Google’s(GOOG) in trouble. I’m forecasting the next 24 months will take this stock back to its first-year initial public offering levels of $300 a share. The Internet search giant has ruffled the wrong feathers.<\/p>\n
When I hear Apple(AAPL) CEO Steve Jobs mention that he feels betrayed by Google CEO Eric Schmidt, and when I see Apple go out and buy its own mobile advertising firm, I begin to question Google’s future growth prospects. Apple’s Quattro is coming, it’s going to be revolutionary, and it’s going to be the most important contributor to Google’s demise. But it won’t be the only contributor. With Google it’s a matter of picking its poison.<\/p>\n
1. Leadership<\/p>\n
This company is running like a chicken with its head cut off. Schmidt is flying solo without the help of founders Larry Page and Sergey Brin, who are actually selling shares themselves. It’s not exactly a ringing endorsement from the innovators.<\/p>\n
2. Profitable Innovation<\/p>\n
In a rapidly changing landscape of mobile innovation, Google is having difficulty making money on anything other than its core desktop search business. Desktop search advertising was a great business to be in during the last decade but its growth now looks limited because of the shift towards mobile computing.<\/p>\n
Schmidt knows Google is vulnerable, which explains why we hear about yet another Google experiment on a weekly basis. Last week it was Google broadband; this week it’s Google TV. It’s all a big joke. Even Android is a joke. The recent market share gains from Android are misleading because it suggests Google is making money when all the company really has done is give it away for free. Investors are ready to see profits beyond desktop advertising. Twenty four months from now, desktop Internet surfing will be in dramatic decline.<\/p>\n
3. Mobile Search Competition<\/p>\n
Mobile versions of Twitter, Facebook, and Microsoft’s(MSFT) Bing will give Google a run for its money. And I would not bet against Jobs and Apple’s Quattro. The problem for Google is that the mobile Internet relies on applications rather than Web sites. Apple controls more than half of the mobile Web market share, and Google is one Jobs decision away from being left out of the Apple ecosystem. This makes Google extremely vulnerable.<\/p>\n
Sources from Business Week revealed that Jobs hopes to “overhaul mobile advertising in the same way they had revolutionized music players and phones.” AppleInsider reported that “specifics at the moment are not known, but a number of potential approaches were offered: Apple could rely on user data collected through iTunes and the App Store, along with geo-location technology due to GPS in the iPhone, to create targeted, local advertisements that would be more relevant to consumers. The company could also utilize gimmicks, such as having users shake their iPhone to win a prize.”<\/p>\n
The report added that “some developers have profited by embedding ads in their apps, but the payments tend to be insignificant since the ads are usually smaller, less effective versions of their Web banner forms.” In addition, “according to a source familiar with his thinking, Jobs has recognized that ‘mobile ads suck’ and that improving that situation will make Apple even harder to beat.”
\n4. Brand Trust<\/p>\n
Google’s Nexus One was a disaster on so many levels. Google rushed the product to market without customer service. The trademark application was subsequently denied by the U.S. Patent and Trademark office. It rushed the product to market and caught all of its Android partners off-guard who never thought Google would come out with its own phone to compete.<\/p>\n
Now do you understand why I compare this company to a chicken running with its head cut off?<\/p>\n
While Apple spent years securing patents to protect the intellectual property of the iPhone, Google is late to the game and is running scared. How much money will consumers invest in Android apps when they know Google offers no tablet computer and might not continue with the Nexus One? Whereas you go with Apple and you know that your apps and iTunes library will work on your iPod, iPhone, iPad, and next year they’ll probably work on the iTV as well.<\/p>\n
5. China<\/p>\n
This China thing has been catastrophic for Google. After struggling to gain any share from Baidu (BIDU), Google is out of a country that has more Internet users than the U.S. has people. Not good, especially if Google had any aspirations of growing its Chinese Android platform.<\/p>\n
Desktop search advertising is Google’s bread and butter, but two years from now the landscape will be completely different. Investors will look at Google as a declining search-market share story. That’s not a good thing when you’re stock is priced near $600 a share.<\/p>\n
Google reminds me of Research In Motion (RIMM) two years ago. Back then, everyone assumed RIM was untouchable as well. The problem is that when you go to war against Apple you better be more than a one-trick pony.
