Google

Core story of Google
-When people go to the internet and want to buy something, they start with Google to search, and to look for things in e commerce.
- Today, Google has 1% of the global ad market.
- Given the way consumer habits are changing, going more and more to search to start looking for things to buy, why can't this be 10% to 15% over the very long-term in terms of share.
- If you look at where we were in 1950, television was only 3% of the total ad market. Today it is about 25%.
- We think total online advertising will be 25%, and Google will be a pretty big share of that.

Google announced its $3.1 billion deal to buy DoubleClick.
DoubleClick is a key asset.
Doubleclick is the leader in display advertising as well as the top aggregator of consumer data.
Within days of the deal news breaking, Google competitors Microsoft, Yahoo and various others began beating the anti-trust drum, loudly complaining that a merger could create a company too powerful on the internet.

But since then, a lot has been been happening in the online advertising world these past few weeks.
1. Microsoft bought Aquantive for $6 billion
2. Yahoo bought Right Media for $680 million
3. 24/7 was acquired by WPP for $679 million.

The online advertising market is hot.
$40 billion, growing 20% year-over-year for the foreseeable future
and there's $600 billion in overall advertising on a worldwide basis.

Microsoft's mega-merger with aQuantive, offering an 85% premium to yesterday's closing price
1. Microsoft simply hasn't been able to come up with any effective formula in trying to take on Google, or even trying to stake any kind of meaningful claim in the online advertising market
2. That's if the company is successful in integrating the disparate aQuantive businesses into key Microsoft initiatives like "Live," "MSN" and many others.

Now the attention shifts to one of the other key players in this sector: ValueClick,
Valueclick rose 11% in sympathy of the aQuantive deal.

Over the past year, Google shares haven't done much of anything.
So you might expect a fair amount of frustration as the company continues to shell out big bucks for major, yet very controversial deals like YouTube ($1.6 billion and fraught with copyright litigation) and DoubleClick (a deal that some say could encourage a US Department of Justice anti-trust investigation.)

Google is a dual-class share company. Shareholders have to expect that the company will make decisions and they have no voice or influence in how those decisions are made.
Class A and Class B.
One matters; the other doesn't. Sergey Brin owns 28.6 million shares; Larry Page 29.1 million; and Schmidt holds 10.7 million shares. The three together control well 65% of the voting shares
With their Class B shares, the three executives control 66.2% of the vote. Shareholders have no voice.

Q1 Google continues its aggressive expansion, but isn't sacrificing profits to do it.
Earnings jumped 69%, and revenue better than 60%.
Google hired about 1,600 new workers over the past quarter -- 200 more than the Street anticipated
And still managed to beat gross operating margins, reporting 49% instead of the 48% analysts anticipated.

Youtube
Youtube was so new, and so small, but because we now know that the company only generated about $15 million in advertising revenue last year.
Sure, the company has the eyeballs; 135 million visitors, a billion video views every month, growing at a staggering 1,300% annually.
YouTube has the numbers, but not the revenue. And there's been no clear strategy vision offered up by Google as to how it plans to "monetize" the YouTube property
If major, commercial content providers start to leave Google and YouTube for online distribution projects of their own, YouTube runs the risk of becoming marginalized as a kind of Funniest Home Videos for the net
Youtube will always feature user-generated, homegrown content that will attract the eyeballs, but that's probably not the "niche" position Google envisioned when it came up with the $1.6 billion takeover offer.

Things like the $1 billion copyright suit filed by Viacom.
When Google acquired YouTube, they set aside a substantial amount of money to cover copyright liability
Google says its new "Claim Your Content" software debuting on YouTube shortly will make that lawsuit irrelevant.

Wireless
Google plans to enter the wireless business with a free, advertising-supported cell phone that the company would sell, using wi-fi AND cell technology.
Andy Rubin, a co-founder of Danger Inc. the company behind the wildly popular smartphone "Sidekick" from T-Mobile.
The fact that Google would be entering a whole new business would generate a lot of enthusiasm
The phone would be both cell and VOIP capable, meaning Google could end-run traditional cell towers where wi-fi is ubiquitous, and offer its own communications network if it so desired.
Google said at the Iphone lauch that tehy hope to be a leading representative, provides HTML, XML and other sophisticated services, that the Safari browser embedded in the iPhone, and many other of its tech devices, and future devices out of Apple, will be able to take advantage of."

Valuation
Google trades at about 25 times next year's earnings.
Its only real competitor in the sector, Yahoo, trades at 37 times next year's earnings.


Issues
1. Investors look beyond the almost daily headlines of new business ventures and partnerships and start searching for the return on those investments, which, to date, haven't materialized yet.
2. Google is arguably the biggest name in tech. oogle from becoming the Microsoft of a new generation
3. Rumour about MS buying Yahoo.