GOOG

So for a while now I’ve been trying to understand why GOOG is worth 60Billion. Actually when I started wondering it was more like 30Billion and I’m not getting any closer to figuring it out. While it might be old fashioned, I thought a good way to proceed was to look at how much they make.

According to this in the first quarter,

• Google’s revenue was 1.26B
• Google earned $369 million
• Google made $657 million on thier sites
• Google made $584 million selling ads on other people sites.

Ok that’s all fine as far as it goes. I mean they make more money than I do, so I guess thats ok. But isn’t the value supposed to be about the future? So lets look at that. Google is unlikely to become any more dominant in Search so while I think they will continue to make a butt load of money reminding me that I can buy anything on eBay, I don’t know this market is going to double many more times.

So what about selling ads on other people’s pages. This seems to have potential since there are lots and lots of other pages. Even this one. But What I don’t get is how does selling ads on other pages require Google. The search thing is hard to replicate even if you have BillG kind of money. However in order to sell ads based on keywords on my page just my page has to be searched. A little python script on my server could scrape words and talk to some remote server somewhere else. Seems like the margins for this could be driven pretty low and the $584 Million is pretty vulnerable. But hey its only about 1/2 the revenue so who’s counting.

Maybe their is something in all the other thingsg Google is doing. Maybe selling ads in gmail,maps,etc. will make up the difference. Seems rather risky to me. But then what do I know. I once bought AKAM at 110.