More On Why Shares in Google might be worth $5,000-$10,000
The first and second parts in this series was published in these previous Newsletters -
What is the value of YouTube.com to Google & The Overall Internet?
The snowball of video coverage on the web is growing daily, and within a few years video is going to be so huge it's almost inconceivable. Google bought YouTube for $1.65billion in October 2006 and although at the time many said it was a crazy price it is now looking like THE major internet deal of the past 15 years.
The reason for this is that YouTube basically has NO competition in the delivery of video. At present Google owns video on the web and, because of its power and overall influence, any company trying to break into the market has an almost impossible task.
For any readers who do not know, YouTube.com is a website where users upload video clips. These are extremely varied and could be of a dog juggling, a man pulling wheelies on a motorbike, or a recent interview with George W. Bush that appeared on CNN.
Google Has Very Ambitious Plans For YouTube
YouTube is now mainly US orientated but Google is hard at work internationalising it with local language versions, such as French, Spanish, Turkish and Hebrew (a total of 9 national sites have now been created). This means that the videos which are shown in the different countries will be more appropriate to the local market and culture.
- YouTube is making business deals with international media outlets such as the BBC and France 24, and the plan is to show their content
- Google is now starting to integrate video content into their search results (see next page for more on this)
- YouTube has been putting A LOT of effort into getting the videos working on as many different types of screens as possible, including mobile phones, handheld devices, and even regular TV screens
How will Google monetarise YouTube?
They will likely use the same method as did to monetarise the search results. Quick adverts are most probably going to be the key, for example adverts lasting a maximum of 15 seconds. So if you click to watch a video clip the first 5-15 seconds might be an advert.
Naturally the key will be to customise the advert according to its content.
So if you click on a video about football, an advert for the new Nike football boots will appear. Click on a video for a fashion show and an advert for M&S clothes might be there if you're in the UK, but if in the US an advert for Saks 5th Avenue etc.
We can only speculate of course but one of the reasons that video is going to be so enormous is that it will be served up in short clips so that viewers will be able to zero in on just what they want to watch.
Sports clips will also work very well, such as last week's top 10 premiership goals or highlights of a recent Alpine stage in the Tour de France etc. The organisations who own such content should be rubbing their hands with glee at potential profits that video clips may offer because they can use them not only to sell advertising for other companies but also their own media back catalogue.
When advertisers realise the potential profits to be gained from advertising via video clips the revenue will go ballistic and you can be assured savvy companies are now hard at work working out their game plans.
Online Video - The Second Revolution Of Google
YouTube seems as if it will herald the second wave of Google' s online revolution.
First of all the company worked out how to tailor targeted search results to surfers. Now they are thinking about how to target targeted videos to online viewers.
Here is the key to all of this - once you have mastered how to deliver quality content to the right people, making money by advertising is the easy part.
We mentioned in the May newsletter that Google's share price has a real chance of heading to $5,000 and perhaps even $10,000 over the next several years. Online video is certainly going to be a real kicker to all of this.
At the time of writing, Google's capitalisation is around $170billion, and it effectively controls both search and video on the web
If it can gain control of our desktops via creating super networks it will in effect own the internet. And as the internet is now so dominant and computers such a part of almost EVERY aspect of our lives (even if you don't own or use one), is there any reason why this company should not very quickly become the first trillion dollar capitalised firm?
If that is the case then the shares will be pushing a $5,000 valuation.
Summary
The key for Google's share price advancing can probably be summarised into 3 key points:
- Get control of the internet via search (already done)
- Get control of video on the web (in progress)
- Get control of our computers (not literally) via an online operating system (in the planning stage at present)
Google's Recent Earnings Release
On Friday 20th July 2007 Google reported quarterly earnings that missed analysts expectations and their shares were marked down around 5% to $515 (previous close $550).
This news is only relevant to short term players in the stock and to long term holders who are concentrating on the far bigger picture the news is irrelevant.
Quarterly earnings on Wall Street are nothing more than subtle marketing ploys to create buy and sell orders, hence revenue for the brokers.
Long term investors who have the ability to see the potential future for Google should welcome these kinds of sharp selloffs to add to their positions.
This is what we've been doing.
