Top 20 companys in the World to invest in?

[Mega]

Was watching Terry Smith video where he plans to invest in just 20 "TOP" World companys. I thought about it last night, which would you pick?

Well, i thought it must be able to not have two kids in bed room wipe them out over night by coiming up with a better website...so no facebook.....it must not MEGA pension debts hanging over them (British Telecom)...& as Terry sez "Could be run by a fool".

Mega choice:-

Mircosoft
Coke a cola
Johnson & Johnson
Vodafone
Total
...................and i run out of ideas.

Yours?
Mike

[Milton Kuo]

Re: Top 20 companys in the World to invest in?

Smith's idea seems very similar to what Jeremy Grantham has stated for years now about equity in quality companies outperforming over the coming "lean years." I haven't been able to find any literature published by GMO that specifically states the attributes they use to qualify an equity as "quality" but I'm sure it's things we've all read before: high barrier to entry (Warren Buffet's "moat" concept), low debt, business that is relatively immune to recessions, good management, etc.

You can look at the GMO Quality IV mutual fund (GQEFX) to get a good idea of what companies are considered quality by GMO. Interestingly, of the equities you've mentioned, Coca Cola, Johnson & Johnson, and Microsoft are on GMO's list. I would also add McDonald's and Procter & Gamble (yes, it's been a dog for the past few years) to your list.

Personally, I have a good slug of stock in tobacco companies (Philip Morris, which is one of GMO's quality stocks, and Altria), which have performed remarkably well. Unfortunately, I feel that a good deal of the incredible recent performance is likely due to Bernanke having driven down rates of interest such that people are desperate for income and are piling in to anything that has a yield greater than 1%.

In the discussion of the Eastham Capital investment, EJ has mentioned that he believes that there ultimately may be a bubble in multi-family real estate. I believe it's likely that there will be a bubble in anything that appears to be safe and yields more than what U.S. Treasury bonds or savings accounts yield. I see people reaching for yield everywhere and Bernanke's promise to hold rates at zero until 2014 is beginning to erode the resolve of even those stalwarts who were adamant about staying out of the crooked Wall Street products.

[doom&gloom]

Re: Top 20 companys in the World to invest in?

Plenty of monetary and rate distortion still to come as well....

[seobook]

Re: Top 20 companys in the World to invest in?

if the market drops significantly Google would be great to get. a lot of the "social" hype online is a bit of a bubble & search is still the cash cow. if the US Dollar gets hit, then Google having about half their current revenues and over 80% of the search volume in foreign markets is a huge win. when some of those markets develop more robust ad markets they stand to gain big on that. a few years back my wife and I were in the Philippines and Google would show like 1 or 2 ads on the search results for keywords in the US where there would be a dozen ads (like "credit cards").

in some foreign markets where the ad market is not too strong Google buys up some of their own ad inventory to give them greater control over user experience and in many markets they reinforce their default search position by also being the default web browser too. globally Chrome has as much (or more) usage than Internet Explorer. and they have android on mobile phones too.

also take a look at what happened to MegaUpload & the UK kid who created TVshack...they got hosed. And Friday evening Google announced a new policy toward turning DMCA requests into a "relevancy" signal. YouTube already captures about 1 in 13 downstream clicks from Google & as they get more content on it (and it remains exempt from this sort of penalty that will block out newer and smaller competitors) I have to think Google wins the online video market. so in many ways Google is not only dominating the web & will ride increased consumption of media online globally, but they are also able to control the ecosystem via opaque policies that allow them to lock down the advantages they gained when they bought YouTube. If another start up started from scratch today & behaved like YouTube it would either get filtered as spam or have agents do a militant styled raid on the founder.

and if energy gets more expensive & people are forced to travel less, then won't more types of work (& entertainment) be done at home over the web?

