Google Explores Facilitating Worldwide Internet with Balloons
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Google announced its Project Loon on June 14, which is a plan to send balloons into the stratosphere that can facilitate Internet in rural areas, even on mountaintops. That means that if you are climbing Mt. Everest and need to call your mom to let her know you are still alive, you can. But before you start planning your trip to the Himalayas, it could be awhile before Google launches. The company reported that it intends to test 50 balloons in Christchurch, New Zealand, to see if they can provide an Internet connection from the sky.
Why this device would make Google even richer
Two reasons come to mind about why this move is good for Google and, therefore, its shareholders. First, providing Internet access to the hinterlands will trigger a whole new stream of revenue for the company. The balloons floating in the stratosphere that the company is using will need to be paid for, and so Google will charge Internet providers a fee for facilitating customer access to the Internet. Second, this raises the level of cool that Google has and, with it, promotes the company to the public. In the circle of massive technology companies, cool carries a lot of weight. The more the kids like it, the more they will beg their parents to buy it. And maybe those parents will also jump on the bandwagon.
If you don't believe me
Look at Microsoft (NASDAQ: MSFT). Apple was constantly attacking the lack of coolness of that company. Most of the attack was facilitated by actor Justin Long in the PC versus Mac commercials. Long represented a Mac, and a less hip dude represented a PC. Since becoming uncool, Microsoft has lost a huge amount of market share to Apple. The company's profit margin fell last year; in 2012, it was at nearly $17 billion, but was over $23 billion a year earlier, representing a 26% decrease.
Apple, on the other hand, appears to have injected its annual revenue with growth hormones. From 2009 to 2012, revenue increased by 265%, and drove profits up by 306%. It is clear between these two companies which one is coming out on top.
As if the prospect of Project Loon isn't enough, Google is also taking its revenue and profits to the stratosphere. From 2009 to 2012, revenue increased by 112% and net profits went up by 60%.
The revenue trend for each company is solid, but the type of technology that Apple and Microsoft are releasing isn't as groundbreaking as some of the developments Google is pursuing in Google X -- such as the Project Loon, self-driving cars and Google Glass.
Worldwide Internet access, you say?
The balloons are still being tested, but could one day be used to provide Internet to everyone on Earth. That would take hundreds, and maybe thousands of balloons. The bottom line is, if Google can really pull this off, it could take the company to a whole new level, maybe even surpassing Apple as having the largest capitalization in the world.
As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, 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!