To The Moon

Google Competitor 

Search engine: 

Google ${{780076c5c14047b596498b495eac4fbe}}Alphabet.US's main business still comes from search engines, accounting for about 57% of quarterly revenue. The company has been trying to diversify its product portfolio, but so far, most of its products are either basically unprofitable or can only be used as a substitute for search engines. Although Google still dominates Internet search, we can see that their monopoly is being hit by some competitors. Users seem to be moving towards search engines that protect privacy, including DuckDuckGo and Brave. These users happen to be early adopters who are proficient in network technology, which means that users are becoming more and more distrustful of Google. I think from the perspective of the current market, these alternative search engines are not enough to overthrow Google's dominance at present, and may be a good reason for them to tell the market that they are not monopolies.

Media: 

YouTube is Google's creator media platform. YouTube allows anyone to upload videos to the platform and share revenue with approved creators. I think this is also a good thing, but unlike traditional software, it is a product with a very low profit margin. The main cost of this business is the video storage cost of the company hosting millions of videos. With the improvement of video quality and more storage space, the company needs to copy the video in multiple storage locations so that the audience can enjoy fast streaming media. That said, the company earns $7 billion from YouTube Ads every quarter, accounting for about 10% of the total quarterly revenue. Nevertheless, in recent years, more and more competitors compete with YouTube in this field. I can only say that YouTube is by no means a solid business. Although it does have potential, the flow of people will be more scattered when users have more choices.

Cloud Computing Services: 

Google Cloud currently accounts for about 10% of the total quarterly revenue. I think this part may continue to grow in the future, because cloud services seem to have gradually become one of Google's key areas. For a company that has reached a bottleneck or is already quite mature in other businesses, this development direction is actually correct. Key software that used to appear in physical form, such as movies, offices, games, etc., can now be accessed from the cloud. The technology is developing in the direction of computing on the cloud rather than home/office devices. We can see that when we work from home, it becomes easier and easier to do software computing remotely. Finally, most offices are already in the cloud, and it is accelerating its adoption after the 2020 pandemic. Google is one of the three major suppliers besides $Amazon.com(AMZN)$ Amazon and Microsoft.$Microsoft(MSFT)$ 

Google's main cloud services include:

Computing engine: a virtual computer service that provides users with access to Google infrastructure. People can "rent" this virtual machine and develop various software remotely.

Application engine: A platform as a service allows developers to build and run applications on Google's infrastructure. Similar to the computing engine, but with less configuration, it focuses on developing and expanding software.

Cloud SQL: a relational database service that provides users with access to Google infrastructure. Cloud data storage: a NoSQL database service that provides users with access to Google infrastructure.

BigQuery: An analysis database, almost the same as Snowflake and Databricks.

Although Google Cloud is expected to continue to attract fierce competition from other large providers such as Microsoft's Azure and Amazon AWS, I think large cloud players will unite against start-ups such as Datadog and even Snowflake. Unless there are highly innovative technologies, large suppliers may dominate this field.

I think Google's largest revenue at present comes from its search engines, which actually contains certain risks, because Google's search engine business seems to be saturated and faces the risk of losing market share. As for the media business, there may still room for growth, but it should not be too careless in the face of other inter-industry competition platforms. After all, if there are too many users, natural flow will be diverted, unless the platform has any freshness and creative content that can continue to retain the hearts of users. So I think there seems to be room for cloud computing services to grow from the perspective of Google's future growth engine.

In addition, I think the development of artificial intelligence may also have the opportunity to push Google to another peak. In the past, there were actually many trends rising in the context of cloud computing, but most of them were difficult to stick to. These trends include the Internet of Things, blockchain, no/low code application processes, smart cities, big data, and online classrooms. Maybe all this has played a role in their respective fields, but some of them may be overestimated in terms of their market size and value-creation potential. At present, new trends and themes seem to revolve around artificial intelligence search, autonomous driving, dialogue interaction, virtual reality, etc. Many companies, including Google, have joined this train. In fact, Google was one of the first companies to enter the field of artificial intelligence communication. They developed Google Assistant, and other companies that joined the train included Microsoft's Cortana, Amazon's Alexa and Apple's Siri.

Until the emergence of OpenAI and related products later, this caused a more obvious innovation boom. However, I see that large enterprises will benefit more than start-ups. The reason is that although OpenAI has made significant progress in the field of artificial intelligence, it seems that two factors are somewhat unfavorable to them. First, large companies like Google are likely to find ways to grab advantages from OpenAI. Second, more importantly, large enterprises like Google actually have a larger amount of proprietary data, which can be easily used to exceed the quality and quantity of services provided by OpenAI. I boldly expect that Google and other large enterprises may absorb any innovation created by OpenAI in the future and use their proprietary data to provide more excellent services than OpenAI, so Google will compete with other large enterprises rather than small innovators for market share.

Small summary

Finally, although I seem to have some views on Google in the article, I think Google's current more reasonable stock price should be in the range of $105-110. Of course, this is just my personal subjective assessment. I look forward to seeing management more stringent implementation projects in the future, as well as a productivity-oriented environment, clear key performance indicators, and more attention to implementation. If we look at the "picture above", we can find that Google compares the debt-to-capital ratio of comparable large enterprises such as Amazon, META, Apple and Microsoft, which means that the debt risk it faces is quite low. Although Google's current valuation is not reasonable for some conservative investors, I suggest that investors can pay attention to Google cloud computing in the future, because it may be a catalyst for Google's future growth. For friends who want to invest in Google, I suggest that you should consider buying slowly through time periods and funds in small batches. Don't buy too much or buy too hastily at one time, and don't put all the eggs in the same basket. Even if you are so confident, don't forget to invest risks while controlling the opportunity and encourage them together.

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