currently I don't own any Google shares, but their moat is far deeper than most realize (look at Bing's multi-billion Dollar losses for years & years now, Yahoo!'s willingness to gut their own search to outsource to Bing, the flame out of Cuil, etc.) ... about the only search start ups that have had sustained success against Google are ones where they favored a local market (Naver in South Korea, Baidu in China ... though even some of their marketshare is from the government there blocking Google's site sometimes, and Yandex in Russia). There are a couple tiny search start ups in the US in Blekko & DuckDuckGo, but they both have fairly small usage & Google hasn't really seen an erosion of search marketshare even as they displace their organic results with their various verticals and ads.

and Google is still growing faster than most companies it size, yet has a lower P/E ratio than companies like PG or JNJ (and that is before considering that Google has over 20% of their market cap in cash).

[c1ue]

Re: Top 20 companys in the World to invest in?

a lot of the "social" hype online is a bit of a bubble & search is still the cash cow.

Do you think Google is immune to the mobile switch?

From what I understand, something over 1/3 of Google's advertising revenue is banner ads - the latter of which are exactly like Facebook's primary revenue albeit on a much wider variety of sites, which in turn implies some vulnerability to the mobile switchover.

The role of search on mobile also in interesting - iOS' market share in mobile in general plus the rise of non-Google search alternatives via apps/maps/whatever is also a possible concern.

Your thoughts?

[seobook]

Re: Top 20 companys in the World to invest in?

Do you think Google is immune to the mobile switch?

in a word? yes.

currently mobile CPCs are lower than desktop CPCs, but in time they will increase. And Google can get away with dominating more of the mobile interface with ads.

Here are a couple images from a blog post I made a week or two ago

the first is an iPhone...the yellow background denotes it is an ad...it only takes them 2 ads to fill up the entire search interface.




the second picture here is from RKG, it highlights how mobile ads gets a much higher clickthrough rate than desktop search (largely because almost the entire interface is ads for commercial keywords ... note that how as screen sizes get smaller ad CTR goes up)



over time Google's mobile click prices will increase due to their ability to offer a click to call feature (what's more valuable than getting a hot lead/prospect on the phone right now).

Also over time mobile CPCs should go up as mobile payment solutions become better integrated (currently this is exceptionally fragmented) & advertisers use the local targeting cue to be able to bid more for people who are known to be local.

From what I understand, something over 1/3 of Google's advertising revenue is banner ads - the latter of which are exactly like Facebook's primary revenue albeit on a much wider variety of sites, which in turn implies some vulnerability to the mobile switchover.

Google's margins on search clicks are much higher than their margins on their display ad network. Their default ad share payout percent on their distributed ad network is 68%. However larger partners in the display network get even higher percents than that. Companies like Ask.com & AOL likely get closer to a 90% revenue share with Google. Also worth mentioning that to win some of the big deals & keep them out of Microsoft's hands Google is willing to lose money.

• Google lost hundreds of millions of Dollars when they paid $900 million to be the default ad provider on MySpace. A site which later sold for $35 million. ;)
• When Bing was pushing hard to become the default search provider for AOL, to renew the ad pact Google "invested" a billion Dollars in AOL. They did a cool $726 million writedown on that deal.
• Here is an interview of a founder of a meta-search engine in Latin America. In it he states that Google was paying ABOVE 100% revenue share rates to win partnerships.

The point I was trying to make there was not that Google needlessly burns money, but that on their syndicated ad network they were willing to bet big and lose money to maintain their monopoly market position & most of their profits come from their core search business on Google.com (& Google.co.uk & Google.de)

And Google doesn't really have any serious competition in the distributed online ad network game either. Yahoo! folded their ad syndication network. And Microsoft never pushed theirs too hard, so its still tiny - they have basically no exposure on the longtail of sites & have a requirement of a couple hundred million pageviews for new publishers.

I mean Facebook is allegedly an up-and-coming competitor on the distributed ad network front, but their ads are more top of the funnel & online most of the value of advertising is attributed to the bottom of the funnel.

