Is it possible at all to disrupt advertising system Google is dependent on?
Just want to ask smart people of HN what they think...
Longer answer, looking at Googles rates of return on capital is like watching a very, very, fast train driving along straight track. Google's nominal operating mode burns a lot of money, that burn rate leaves them vulnerable to down turns. What the most likely scenario is not that they get disrupted so much as others meet them at parity but run at an operationally much more efficient way. Say that M$/Bing inexorably creeps up into a neck and neck race with Google in terms of search reach, and the combination pushes down advertising rates. The spending brakes go on at the 'plex, the company changes, the bean counters rise in power beyond reasonable measure, and the company 'flips'. Out go the creative, inventive, people and in come the 'lifers' who know how to make their job look important without actually doing anything. The mechansim which makes this happen is really hard to avoid since from the board room things look fine, even after they aren't fine. And there is a fine balance of disbelief that is held between the employees and their condition that, once disrupted, cannot be re-established. Cisco, HP (Tandem), Sun, and Intel are all places where I've known folks who lived through the flip. Nothing is the same afterwards, if you can't re-invent yourself like Apple did, it gets a lot harder.
That being said, there is (as others point out) usually some time to cover for that.
I cannot stress enough however that financial planning is serious business and you should take your time with it. I believed them when they said if I started putting money in my 401K in 1986 that it would be worth multiple millions by now thanks to the 'miracle' of compound interest. They missed the part about the 'miracle' of the nations worst economic debacle deleting that value in a heartbeat. I don't believe them any more :-(
I'd peg it to early 2009. Whenever they changed the shuttle schedules, if anyone remembers.
Or am I missing something?
Google is a single pony like Exxon is with oil.
That being said, not sure what your investment goals are, but if you're looking for the long term I'd suggest something more along the lines of a few broad ETFs that cover a few different markets, rather than trying to place a bet on only a handful of high flying companies... basically, are you looking to invest or gamble? Either is ok, but they are different...
edit: seeing a couple other comments, I'll admit that adblocking being included automatically in a browser that gains dominant marketshare is something that would be terribly disruptive to a lot of businesses, google included. What's interesting there, is it would essentially destroy a tremendous amount of revenue for large and small companies across many industries without offsetting it with a new profit center. It wouldn't be like cars replacing carriages, it would be like teleporters you can assemble at home with $5 of drugstore components replacing the auto industry. I guess consumers would win, but they'd probably have to start paying for gmail and google maps access...
If your primary concern is share price growth, look at a smaller cap stock - or try to convince yourself that Android or one of their other projects will ever move the revenue needle.
But like the other giant corps their demise will be a very slow process with plenty of time and capital to find their next big thing.
And then how Yahoo failed to compete with AdWords because of corporate politics, worries about existing revenue streams, etc.? http://www.wired.com/wired/archive/15.02/yahoo.html
Disruption doesn't only happen from a head-on challenge. Effective disruption is often not considered relevant until its way too late, and often couldn't be acquired even if seen. Consider how Craigslist destroyed the newspaper classifieds business, and that buying Craigslist would not have helped a newspaper at all.
There will be years for them to find a way to recover, or, in the absolute worst case, years for you to reinvest.
No, there wouldn't be years for him to reinvest. If it was revealed that Google's best days where behind them -- i.e. revenue was shrinking and they were dipping into their cash reserves to keep things rosy -- then investors would sell, sell, sell and drive down the stock price in a relatively short period of time.
However, it should be mentioned stock prices already go up and down like mad. Diversify, regardless of how solid a company is.
Not to mention the google search product IMO is better than any other available.
However, I'm not sure it's possible to disrupt AdWords. Disruption in the classic sense implies "way cheaper, but not as good". You can't make advertising "way cheaper" without leaving metric tons of value on the table, and nobody is going to do that. After all, the quality of advertising is the price you pay for customers.
More likely is a scenario where everyone else catches up - but that's a slow process and will give Google plenty of time to find another trick.
Relentlessness will enable them to hold on to their position for longer than other companies would. However, all companies will eventually fall to competitors as t approaches inf.
It is certainly simpler to make a lot of money in the short term by focusing on one core business only. But diversification and redundancy are known survival techniques. Think IBM and Microsoft: both companies do a lot even if they have some sort of a core. But even the core is somehow intermingled with much of the else they do.
It's also not so simple to connect different dots if you only have one kind of dots. Google can combine stuff in novel ways because they're kind of a technological crossover. Not so easy if you've purged out all that clutter that doesn't fit in your core work.
Depends. There are other ways for companies to fail, too.
Apple is another matter. Maybe they like to keep their options open, too.
