Google will always be about search innovation

A lot has been said about Google's inability to find a business outside of search that it can effectively monetize and that Google is a now a value stock. The latter couldn't be further from the truth in my view. How could a stock of a company who consensus has revenues growing 21% in 2010 and 22% in 2011 and with profits growing similarly, with both years likely beatable, could be considered a value stock? We need a séance to get Graham and Dodd back to discuss the topic. But more on that at a later date.

See my previous write-up about Google hitting a wall.

I believe Google is making headway with display and video advertising and TV has, I believe, true potential for significant growth. However, when I think about Google's product launches and acquisitions, I think, reinforcement to the core business to drive incremental growth, rather than finding a business outside of search. I thought that about Andriod and Google's push to get ahead of mobile search advertising, which reinforces the core search business. Make no mistake, Google is search and will always be search. And search, like e-Commerce, is only 20% to 25% into its growth curve. Therefore, Google, like Amazon in e-Commerce, has significant runway to continue to pursue its core business. Think about it. If search lacked growth, as several articles in the Wall Street Journal have alluded to, why would Microsoft spend billions and lose billions to enter the market?

To understand my thinking better I took a look at Google's products and services and sorted them into clear winners, potential for winning and losing, and the losers. What I found was that the clear winners all serve to boost Google’s core, immensely profitable and strong cash flow generating business, while the losers were just sunk costs with hardly a dent to shareholder value. In fact, I believe that Google actually gained knowledge from the losing ventures that they could use to enhance the current business and pursue others. 

So to Google's managers and engineers I say keep innovating in search, keep focusing on what you do best, and shareholders will come back.

Clear Winners
AdSense - A $16bn business in 2009
AdWords - A $7bn business in 2009
Search Appliance - about $300mn not bad.
DoubleClick - A $1bn business. Not bad
Andriod Operating software - I love my Andriod based phone
Gmail - don't know of anyone without a Gmail account
Google Finance - other than Yahoo! Finance's chat boards I switched almost entirely to Google. I do like Yahoo!'s quick and easily downloadable historical quotes.
Google News - use it daily. Love the Google alerts
Blogger - Love it but could be more powerful.
Images - good to find out what clients look like before meeting
Patent Search - has been helpful with my stock research
Google Maps - use it all the time
Google Calendar - love the email and text reminders
Picasa - should get more marketing dollars to get the word out. Great asset
Google Reader - use it everyday. 
Google Earth - good product. Helpful planning vacations.
Google Base - Remember Base? Helped shaped Google as a shopping destination
Google Book Search - not a big fan but my Phd friends have taken to it
Google's dark fiber purchases

Give me time
Chrome - jury is out on this one. I went back to Firefox
iGoogle - I see potential
YouTube - the $1.65 acquisition has resonated with users globally but has had difficulty driving profits thus far. I see profits in 3Q10.
Google Aps/Google Docs - I see potential.
SketchUp
Google Trends
TV Ads - maybe Google hits its non-core stride here.
Knol
Trends - useful tool for analysts but that's about it

Wait and see but most likely a loser
Google Phones, i.e., Nexus One
Checkout - oops. Paypal is way to penetrated.
Wave - someone tell me what happened here

Best up and comer
Google Transit

Down for the Count - Chalk me up as Sunk Costs
Dmark
Print advertising
Orkut
Buzz
Desktop Search
Google Health
Google Video
Google Talk
Notebook
Co-op
Answers
Local
Music Trends
Personalized Search
Web Accelerator
Dodgeball