Which leads me to my next point ... Google Analytics. Google is the default tool for measuring the performance of online marketing efforts, so Google can sway the perception of performance for many people. Google is also able to force bundling into use their analytics service by restricting data that other services can get. If you use *any* analytics service other than Google's, for a lot of search clicks you have no way of knowing what keyword was searched for. Anyone who searches while logged into Google does not send keyword data from Google.com. And anyone using Firefox is defaulted to the https version of Google, which also does not pass keyword referral information.

The keyword referral data *is* sent if someone clicks on Google's paid ads, but the only way to get that data & tie it to performance on the organic search results is to use Google Analytics.

The role of search on mobile also in interesting - iOS' market share in mobile in general plus the rise of non-Google search alternatives via apps/maps/whatever is also a possible concern.

Even with iOS having a strong marketshare they still sell default search status to Google.

Google's search marketshare on cell phones is even more dominant than it is on desktops. Google is in the 80% range on desktop search (inside the US...in some EU countries they are at or above 90% to 95%), but on cell phones they are more like 92% (and even higher than 92% within the US ... more like 97%).

About the only viable alternatives Apple can consider are Microsoft (and what would the fanboi crew think of that?) or building their own search engine (maybe including buying something like Blekko to have a head start).

Certainly there might be some sharding of marketshare to applications, but Google will likely buy out some of the winners anyhow. (They bought out the iPhone email client Sparrow a few weeks back).

I think Google's biggest market risk is being regulated for their monopolistic abuses. But they are sooooo good at public relations that they can spin themselves as the good guy in any event.

• At one time they had 50,000 AdWords advertisers selling counterfeit goods. Once they mentioned that they had blocked them the media fawned over how they were "cracking down" & protecting users. (how exactly did the problem grow to 50,000 advertisers without it being an intentional blind eye?)
• Just this past Friday afternoon Google announced that they were going to use DMCA reports as a relevancy signal to block copyright infringement from ranking well in their search results. As part of the post they also hinted that they would be exempting themselves & their own properties from the policy Yet again idiots in the mainstream media were fawning over Google's great "transparency." And now that well timed move by Google on copyright (that only serves to increase the dominance of YouTube) is a footnote in history, because the media is reporting about how Google just acquired Frommer's.
• Apple is probably the only company in the world that can compete with Google in terms of public relations. They are both simply amazing.

[c1ue]

Re: Top 20 companys in the World to invest in?

currently mobile CPCs are lower than desktop CPCs, but in time they will increase. And Google can get away with dominating more of the mobile interface with ads.

I'm not sure how relevant CPC is because it only denotes the cost per click on an ad whether adwords or banner. If fewer ads are being shown, how does even an identical CPC between mobile and non-mobile matter?

the second picture here is from RKG, it highlights how mobile ads gets a much higher clickthrough rate than desktop search (largely because almost the entire interface is ads for commercial keywords ... note that how as screen sizes get smaller ad CTR goes up)

The same held true for any number of other new digital advertising media - I think time will tell if mobile CTR will hold up better than the others (which didn't).

over time Google's mobile click prices will increase due to their ability to offer a click to call feature (what's more valuable than getting a hot lead/prospect on the phone right now).

Also over time mobile CPCs should go up as mobile payment solutions become better integrated (currently this is exceptionally fragmented) & advertisers use the local targeting cue to be able to bid more for people who are known to be local.

The first comment seems reasonable, though I'd want to see proof before believing it. For one thing, the reasons and venues in which people use mobile internet are vastly different.

The second comment, I disagree completely. If you're seeking to buy, there are already any number of payment solutions for non-mobile. I fail to see why mobile payment in this context is in any way relevant. NFC and other systems are not there for the purpose of enabling mobile internet business, they're for the purpose of replacing/augmenting wallets with their cash and credit cards. Mobile payments are a transaction play not an enablement play.

