Last year, I asked if Google would surpass MSFT by 2010, this year, with Google crossing $600 and $700 in a matter of weeks, Silicon Alley’s Henry Blodget and Tech Crunch’s Duncan Riley are getting in on the fun.
For the record, it is highly possible to think that Google will be worth a lot more than it’s worth today, but there’s also a lot to suggest that it won’t. When you break down the variables, it’s plausible to think that Google might be the world’s first trillion dollar company, too, but there is enough to suggest that that company will be based in China or India, and involved in wireless. Of course, these last three traits are right now very speculative, so Google is as good of a bet as any. But more on Google later, the thing that struck me most with Duncan Riley’s most, who is Australian, is that he asks: Imperium: Google’s March Towards Becoming America’s Biggest Company.
The key word, my friends, is America. Has America lost its edge? Probably. I am very sure that the world’s most valuable company in 10 years will not be an American one. The US currency is a shadow of its former self. Growth will come increasingly from Russia, China and India.
Back to Google, don’t get me wrong: Google has a lot of growth opportunities, and almost gets 50% of its revenues from abroad, but right now it only generates ads from search ads… once it begins to monetize YouTube, integrates Doubleclick etc., there is upside, but we should also put down the koolaid and realize that Microsoft remains a pretty good bet on that front: it will do nearly $60B in revenues, 5x what Google will do in 2007. Sure, MSFT is not growing anywhere near as fast as Google, but Google is a one trick pony whereas MSFT can more easily gain market share in Internet than Google can add market share (at least that’s the theory). The Web shall inherit the meek, I suspect that by 2021, web ads will be larger than TV ads… and guess who’s value will increase to reflect that?
While everyone is getting giddy in a remarkably 1999-esque fashion, I’d like to point your attention to the last Web-based company that had trillion dollar aspirations: Infospace, who’s Naveen Jain said “we’ll be a trillion dollar company.”
At one point, in 2000, Infospace’s market cap was $25B. Today, Infospace’s enterprise value is worth $425M.
Infospace was never a Google, mind you… but Google isn’t yet the America’s most valuable company yet, let alone a potential trillion dollar company either.
With China’s economy in a bubble-esque state of euphoria, I suspect that the market in China will face a correction in the hangover period after the Olympics… but after things settle down, expect one company to emerge from China to become the world’s most valuable company before long.
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November 5th, 2007 at 3:54 pm
I keep wondering what happens if the market tanks and ad dollars suddenly become very tight? Outside the tech sector, you don’t find the same blind enthusiasm right now.
As someone at a large agency, I can actually see a scenario where more of the big money traditional media dollars quickly start to flow to less expensive, cost-effective online advertising (with much of it naturally filling Google’s coffers.) But I can also see another scenario where there’s (initially at least) a general pushback from all forms of advertising across the board. That’s what happened the last time the markets soured (granted, we didn’t have as many proven online ad platforms back then.)
If the latter happened (even if only for a few quarters) I can’t help but think investors would suddenly awaken to the fact that Google hasn’t done a very good job monetizing most of its businesses areas outside of search. They’re dipping their toe into a lot of areas and getting a lot of press. But most of these ventures don’t appear to be generating any significant revenue.
Microsoft is a bastion of diversity be comparison. And it’s still heavily dependent upon Windows/Office. But it at least draws some fairly significant revenues from other sectors as well.
November 5th, 2007 at 9:49 pm
RS, you raise a valid point, but I think that marketers are savvy enough to know that with online ads, their spending can be tracked and the ROI - while no slam dunk - is measurable and more effective.
We’re not in 2000, marketers understand web advertising pretty well and I’d argue that any downturn will help online media at the expense of old media advertising.