\nGoogle is scrambling to come up with a family of products similar to Apple’s but it simply is not in the company DNA. Google does search, that’s it. Its software is profitless and its hardware is copycat. I’m not saying that Google is going to disappear, but I am saying that its days of high growth are over and that means the stock is doomed over the next 24 months.<\/p>\n
Investors might make more on Google puts than on Apple calls.<\/p>\n
Now there’s nothing wrong with writing this article, though I don’t agree with his dire \u00a0conclusion on Google — namely reaching $300.<\/p>\n
What’s wrong with this article is that it’s been published in at least two places I’ve seen. One place reported that Jason Schwarz himself was short Google, long Apple. But when it was published in \u00a0The Street<\/a> <\/strong>it\u00a0omitted those minor facts.<\/p>\n This whole thing reminded me of one of Cramer’s earlier books in which he talked about being a hedge fund manager, about loading up on a stock, then calling financial reporters and extolling the virtues of his chosen stock. Whether this was legal (or even kosher) or not was irrelevant, since the SEC never had any teeth, and still basically doesn’t.<\/p>\n But it does suggest that you have to be very careful believing anything you read on the Internet.<\/p>\n Fact is right now the wind is clearly behind Apple<\/p>\n and not behind Google<\/p>\n The Wall Street Journal’s James B. Stewart also has a piece on Google. Note the last sentence. He may or may not be pushing his own position in Google.<\/p>\n Google’s Stock<\/strong> That any private concern\u2014even the world’s largest Internet search-and-advertising company\u2014would take on the world’s most-populous nation is pretty mind-boggling. Is technology now so powerful that the company can defy the government of one of the world’s most-powerful emerging markets?<\/p>\n Even more broadly, can a government as pervasive and controlling as China’s stop the digital flow of uncensored information and continue to dictate what its population knows and can discover? Is it even in China’s self-interest to do so?<\/p>\n I’d love to be a fly on the wall as Chinese government leaders wrestle with these issues, since the discussion surely represents one of the great debates of our time. But not even Google seems to know exactly what the Chinese authorities are thinking, or even what the terms of the debate are.<\/p>\n Google took the momentous step of closing its Google.cn site this week and rerouting users to its unfiltered Chinese-language Hong Kong site. The move offers the Chinese government a face-saving compromise by enabling it to enforce its restrictive policies on the mainland while allowing a relatively uncensored site in more-liberal Hong Kong. But it isn’t much more than a fig leaf if any Chinese user can simply type in the Hong Kong address and get unfiltered search results, not to mention the competitive advantage Google would gain over Chinese search engines like Baidu that censor results.<\/p>\n So I don’t think China will go along. (Almost immediately, there were indications that China continues to block some search terms or filter sensitive results on the Hong Kong site.) But why doesn’t China use Hong Kong as an experiment in greater digital tolerance? China could block users on the mainland while seeing what happens in Hong Kong. It already allows Twitter and Facebook in Hong Kong, with no evidence of subversive consequences so far. It’s surely in China’s long-term interest to have a better-educated, Google-equipped population.<\/p>\n While investors are waiting for these long-term issues to play out, they need to ponder the implications for Google’s stock, which has dropped more than 10% from its peak this year, in large part over concerns about the China standoff. Investors seem to be assuming the worst, which is that Google will be shut out of one of the world’s largest search markets. That seems the likely outcome, at least in the short term.<\/p>\n But longer term, I believe China’s own self-interest and the forces of technology favor a Google return. Google says it’s maintaining its research-and-development operations in China, which will be essential if it hopes to remain competitive. Google could also show a little more sensitivity towards the Chinese government’s sensibilities and try to avoid making this an issue of American cultural imperialism. Any good news for Google in China will likely give the stock a boost.<\/p>\n More fundamentally, the case for owning Google has never depended on its success in China, in my view. There are plenty of other growth areas for the company, including the U.S. I’m more interested in its market share in search and its revenue growth as the developed world emerges from the financial crisis and advertising spending rebounds. The switch to digital advertising is still in its early stages, and as I see it, Google has only scratched the surface of its potential. As long as these trends remain intact, I’m comfortable owning Google as one of my core holdings.<\/p>\n For anyone seeking an entry point, the recent 10% pullback represents an opportunity. Whatever the eventual outcome, once the China conflict simmers down, investors will again be focusing on the fundamentals. In Google’s case, they remain compelling.<\/p>\n \u2014James B. Stewart, a columnist for SmartMoney magazine and SmartMoney.com, writes weekly about his personal investing strategy. Unlike Dow Jones reporters, he may have positions in the stocks he writes about. For his past columns, see: www.smartmoney.com\/commonsense.<\/p>\n Horrible things do happen.<\/span><\/strong> Please be careful. Daughter Claire attended a funeral for a 45-year old who got a small \u00a0cut, ignored it — only to have it infected by a flesh-eating bacteria. Yes, there is such a horrid thing. According to Wikipedia<\/a>,<\/strong> necrotizing fasciitis (NF), commonly known as\u00a0flesh-eating disease or\u00a0flesh-eating bacteria<\/a> is pretty serious.\u00a0Patients with necrotizing fasciitis typically have a fever and appear very ill. Mortality rates have been noted as high as 73% if left untreated.<\/span><\/strong><\/p>\n How Fairy Tales really end:<\/span><\/strong><\/p>\n <\/span><\/strong>Little Red Riding Hood Cinderella SnowWhite The Little Mermaid Apologies for taking up all the space with these idiocies. I found them amusing.<\/p>\n![\"\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2010\/03\/AppleBlogs.jpg\" "\\"AppleBlogs\\"")
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\nThe Google-China showdown is at hand, and for sheer drama it’s hard to beat.<\/p>\n
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