Google's margins on search clicks are much higher than their margins on their display ad network. Their default ad share payout percent on their distributed ad network is 68%.

Yes, but as noted previously, search clicks only seem to comprise 2/3rds of Google's ad revenue. Having 1/3 of your business constricted by a fundamentally different environment is still a significant issue from a market capitalization viewpoint. Unless you're saying the search clicks on mobile are going to make up for the sheer lack of ad space?

Or put another way: for banner ads, what matters is CPM + number of ads shown. CPM for mobile ads don't seem better to any significant degree than non-mobile (maybe worse), while there is no question whatsoever that the number of ads shown is much fewer.

This in a nutshell is what seem to be the problem with Facebook's mobile switchover.

And Google doesn't really have any serious competition in the distributed online ad network game either. Yahoo! folded their ad syndication network. And Microsoft never pushed theirs too hard, so its still tiny - they have basically no exposure on the longtail of sites & have a requirement of a couple hundred million pageviews for new publishers.

Agreed.

Which leads me to my next point ... Google Analytics. Google is the default tool for measuring the performance of online marketing efforts, so Google can sway the perception of performance for many people.

That might be true for non-mobile, but it absolutely isn't true for mobile.

Even with iOS having a strong marketshare they still sell default search status to Google.

Google's search marketshare on cell phones is even more dominant than it is on desktops. Google is in the 80% range on desktop search (inside the US...in some EU countries they are at or above 90% to 95%), but on cell phones they are more like 92% (and even higher than 92% within the US ... more like 97%).

What you note above was true for maps...but now it isn't true.

What makes you think search is sacrosanct?

About the only viable alternatives Apple can consider are Microsoft (and what would the fanboi crew think of that?) or building their own search engine (maybe including buying something like Blekko to have a head start).

Search isn't rocket science. The primary factor in startups' failure to complete with Google search isn't technology - it is that there just aren't any ways to detectably offer a better search solution. How many people care if one search engine returns 10 million results but the other returns 12 million?

The Siri platform is specifically intended to erode Google's search by providing a better interface. Time will certainly have to tell if this works, but as you noted, Apple is more than large enough to compete with Google on spending.

No doubt many people are looking for others.

[seobook]

Re: Top 20 companys in the World to invest in?

I'm not sure how relevant CPC is because it only denotes the cost per click on an ad whether adwords or banner. If fewer ads are being shown, how does even an identical CPC between mobile and non-mobile matter?

the point of the graph was not (cost per click) CPC but CTR (clickthrough rates) ... for commercial keywords, on cell phones Google gets about DOUBLE the ad clickthrough rate as they do on desktop.

they don't need to show many ads if only showing a few ads dominates the entire interface.

the key factor here is not the raw number of ads, but the ratio of "above the fold" screen real estate that is dedicated to ads vs editorial. on small screens Google might show 0 editorial results at all above the fold, therefore if a user clicks on anything on the search result they will be clicking on an ad. this is already reflected in the above CTR stats today.

The same held true for any number of other new digital advertising media - I think time will tell if mobile CTR will hold up better than the others (which didn't).

I would agree with the dismissal of the faddish nature of some mobile ad units (& for many of these we have already seen the CPM plunge through the floor).

however what makes search ads have such a high CTR is that most people do not realize there are ads in the results, or where the ads are.

I spent thousands of Dollars surveying real web users about a half-dozen different ways on this very question.

The first comment seems reasonable, though I'd want to see proof before believing it.

Google already has a click-to-call option on their mobile ads. Look at how much Google stated they lifted CTR on ads.

For one thing, the reasons and venues in which people use mobile internet are vastly different.

I agree wholeheartedly with this. And I have analytics data that confirms how people use different sites differently across different devices. Note that I didn't state that mobile will displace desktop (& there are certain things people simply won't do on mobile phones because they are too inconvenient).

