What Next After Hitting $1000?
Lennox is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If and when shares of Google’s (NASDAQ: GOOG) hit $1,000, will it still be able to present the same solid growth seen in the past year? Going by its position in different segments in the industry, along with its strong cash position, Google could very well grow astronomically going forward. In addition to having $50 billion in cash & equivalents, which represents about 17% of its market cap, Google has a promising product pipeline; one that not only promises a bulging top line, but that exhibits tremendous growth potential.
Ads arguably remain Google’s top earner. And now with the shift to mobile, the bigwig seems to be gaining even more. An eMarketer report intimates that Google netted $4.5 billion of the $8.8 billion total mobile ad revenue in 2012. The figure is expected to rise to $8.85 billion this year.
Facebook (NASDAQ: FB), which has been under a lot of pressure to step up its mobile ad revenue, is making notable improvements. From making nothing in 2011, it managed to bring in an excess of $500 million in 2012. This figure is expected to track upward to $2 billion this year.
Facebook’s push for a bigger piece of the pie, as far as mobile ad revenue goes, is expected to intensify in view of Zynga’s increasingly less-significant role. Facebook is making less money from Zynga than before. Revenue from the social gaming company currently represents only 7% of its revenue compared with 13% two years ago. Facebook therefore needs a new revenue stream to offset Zynga’s fall out.
For now, Facebook remains little of a threat for Google’s ad business. As long as Google controls the core of the business, Facebook can write its own growth story at the periphery of the market.
The ad business will remain a key growth pillar for Google in view of increased mobile penetration in both developed and emerging markets.
Google has finally put speculation about the Motorola X Phone to rest. The Moto X Phone, which will be the first flagship phone for Motorola after being acquired last year by Google, is expected to compete directly with Samsung’s Galaxy S4 and Apple’s (NASDAQ: AAPL) iPhone.
What are the selling points?
The Moto X Phone will kick start things with a fully fledged U.S launch. Availability will not be an issue, as the device will be available in AT&T, T-Mobile, Verizon and Sprint. In order to secure anchorage in the hearts of U.S consumers, Google has stressed in its ads that the Moto X Phone is made in the U.S., unlike Apple’s iPhone, which is made in China.
Furthermore, Google is set on spending up to $500 million on marketing this ‘all American product.’ The $500 million marketing budget is higher than Apple’s and Samsung’s 2012 marketing budget. The two spent $333 million and $401 million respectively on marketing in 2012.
There is a high chance that the Moto X Phone could disrupt the pecking order in the smartphone industry. And even if it doesn’t, it will open a key revenue stream that possesses the ability of expanding at lightning pace: another growth pillar for Google.
Google is leveraging its Android ecosystem to control competitors’ software prospects in mobile. Google has in particular managed to seal all of Microsoft’s (NASDAQ: MSFT) entry points into the mobile software segment. Microsoft’s licensed software approach has no place in a smartphone world where users can get a host of similar software free on Google Play. By keeping Microsoft, a leading software developer, at bay, Google can protect its own interests in the industry and in part push growth up.
Microsoft has now renewed its stance and is undergoing fundamental changes in how it does things. For starters, it is working to concentrate power around CEO Steve Ballmer in order to reduce the elbowing that has become commonplace in the company’s top echelon.
In my opinion, Microsoft needs a stronger solution. Even as the company takes a new ‘devices and software’ image, its Surface Tablet seems to be taking hits as suggested by the now confirmed $150 price cuts. Microsoft ought to have looked for a lasting solution to the PC sector’s woes. This was its only stable income stream.
Self driving cars concept another market all together
While analysts argue that commercial availability for Google’s self driving cars technology is something that is decades away, Google’s executive chairman, Eric Schmidt, ventures that it’s only years away. Schmidt adds that Google has held discussions with "every single car company."
This self driving cars concept could be a game changer, even as Apple intensifies its footing in web-based services for automobiles through the impending launch of its iTunes online radio service.
Apple is set on capitalizing on the healthy automobile industry where it will battle with heavyweights like Pandora and Sirius XM Radio. In the near-term, Apple will not be a great threat to SIRIUS, as the latter is not dependent on web based services. Pandora however is under direct threat. Considering that Apple's iPhone is widely dominant in the U.S, there could be a great possibility that most of Pandora's users access its service through their iPhones. Apple could very well leverage this factor to rope in as many of Pandora's users into its own internet based iTunes Radio service.
But as cars also go smart, an all-encompassing Google ecosystem brought about by the self driving cars concept could sideline current online service providers. This will open up an opportunity for Google to tailor its own web based services, apart from the now widely popular maps, to automobile owners. From this perspective alone, we see that the self driving cars concept is a strong growth pillar.
Although some competitors are better off in specific fronts and niche markets, Google’s holistic approach minimizes risks and promises collective growth. It’s not too late to get onto this ship. There is still great potential upside in Google despite the seemingly ‘high’ price.
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Lennox Yieke has no position in any stocks mentioned. 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!