Google Has Enormous Upside Potential
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Online advertising, video streaming, social networks, mobile computing and the cloud are just a few noteworthy examples to consider: new trends and technologies provide investors with some really fantastic opportunities with enormous potential for profits over the next years.
The trick, of course, is separating the winners from the losers. No company will win every battle, and they all have their pros and cons. But one player which is in a rock solid competitive position to reward shareholders in a big way by riding the new technological trends is Google (NASDAQ: GOOG).
The search king
According to Comscore, Google had a 66.7% market share in search during December, down from a historical high of 67% in the previous month, but higher than the 65.4% the company had in December of 2011. Both Microsoft´s Bing and Yahoo saw their market share rise slightly to 16.3% and 12.1%, respectively.
Since Yahoo uses Microsoft´s search technology, we could take them together as one only competitor with a 28.4% market share, but this still wouldn't be a reason for concern for Google. The company is way ahead of its competitors, and the small market share loss observed in December is hardly very relevant as it comes after a historically high market share record achieved in the previous month.
Facebook (NASDAQ: FB) has an enormous user base with more than one billion users, and it has a lot of information about them too. The new graph search, sponsored stories and other initiatives have the potential to become attractive products for advertisers, and Facebook can compete against Google for some of its online advertising revenues.
But search is an ideal product for advertising; it generates ads in a context of relevancy for the user as opposed to interfering with other activities like Facebook does. Google has a superior search technology, and it only gets better as more people use the company's search and other products.
That's the beauty of the business model, we are not just users, but also Google employees. Privacy issues aside, we don’t complain because it allows us to use all those fantastic tools and services for free, but Google gains a lot of valuable information from us, and it puts it to good use by building better and more efficient products.
A friendly war with Apple
When it comes to the war against Apple (NASDAQ: AAPL) in the mobile battlefield, Google is in a very comfortable position. Android has a 75% market share in global smartphone platforms and, even in iOS products, Google is tremendously popular. According to Pando Daily:
Google Maps is currently the most popular free product in the App Store. YouTube, Google Earth, Google Translate, Gmail, and Google Chrome are all in the Top 50 free apps. Google Drive and Google Search are both in the Top 100, and that’s despite the fact that Google powers Apple’s default search tools in Safari and Spotlight anyway.
Google owns a big part of the global smartphone market via Android, and it makes sure to provide some fantastic apps for iOS. That's good for Apple and better for Google, as traffic and advertising continue moving towards mobile, no company is better positioned than Google to ride that trend.
All those lottery tickets
Google has a fantastic and growing business in online advertising, and it has invested some of that money in different projects, which can be considered lottery tickets for investors. Many of them may never produce any material economic gains for the company, but if they work, they could have some tremendous benefits.
The company is getting into hardware lately; both tablets and smartphones have received positive reviews and are competitively priced. This line of business will have lower profit margins than its traditional advertising operations, but it can also provide some big revenue streams and strengthen the company's competitive position by expanding into a whole new area.
Google TV could dramatically change TV as we know it, and YouTube has an enormous potential for monetization. Google Fiber opens another door to many exciting possibilities. Google Apps is a serious challenge for Microsoft Office, especially when it comes to smaller corporate clients with reduced budgets looking for a cheaper and simpler alternative.
Project like Google Glass and self-driving car technologies may have seemed too futuristic not so long ago, but the company has proven that these technologies are already working quite well. They are still long shots from a commercial point of view, but the potential is enormous and they show that Google is a restless innovator.
The possibilities from all these “lottery tickets” either on a standalone basis or combined with Google's other technologies are certainly very exciting, and the best part is that they are not defensive but offensive moves.
If they work: Google wins a lot. If they fail: the company doesn't lose that much.
Technological innovation and new paradigms will produce many extraordinary opportunities for investors to profit over the next years. If you are looking for a solid candidate providing a diversified exposure several powerful trends at the same time, search no further, pun intended, Google is your best option.
acardenal owns shares of Apple and Google. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!