The second comment, I disagree completely. If you're seeking to buy, there are already any number of payment solutions for non-mobile. I fail to see why mobile payment in this context is in any way relevant. NFC and other systems are not there for the purpose of enabling mobile internet business, they're for the purpose of replacing/augmenting wallets with their cash and credit cards. Mobile payments are a transaction play not an enablement play.

I am not so much thinking about for "in-person" payments (like Square) but more for "wow do I really have to fill in 37 forms to buy this purple sweater from this online website" ... what if that gets reduced down to a couple clicks due to data you have stored in the phone. Then compulsion ecommerce shopping on mobile phones is far more profitable for advertisers.

eBay already stated they have explosive growth on mobile. “A woman’s handbag is purchased on eBay mobile every 30 seconds”

but the problem for sites that are not eBay or Amazon (and thus are not loaded into most phones) is someone else needs to make conversion simpler on these other sites. (Almost) nobody wants to set up an account, confirm their email, and 20 other steps to buy something on a cell phone for smaller sites...that is where Google storing some user data & smoothing out the purchase process can increase value to advertisers.

Yes, but as noted previously, search clicks only seem to comprise 2/3rds of Google's ad revenue. Having 1/3 of your business constricted by a fundamentally different environment is still a significant issue from a market capitalization viewpoint. Unless you're saying the search clicks on mobile are going to make up for the sheer lack of ad space?

indeed they will, as the search results on mobile phones are often nothing but ads ... meaning that each search (on lucrative commercial keywords) where someone clicks on a listing without scrolling below the fold becomes an ad click. And keep in mind the point about not having to share that $ with AdSense publishers (Google's other 1/3 of display revenue has at least 2/3 of it shared with publishers).

Or put another way: for banner ads, what matters is CPM + number of ads shown. CPM for mobile ads don't seem better to any significant degree than non-mobile (maybe worse), while there is no question whatsoever that the number of ads shown is much fewer.

This in a nutshell is what seem to be the problem with Facebook's mobile switchover.

Yeah on Facebook...I think their mobile ads are way more faddish due to the lack of user intent.

One deep well of mobile ad inventory Google has is pre-roll ads on YouTube videos. Apple is dumping their YouTube app going forward & when Google makes their own Google will be able to add in pre-roll ads.

That might be true for non-mobile, but it absolutely isn't true for mobile.

I am speaking more about website performance rather than offline performance & custom internal databases tied to loyalty cards and so on.

What you note above was true for maps...but now it isn't true.

Local is certainly going to be a big growth area with ads, but search engines haven't yet really cracked the nut on a lot of the local business (outside of ads for things like hotels & maybe super high-value niches like lawyers). Google's willingness to bid $6 or $7 billion for a turd like Groupon shows the desperation on trying to tap into a local market that has just not been tapped into yet online.

I see maps as an area of future growth rather than something in decline. It is a pie that could get split a few different ways and still have the pieces of future pie bigger than the current whole.

What makes you think search is sacrosanct?

Having studied it for a decade, with a likely similar intensity to how EJ studies economics. I am nowhere near as smart as EJ, but I have seen a lot of stuff with search (my main biz is search marketing).

Search isn't rocket science. The primary factor in startups' failure to complete with Google search isn't technology - it is that there just aren't any ways to detectably offer a better search solution. How many people care if one search engine returns 10 million results but the other returns 12 million?

Most people typically only care about the top few results on the page. But it is not always easy to get the right ones. Google is not just a company with loads of computers, but they also hire over 10,000 people who manually rate the results based on hundreds of pages of training materials. And then they feed that data back into tuning the algorithms. And they have done the manual rating stuff since *at least* 2003. A couple other economy of scale items to point out...

