Blog Post

I know it is probably a good idea to keep from having "favorite" stocks because it creates bias, but I do love Google. Instead of breaking down key fundamental ratios or bogging through any type of quantitative stuff, I would like to run over some basic entrepreneurial principles.

First, share of mind equals share of market. In the case of Google, sure they "may" be losing small %'s of market share, their click-through-rate might have dropped by a point or two, but that does not change the fact that they are effectively the internet's biggest brand name. What is the first word people associate to the word internet? Does that carry any value?

Second, in conjunction with the first point, Google not only has the quickest and most effective product in its class of search engines, but it is also a brand name. Market share of their other products such as Gmail (Growth: 53%/yr vs. YahooMail 3%/yr), Google Maps (Mapquest vs. Google Maps: last year 5x, now only 2x visits) and YouTube are rapidly increasing.

Third, Google produces a myriad of products, all of which are still in beta. Looking at Taleb's The Black Swan approach, Google takes the stand of trying to create as many products as possible in the hope that they will catch a "black swan." In this case, a "black swan" is essentially a market which is an outlier but has an potential for an extreme impact (profits). By taking this approach, maintaining quality and of course maximizing usability, Google sets themselves up for finding more gold mines. While Buffett may argue that very few people get rich on their seventh best idea, Google's ideas though not bringing in the revenue, have brought them brand equity, share of mind, and will bring them share of market.