Sunday, October 22, 2006

Don't Be Gevil

Investors were euphoric last week as Google released quarterly earnings and announced nearly a 100% surge in profits. Brokerage houses responded by lifting share targets to well over $500. Does anybody remember 2000?

There is no question that Google does search well, evidenced by their hefty share of the market and dominance over Yahoo! (exclamation included) in the area. The prospect of paying 70x earnings for Google and expecting profits to continue their upward trajectory of 80% YoY seems ridiculous. Are any of Google's other products really that good? (Ok--Maps is good and Reader is just allright) After all, the company generates nearly 100% of its profits from online search advertising. Why does Google dominate search? They are certainly more profitable because of their ad placing algorithms which optimize revenue and click throughs. But this still doesn't explain why people prefer Google over other search engines. The truth is that results are fairly equal.
Check out for a comparison.

My view is that search will become commoditized in the long run and Google's advantage will dissappear. Other sources of revenue are in dire need.

Widow Meta Search does a good job of showing the commoditization in the search area:


Anonymous said...

I believe that part of google's success is smart partnerships like with mozilla as well as being more aesthetically pleasing than its competitors.

Anonymous said...

Firefox does have the google search bar, but it can also be changed to default to Yahoo. I think in the long run the firefox strategy is to rival microsoft with office productivity applications such as Word / Writely.