• the depth of their ad market
• their understanding of page-level relevancy (not only for ranking, but also for ad targeting on those pages)
• them having way more search data that not only helps their ad market get better at creating yield, but also allows them to track user data & query chains/refinements for things like localization of results and spell corrections
• their distributed ad network
• their leadership in online video (ties in nicely with how they police others on copyright)
• their browser having more global marketshare than even Internet Explorer
• the cash to buy default search placement in other web browsers
• the size of the web & the cost to scale crawling it all & picking up signals
• the value of doing hundreds of bucket test experiments per year for a decade
• the strength of their brand (people use them over 3 billion times PER DAY!) ... Microsoft has even done studies where (after losing something like $8 to $10 billion building Bing) they showed they matched Google on relevancy, however users would perceive the results as being more relevant if they were wrapped in Google's branding & less relevant if wrapped in a different branding.

The Siri platform is specifically intended to erode Google's search by providing a better interface. Time will certainly have to tell if this works, but as you noted, Apple is more than large enough to compete with Google on spending.

No doubt many people are looking for others.

I would like to see more competition in search, but I think there is one big advantage in a text list of results over a lower friction smooth voice interaction ... and that is the ability to throw ads down people's throats & force the brands to have to buy their own pre-existing brand equity. If a person tried that model with voice search I don't think it would work as well, but Google has already made it seem plenty normal on text-based searches with lists of options (even if all the unpaid/free options are sometimes stuck below the fold).

[unlucky]

Re: Top 20 companys in the World to invest in?

For a buy-and-hold investment strategy, technology is extremely dangerous. Look what happened to RIM. Or Nokia.
I would remove Microsoft from your list, Mega. Stick with Coca-cola.

[c1ue]

Re: Top 20 companys in the World to invest in?

Having studied it for a decade, with a likely similar intensity to how EJ studies economics. I am nowhere near as smart as EJ, but I have seen a lot of stuff with search (my main biz is search marketing).

I'm still not sure I agree, however; the entire mobile internet thing is still very new - there have been literally tens of millions of new smartphone owners just in the past 2 years, and it is far from clear to me just how avid these new entrants will continue to make use of apps/mobile internet as time goes by. Higher CTR rates are to be expected with new media - and as noted previously, far from clear how these will pan out over time. The same goes for 'click to call' - seems nice but of course this now involves potentially increased commitment on the part of the advertiser as well.

In any case, I appreciate your viewpoint and the knowledge you've contributed.

[kduffey]

Re: Top 20 companys in the World to invest in?

Very interesting thread. I've enjoyed reading through it.

Which leads me to my next point ... Google Analytics. Google is the default tool for measuring the performance of online marketing efforts, so Google can sway the perception of performance for many people. Google is also able to force bundling into use their analytics service by restricting data that other services can get. If you use *any* analytics service other than Google's, for a lot of search clicks you have no way of knowing what keyword was searched for. Anyone who searches while logged into Google does not send keyword data from Google.com. And anyone using Firefox is defaulted to the https version of Google, which also does not pass keyword referral information.

The keyword referral data *is* sent if someone clicks on Google's paid ads, but the only way to get that data & tie it to performance on the organic search results is to use Google Analytics.

Isn't it true that unless your an Adwords customer, you can't see any of the organic search term data from logged-in Google users (and firefox https users)? I assume Google is simply trying to protect one of their biggest assets which is keyword data?

As an SEO, how has this impacted your business?

[seobook]

Re: Top 20 companys in the World to invest in?

Very interesting thread. I've enjoyed reading through it.

I should reiterate that I don't own any Google shares right now, but that I do appreciate how well positioned Google is.

One more point I forgot on the above posts ... on their content network (not the search results) on tablets sometimes the ad CTR can be as much as 5x or 10x higher as on the desktop due to errant clicks.

Isn't it true that unless your an Adwords customer, you can't see any of the organic search term data from logged-in Google users (and firefox https users)? I assume Google is simply trying to protect one of their biggest assets which is keyword data?

It is not just logged in searchers who have their data hidden. iOS6 does it by default & so does Firefox, so it is even worse than Google's original spin. At some point I am pretty certain Google will do it in Chrome too. They also have a search/ad deal with Opera. If Opera and Chrome switch over that will leave Internet Explorer as the last remaining browser that allow the flow of keyword data on organic search. Microsoft is likely to leave it that way if they view Google as the enemy & SEOs as "the enemy of my enemy."

