Google

  • Posted: 17 February 2011 02:09 PM

    For all of the talk about Android it doesn’t seem to be having much of am influence on Google’s share price.

    Here’s a five year chart.

    If Android is such a success why hasn’t Google’s share price moved above the late 2007 highs? Is Android’s “success” much more talk than it is a financial performer for Google?

         
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    Posted: 17 February 2011 02:43 PM #1

    Sparky - 17 February 2011 06:09 PM

    Is Android’s “success” much more talk than it is a financial performer for Google?

    No, Android is definitely a success. After all, Google is giving it away for free and smart phone & tablet manufacturers are happily adopting it.

    The problem is that Google’s plan to monetize the platform is just getting started. It remains to be seen if they can reach the kind of numbers they’ve implied is waiting for them in the future: $10 per user over a billion users. $10 per user? A billion users? Two very big question marks.

    What I think Google should do is to start developing PAID apps for both iOS and Android. There’s going to be 250-300 million iOS devices by the end of this year. I’m pretty sure they could sell $10 worth of apps to 100 million users fairly quickly. That’s $1 billion of revenue just from iOS.

    As a side note, although Android is successful in “activation” numbers, it is not really that successful in building a user base that developers can profit from. Google recently announced that it’s going to hire 6,000 people in 2011. Not a few will be in-house app developers. That guarantees that the best Android apps will continue to be those developed by Google. Not much incentive for independent app developers to take much risk. They’d do better to get a job at Google.

         
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    Posted: 17 February 2011 02:48 PM #2

    GOOG PE = 23.8
    Analyst target price = $ 723 or 689, depending on source
    PEG 0.82 vs. AAPL 0.27

    If PEG is 0.82, then conclusion:  GOOG target price of 689 is reasonable.

         
  • Posted: 17 February 2011 02:56 PM #3

    Drew Bear - 17 February 2011 06:43 PM

    As a side note, although Android is successful in “activation” numbers, it is not really that successful in building a user base that developers can profit from. Google recently announced that it’s going to hire 6,000 people in 2011. Not a few will be in-house app developers. That guarantees that the best Android apps will continue to be those developed by Google. Not much incentive for independent app developers to take much risk. They’d do better to get a job at Google.

    So how long do you think Google will have to be the primary Android app developer? Doesn’t this suggest real weakness in the platform? If Google is hiring (and paying) app developers to handle the load outside developers are unwilling to handle (presumably from a lack of of financial incentive), why does it matter how many Android phones are activated if the platform isn’t producing profits?

         
  • Posted: 17 February 2011 02:57 PM #4

    Tetrachloride - 17 February 2011 06:48 PM

    GOOG PE = 23.8
    Analyst target price = $ 723 or 689, depending on source
    PEG 0.82 vs. AAPL 0.27

    If PEG is 0.82, then conclusion:  GOOG target price of 689 is reasonable.

    OK, it may be reasonable, but the share price isn’t moving and hasn’t come near the late 2007 highs. Is the market saying it lacks confidence in Android becoming a financial success for Google?

         
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    Posted: 17 February 2011 03:05 PM #5

    Since the current price is only 10-15 % below the target price, Goog will increase more slowly than Aapl.  So, one way or another, the market lacks confidence in Goog.

         
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    Posted: 17 February 2011 03:46 PM #6

    Sparky - 17 February 2011 06:56 PM

    So how long do you think Google will have to be the primary Android app developer?

    It depends on how you define “primary”. There are plenty of developers producing Android apps. It’s just the really distinguishing ones are made by Google. They’re free and come already loaded on most Android devices (not on the cheap Chinese devices). All the other good apps usually come out on iOS first, then get to Android.

    Doesn’t this suggest real weakness in the platform? If Google is hiring (and paying) app developers to handle the load outside developers are unwilling to handle (presumably from a lack of of financial incentive), why does it matter how many Android phones are activated if the platform isn’t producing profits?

    Yes. App developers are generally geeks. They really like the idea of “open”, so they’re rooting for Android. But it’s more difficult to make money developing Android apps. It’s much easier to do that on the iOS platform. They’re just not willing to give up on Android yet.

    So what I think is happening is that established developers are targeting iOS first, then Android. Some major developers are focused only on iOS. But the small start-ups, individuals or duos, shoot for iOS first because they know if they create something noteworthy they can earn some immediate income.

    Google has been “forced” to hire more in-house developers because they don’t see independent developers producing what Gruber calls “killer apps”. He describes it better here, but here’s a short excerpt.

    Let?s sort all Android apps into the following categories:

      1. Apps from Google.
      2. Third-party apps that also exist on iOS.
      3. Third-party apps that are exclusive to Android.

    From my time spent with the Nexus One early this year, I know that Google?s Android apps are pretty good. These include both the core system apps, and the closed-source ?Google Experience? apps like the dedicated Gmail client and Google Maps.

    But what I find striking is that the apps in the third category ? those exclusive to Android ? are almost entirely unappealing or irrelevant to iOS users.

    That?s not to say there?s nothing in Android, as a system, that appeals to iPhone owners. Built-in turn-by-turn navigation on certain models. A system-wide notification system. Widgets on the homescreen. Over-the-air system updates. Unrestricted background processing for third-party apps, battery-life be damned. But those are things that are built into the system itself, or which otherwise come from Google. What I?m questioning is the strength and depth of Android?s third-party developer support.

    I think most PRABs (Pundits Reporters Analysts Bloggers) have failed to see the huge disconnect between large “activation” numbers and the reality of the smallness of the Android user base and platform. But the stock market tends to look at dollars & cents and it doesn’t see GOOG raking it in like AAPL.

    BTW, has anyone noticed that although there was some coverage about Google’s “new and improved” Android Market, there was no mention of the number of apps now available? Here’s what you see on Apple’s website.

    The App Store is the ultimate source for mobile apps ? 350,000 and counting in practically every category. Many are even free.

    I was pretty sure there were claims of 200,000 Android apps a few month ago, but now the reports seem to have dropped to the 100,000 number. Nothing official from Google, of course. Just PRABs spouting the usual nonsense.

         
  • Posted: 17 February 2011 05:45 PM #7

    Drew Bear, thanks for the response.

    I’m thinking the comparisons between Apple and Android are a waste of time. Not to take anything away from Google and the Android platform, but looking at the numbers and while there is some overlap, is it possible iOS devices and Android devices are addressing much different consumer demographics?

    But that I mean there seems to be appeal for Android phones among first-time smartphone buyers. Is it possible with the availability of the iPhone on the Verizon network some of the appeal will be lost and the most productive market for Android phones is not in direct competition with the iPhone?

         
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    Posted: 17 February 2011 06:51 PM #8

    Sparky - 17 February 2011 09:45 PM

    I’m thinking the comparisons between Apple and Android are a waste of time.

    Unfortunately, the ‘net is inundated with Apple vs Google drivel and that affects AAPL prices. Although it’s mostly preaching to the choir here, it’s good to clarify the situation.

    Is it possible with the availability of the iPhone on the Verizon network some of the appeal will be lost and the most productive market for Android phones is not in direct competition with the iPhone?

    I wish there was Android sales (not activation) data that was separated by price range. I think it would show pretty clearly that most of the Android phones are not in direct competition with the iPhone.

    $100-299
    $300-499
    $500-799

    The iPhone is mostly (>90%) in the high end (maybe the previous generation phones like the 3GS barely fall into the mid range), but Android devices are spread through all 3 ranges. My guess is the iPhone dominates the high end. That’s why Horace’s data shows Apple raking in 51% of the cell phone industry profits while selling only 4% of the handsets.