Today, Google got blasted over copyright (well, YouTube did, anyway). MSFT CEO Steve Ballmer accused it of reading your Gmail emails.
This begs the question, did we forget what happened after the euphoria of 1999?
Of course, things have changed: online advertising generated $10B worth of transactions in the first 6 months of 2007 in the US alone… no wonder why Google is pushing for more online services.
But I wonder, does Google Deserve to be Worth more than Walmart or Toyota Corp.? Read on.
But before you answer, bear in mind, Google’s market cap is worth quite a bit more than that, just ask GigaOm.
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October 8th, 2007 at 9:08 pm
Hi,
Google’s equity is currently worth more than Wal-Mart’s but as you know this does not fully reflect the relative value of the two companies. Consider the relative valuations at the enterprise value (EV) level:
Google EV $185 billion
Wal-Mart EV $224 billion
That said the growth in Google’s value has been impressive and at the current rate it won’t belong before Google’s EV surpasses that of Wal-Mart.
October 8th, 2007 at 9:21 pm
Sorry Google’s EV is actually $173 billion.
October 8th, 2007 at 9:23 pm
Thanks Sam. I appreciate you adding context to the post… but, should Google be anywhere close to Walmart or Toyota?
October 9th, 2007 at 2:25 am
I think google deserve this value, however, it is more than IBM-I can’t accepte it.
October 9th, 2007 at 2:47 am
[…] post started as a comment on HipMojo’s post Does Google Deserve to be Worth more than Walmart or Toyota Corp? but as the response passed 500 words I thought it warranted a post in its own right. Market […]
October 9th, 2007 at 2:55 am
That’s a tough question Ash. I started my response and when it passed 500 words I decided it should probably be a blog post in it’s own right (http://www.valuecruncher.com/wordpress/?p=217). The short answer is I think Google is currently over priced. I think they have a great company and adwords looks like one of the great businesses of all time (assuming Google can maintain there dominance of search technology). The key issue for me is the ability of Google to capitalise on the growth in online advertising outside of adsense and adwords. Given your media background and experiences establishing WatchMojo I am very interested in your take on the following statement: How much of the projected online advertising spend will end up at Google’s bottom line in other words how much will Google have to pay to content providers? The internet offers the ability to distribute content through one channel to a far greater audience than print or television but will the cost of this content as a percentage of revenue be any different in an online world (this is the content cost not distribution costs)?
October 9th, 2007 at 3:52 am
I agree — GOOG at these levels is WAY over-priced. As somebody else pointed out at Gigaom (and I copy):
Take a closer look at Yahoo’s balance sheet and you’ll see:
$2B in net liquid assets (cash+equivalents+receivables-debt-payables)
~$7-8B stake in Yahoo Japan
~$2-4B stake in Alibaba (depending on how conservative the valuation is, etc.)
Now, add these up and you get Yahoo has $11-14B in net liquid assets on the balance sheet.
GOOG has none. Agreed with your post Ash, GOOG commanded 40% of online advertisement $ of first half of 2007 — but remember this was the time also when YHOO was going through its worst phase and Live had not picked up. Over the last 3 months (precisely the months to be counted in the second half) MSFT with its Live, aQuantative acquisition, another small ad exchange acquisition and renewed vigor is trying to gobble online ad dollars. These same three last months is when Yahoo made some really smart acquisitions (Bluelithium, RealMedia, Zimbra and a few others), the first two of which are purported to beat Google in the behavioral display ads. While mgmt might still suck at Yahoo, I do think it WILL compete rather well with these acquisitions for ad dollars and I foresee less than stellar growth for Goog’s pocket as compared to the past. MSFT and YHOO won’t each Goog’s lunch anytime soon but yes Goog will slow rather sooner than later at which time these share prices are just _not_ sustainable.
As Sam mentioned, can Google really transform beyond Adwords and Adsense? My gut feeling comes out be a strong _NO_. It has not been able to and I am growing increasingly skeptical they can. I see rather dying innovation at Google — look at Om’s post about how bad the new Youtube news released today is!
Finally, I honestly suspect this is pump-and-dump scenario right now with Inst. investors moving out by creating a flurry of momentum and getting the momentum crowd and retail crowd excited. How much ever clown Jim Cramer might be — he hinted at this a few weeks back.
I’d be very interested in knowing your fair comments too, Ash.
Thanks for your wonderful, insightful blog
October 9th, 2007 at 4:00 am
Ugh, I think I am wrong on GOOG not having bank balance. I think they have bank balance but not strong investments like Yahoo…sorry about that.
BTW, make the captcha a bit easier alrighty? I had NINE tries to get these two posts .. bah!
October 10th, 2007 at 10:03 am
thefamiliguy wrote: ” I think I am wrong on GOOG not having bank balance. I think they have bank balance but not strong investments like Yahoo…sorry about that.”. Heh, *indeed*… As of Jun 30, Google’s current assets (cash and equivalent, short-term investments, net receivables) totaled $14.8 billion, vs Yahoo’s $B 3.6; indeed, Google has been criticized for keeping *too much* of a “war chest” (so it can always fund huge acquisitions, bids for spectrum, etc). “Long term investments” are about $1 billion for Google, vs $B 2.7 for Yahoo, but that difference looks less big when you’re talking of market caps around $B 40 (YHOO) or 200 (GOOG).
The key point remains that GOOG’s P/E is 52 (fP/E 33), YHOO’s 55 (fP/E 48), so, _IF_ GOOG’s fully priced or overpriced (and I’m not calling that one either way), so must YHOO be (worse ratios, slower growth, way less of a cash hoard for acquisitions, &c). I suspect that YHOO’s market cap is sustained by some continuing hope of a drastic course change for Yahoo (a break up as suggested by Sanford Bernstein, a “plan B” with layoffs and outsourcing of search and ads, a takeover by Microsoft or private equity…) which might unlock value currently buried by problems of corporate organization, structure, management…