One guy in our industry mentioned that 57% of his keyword data was listed as (not provided).

If you have half as much data you can extrapolate to fill in the gaps on some of it, but it does give you a less complete view of performance.

Google is willing to flow some of the keyword (not provided) organic search data across to Google Analytics if you sign up for Google webmaster tools. (Left unsaid is that both leave public footprints which their "search quality" team can use to cross-compare sites if/when they decide to penalize any of them).

But this trend isn't so much just about protecting keyword data generally, rather it is about some combination of all of the following 5

• monopolistic bundling (data can flow into Google Analytics, but no other analytics tools ... all other analytics tools now have a big hole in them (incidentally, Google has done the same thing with AdSense data too...it integrates with Google analytics but no other analytics tools))
• destroying competing products (both in terms of other analytics tools that now must have an incomplete view of the market AND any of the ad networks that was powered off retargeting search queries or using search queries to help enhance/refine onpage contextual targeting)
• allowing Google to pretend to be privacy-focused while they keep more and more data on users & use that data to more aggressively target ads
• forcing webmasters to register with webmaster tools so Google can implement a one-way transparency program.
• making SEO harder & more expensive (harder to determine what happened during updates, harder to know where that one big conversion you came from, etc)

As an SEO, how has this impacted your business?

This past 1.5 years Google has thrown out more curveballs than the prior decade combined.

- panda update
- penguin update
- EMD update
- link warnings & burning link networks
- tightening of link anchor filters
- dialing up weighting on usage data & brand emphasis
- keyword not provided
- extending the size of AdWords ads
- far more aggressive inclusion of various vertical search offerings (eg: shopping, flight search, hotel search, etc.)
- the announcement of using copyright violation issues as a relevancy signal (while granting themselves blanket exclusion and running YouTube, the web's #1 undisputed piracy leader)
- penalizing sites for having too many ads above the fold (while turning the search results into nothing but ads above the fold for many queries)

if you listed Google's 20 biggest all time changes the above 11 would be in them. about the only other things that compare in terms of magnitude were the Florida update in 2003 (Google wanted to try rolling out some pretty big changes before they lost the Yahoo! Search syndication deal that might have been too risky to role out with an independent Yahoo! Search competitor), buying YouTube & rolling out universal search shortly after (according to Compete.com about 1 in 13 Google searches in the US goes downstream to a YouTube video), rolling out AdSense (this is what funded eHow and created the problem that needed to be solved in Panda), rolling out Google instant (guiding the searchers toward specific keywords), buying android & buying analytics

if you are a huge company with a billion Dollar brand Google has been tilting the table toward you. but that has been at the expense of filtering out layer after layer of smaller independent players.

the main way Google has impacted me over the past year is a greater appreciation for how they have become corporate whores & how history repeats itself.

the interesting thing about their pro big business bias is it is (in my estimation) to some degree based on the following thoughts
- size = quality
- bigger businesses are slower moving
- bigger businesses spend more on user experience
- bigger business are more likely to be legit
- affiliates are unneeded duplication in the ecosystem
- bigger businesses have massive ad budgets (though this would never be put in writing)
- etc.

Such faux ideology only came into play AFTER Google maximized their revenues from direct marketing, that growth rate slowed to a trickle & they decided to shift over to going after targeting brand ad Dollars to monetize much more of the ad cycle.

The thing the above ideals miss is that as soon as such algorithms go in play Google creates a problem with line extension. For example, Sears has affiliate listings for listings of individual baseball cards & Barnes & Nobles has affiliate listings for rugs. These are not value added affiliate listings with thick reviews and so on, just crap tossed onto the sites because Google biased the algorithm to promoting any page on those sites. CircuitCity may have went bankrupt as a company, but their website lives on as a thin affiliate feed powered from the folks who run Tiger Direct. If I did the same thing I am 100% certain Google would burn it to the ground.

