop highly disruptive new business models that use the core GOOG fulcrum to leverage even higher profit margins than GOOG delivered for its record setting March ending quarter. Bottom Line: As I see it, GOOG is trading at least 30% below what I think is a full valuation. Based on this view, and my opinion that Facebook will open trading well above what I could rationalize as a full valuation, I think investors who have set back some money for the Facebook IPO should consider GOOG as a potentially better long-term investment. Excerpted from Next Inning Technology Research, for more information and to subscribe, click here.