This is an excerpt from part two of a multi-part series on the companies vying for dominance during the 3rd major paradigm shift in personal and enterprise technology over the last 30 years. This one will be a biggie (not smalls) and promises to create an investment behemoth out of the winner and relegate the losers to relatively niche markets. This is saying a lot considering the size of the companies participating in the battle for the pole position. I created this series to provide a truly objective, truly informed, and truly analytical (from an empirical perspective) knowledge source on this very important intersection in personal computing and distributed media. This series will end with a full BoomBustBlog style forensic report on the company we feel has the most to gain from these wars from an investor’s perspective.Those who are not familiar with my hard-edged, yet objective analytical work should reference past performance and media appearances for a quick background.
It is imperative that readers first review “There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All” before moving on so as to get a thorough background as to what is at stake, who the players are, and what mobile technologies are being released into the consumer and enterprise realm. This is a lengthy, meaty, objective and information packed post that was initially intended to go out to subscribers only (click here to subscribe to our research services). I welcome you to compare it to the research you find available from technology, financial and strategic advisory firms, including and particularly Goldman Sachs (click here to see what I mean) and let me know whose analysis is more accurate, in depth and thorough (not to mention less expensive).
Google is Giant, Online Ad Agency Cum Enterprise Software Developer and consumer electronics and media giant! WTF! That's right...
At the end of 2009, Google earned $22.9 billion or 96.8% of its total revenues through advertising, out of which $15.7 billion was related to its own websites, with the remaining $7.2 billion related to other network websites.
Licensing and other revenues accounted for only 3.2% (or $761.8 million) of the total $23.7 billion revenues, at the end of 2009.
Amongst the technology companies, Google’s business model is highly dependent on traffic as compared to traditional technological businesses like that of Microsoft which are more dependent on deriving revenues through products.
As you can see, Google is basically a giant web-based ad agency. They are smartly modifying their strategy to become much more, using the healthy and ubiquitous ad agency cash flows to finance high risk/high reward ventures in a diverse, myriad array of ventures. Google may very well be the world’s most prolific venture fund as well as its most profitably ad agency.
· Advertising is not a market but a business model
· Any market that can attract advertising is a target for Google : This is clear with the Google’s latest launch of Nexus One phone (to capture mobile advertising, development and marketing partners) and plans of launching Google TV (to capture the television advertising market)
Google recognized Apple as its main competitor as far back as 2006 and has carefully orchestrated its downfall with the best laid plans. Those plans are now coming to fruition...
Notice how Google has directly funded all of the technologies that have converged to threaten to topple Apple’s smartphone hegemony? Sprint’s 4G Wimax tech, HTC’s collaborative use of the Android OS and the customization of the interface through HTC Sense! Google is, and has been for at least the last three years (since the launch of the IPhone), Apples biggest threat.
Most prominent sell side analysts still do not understand the Google business model and stratey, yet proffer buy ratings as if they are going out of style!
o Goldman Sachs: “We do not view Google’s new device as a near-term threat to the iPhone 3GS as: 1) the price tag of the Nexus One does not seem aggressive enough to entice potential iPhone buyers 2) Apple’s AppStore, which has over 115K applications and over 3 [billion] cumulative downloads to date, remains far ahead of competing app platforms; and 3) internationally, Nexus One’s availability seems limited at this point, with the unlocked version only available in three countries and Vodafone’s UK subsidy not starting for a few months.”
Reggie Middleton begin_of_the_skype_highlighting end_of_the_skype_highlighting’s View
Goldman’s analysts have COMPLETELY struck out on this one. They absolutely failed to grasp both the strategic implications and the successes stemming from the strategy behind the Nexus One, which I will explain shortly. This is also not the first time that Goldman has been so wrong on so important a topic to their retail and institutional clients. See Reggie Middleton begin_of_the_skype_highlighting end_of_the_skype_highlighting vs Goldman Sachs, part 1 and “Blog vs. Broker, whom do you trust!”.
Though the Nexus One cell phone (launched towards the beginning of 2010) which debuted a new, web-based distribution model that didn’t gather the expected acceptance from consumers (most likely because it skirted both the influence and the marketing power of the telcos), the Company has continued to launch newer technologies and service offerings based upon the template pioneered by the relatively high end Nexus One. In addition, its open source Android OS mobile phone operating system continues to gain market acceptance and has been a key milestone so far – beating Apple, RIMM. Microsoft, Nokia and Palm in handset activations for the last quarter – and the HTC EVO handset distributed by Sprint is widely accepted as the best all around handset available as well as the first handset to offer any credible challenge to Apple’s IPhone series – including the brand new, sexy but problem-riddled IPhone 4G.
The full 20 page+ analysis is available to peruse for free from the BoomBustblog: The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift