Google is now sitting at well below $500. Is this important? Yes.
Infospace was once worth $20B when its founder Naveen Jain said he was running the world’s first trillion dollar company. Today, INSP is worth $340M. I used to own the stock, got rid of it after Google went public and all would-be search stock holders sold Infospace, Ask Jeeves and Yahoo! for Google.
This tremendous demand for Google’s stock, combined with Google’s revenues growth made the stock rise tremendously from its 2004 IPO.
The stock’s ascent has been nothing but breathtaking:
This helped Google hire more and more talent, with less salary and more options. Problem is the company’s headcount has ballooned when its stock was sky-high, as a result, a lot of options that were doled out might be under-water or tethering on the brink of it.
In fact, if you were hired after 2006, there is a chance that your options in the company are below water. If those shares are vested, then you are owning options at a loss. If you sold the shares, good for you, but will you remain or look for the next hot startup with 1,000%-style returns ahead of it?
It’s important to note that Google’s long term prospects remain robust, but while many focus on the impact of the US recession, it’s important to note that Google’s international revenues stand at 48% and could very easily rose above 50% in 2008… In fact, with a weak USD, adjusting previous years’ performance, Google has gotten most of its revenues abroad.
The main specter overshadowing Google stock is not the US recession, but the fact that display and video advertising are growing faster than search ads and Google has yet to really demonstrate any ability to generate meaningful revenues from that market, let alone own it.
Over the next few weeks and months, maybe quarters even, Google’s stock will have a psychological test to overcome: investors will be intrigued to buy the stock, but they will wonder if the stock is in a deflationary period where it will be cheaper tomorrow than it is today. Even with some $15B cash on hand and an enterprise value of some $125B… Google is 3-5x more expensive than Yahoo! - the best positioned company to win in the next display/video-based growth period.
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WatchMojo NewsletterSAI has an overview of CBS’ earnings report: CBS - the most ad-dependent and US-focused of the big media companies - reported lower revenue at its TV, radio and publishing divisions, by division, revenues were:
Television: -4%
Radio: -10%
Outdoor: +7%
Publishing: -4%
CBS is a fantastic media company, really well positioned with excellent management and a sound strategy to tackle the challenges that traditional media face, but that’s not a very rosy outlook in the context that outdoors and online are growing but everything else is shrinking.
What exasperates the matter is that - to quote NBC’s Jeff Zucker - these companies are trading offline dollars for online pennies.
If I were a media company - I would be investing in a plethora of companies, leaving them independent, and then buying them before they explode and get too expensive. To their credit, CBS is doing that. News Corp. appears to adhere to the “we prefer to buy, not lease” mantra so they shun minority investments for full buyouts early on.
I covered this in “What the Math Suggests“. The reason is simple: online video alone, for example, represents over $150B in untapped market capitalization… but not for old media.
As an entrepreneur, I would attest that
a) remaining privately funded,
b) getting a strategic investment from a media firm or
c) getting VC funding all have pros and cons…
but the easiest path to success is b) - no doubt… though you tend to limit exit options, and as such, cannot maximize payouts. Mind you, who cares about a potential maximum payout if it is all theoretical.
Related:
- Understanding TV executives Angst and Envy
- Web Video Represents $150B market cap in 2011, but not for TV companies
- Digital Revenues are Never Incremental for Old Media
- Will TV companies face same fate at Print Companies?
- If You’re Old Media, What Would You Do?
Enough people have commented on how Yahoo!’s Buzz is basically a knock off of Digg, so I’ll spare that angle… however what I find interesting is that Yahoo! is now echoing the fact that content has basically gone democratic: back in the day, a handful of business development executives and editors chose which links ended up on Yahoo!’s main page. Today, at least in theory, users can drive up links from Average Joe’s. Over time, this - like Digg - will be gamed and forgotten like most of YHOO’s forays these days.
Equally interesting, the other side of the coin is that distribution really has become a commodity. MSN, AOL and YHOO once commanded some 95%+ of the distribution online. I used to be a VP at a content producer that fed articles to MSN and YHOO and you were a made man once they distributed your content… but getting that took a lot of time, energy and money.
These days, Google has replaced AOL in the trifecta… but more importantly, a second layer of distribution and traffic sources have emerged: the social networks, and on top of those (or below, I guess), a third layer includes the vertical sites has emerged.
Long story short: the fact that Yahoo! has in essence opened up its main page shows just how fragmented and commoditized distribution has become.
Sumner Redstone was right: over time, new distribution channels emerge, and the value of content rises… though how the content wins in the end is now a bit more democratic.
As a content owner, you can’t help but smile about that denouement.
In 2005 Yahoo! released its search API, the developer community went crazy… I assembled a couple of programmers and built a vertical search engine called MetaMojo.com. We subsequently moved away from Yahoo!’s API and built a Nutch-based crawler instead because Yahoo! took one step forward but two step back.
Today Yahoo! Search goes open… This basically allows publishers to tweak Yahoo!’s search, though they cannot tweak results. I think this will be noise today, gone tomorrow. Yahoo! should have really opened up its search platform then, fully. It didn’t. My frustrations working with Yahoo! then were emblematic of everything that is being written about Yahoo! today.
Not a day goes by where Yahoo! does not seem to launch something new, yet old. Yahoo! is now cornered into a corner like a dangerous, wounded animal. Its moves are erratic, it will attempt everything to fend off its pursuers… get out of its way, it might fall under its own weight.
Note: Long YHOO stock.