Further, the content farming stuff that was bad when independent webmasters did it is now being done by some fortune 500 companies (I got CCed internal documents on it from multiple fortune 500s thusfar...surely some of the others are doing it too).

With certain business functions an affiliate who does reviews and comparisons can add value (eg: auto insurance quote comparison) but if you look at the search results for a keyword like "car insurance" the results are going to typically be just the big brands (and local agents of those big brands, due to localization) with maybe a single comparison site in the mix.

And all the above is before we account for the fact that the largest players in areas like finance and pharma are glorified criminal enterprises.

I think eventually Google will soak a lot of the big brands too (likely by even replacing them with more layers* of Google ads), but right now Google is primarily focused on killing off the longtail of the ecosystem first.

* an instructive example is hotel search.

a search for "las vegas hotels" is monetized the following ways
- AdWords ads with sitelinks
- Google hotel finder (paid inclusion)
- if you click onto the hotel finder that paid inclusion property has yet another layer of CPC ads above it
- local listings promoting Google+ are included in the result (along with a map promoting google maps)
- on the local results, click on the reviews link and you are on another google property
- on the local results, click on a price listed in the search result and that brings up a bunch of CPC ads
- click onto that map and there are CPC ads at the top & CPC hotel price ads below it

Google grew to their dominant position by supporting the open web, but as they dial up monetization they are becoming more of a closed ecosystem. In some cases they might fall back on open in certain areas if doing so helps destroy a competitive threat, but they are trying to turn themselves into Apple.

[javaljav]

Re: Top 20 companys in the World to invest in?

I agree with your analysis on Google's moats. Moreover you never even broached the Google culture to aggressively go after new markets. Google has been successful in getting CA, NV & FL pass laws to allow for self-driven cars to enter the system. If Google could manage to pull this one off it will be bigger than Search Engines. Imagine giving an average suburban dweller 2 extra hours a day. What if you're charged by the mile auto-chauffeured? It will change everything! It will be an addiction for life. Someone said that these systems are going to be so much more efficient in avoiding accidents that in order to get a human license you'll have to prove that you deserve it.

There's Voice search, voice signature, natural language processing - to replace overseas BPO & CSR
Youtube as the next {Netflix, Cable TV, PPV} rolled into one
Google Wallet
...

I have talked to someone in Google and he said, "As long as Larry Page is in control, the culture will thrive. Larry is fearless to explore new areas. Failures never get frowned on - rather you get encouraged to try crazy things. If you sense something is not going to work , you are encouraged to 'fail-fast' ". This 'fail-fast' technique is being copied by many new startups.

As for me investing in Google - as always from the IPO day I have thought Google is expensive and chose the sidelines
Maybe someday I'll change and bite??

[kduffey]

Re: Top 20 companys in the World to invest in?

Google is down 8% today.

Buying opportunity?

[seobook]

Re: Top 20 companys in the World to invest in?

Google is down 8% today.

Buying opportunity?

If Michael Belkin is right, I think the entire market is going to have some P/E compression & tech stocks will generally get hit harder than other ones.
http://www.ritholtz.com/blog/2012/10...picture-video/
Though I must confess I am no expert at timing the markets and such.

The other thing I should say is that (unless the Dollar rises and hits international revenues for a few percent) Google's Q4 this year should be stronger than a new lowered expectation might suggest, given that this is the first year product listing ads are inline with the organic search results & how much advertisers gear up for the holiday shopping season.

For about a decade Google provided shopping search as a free service, but is currently transitioning it to paid inclusion & promoting it more aggressively...this allows them to effectively monetize more of the search result page by showing graphical product ads in addition to their traditional text ads. Google did a lighter test of product ads in the past where they were in the right rail of the search results, but they will get clicked on much more in the left rail.