location based blog: THE GOOGLE INVESTOR: Android Could Be A Billion Dollar Ad Business By Next Year (GOOG)

Thursday, February 10, 2011

THE GOOGLE INVESTOR: Android Could Be A Billion Dollar Ad Business By Next Year (GOOG)

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GOOG Down With Market
The market is off in early trading even as new claims for unemployment benefits dropped to the lowest point in over 2 years. Shares of GOOG are down marginally with the rest of tech. Upcoming catalysts include Nick Fox's (VP, Product Management) participation in a Q&A session at the Goldman Sachs Technology and Internet Conference at 5:20pm PT / 8:20pm ET on Tuesday, February 15; Android momentum on smartphones and tablets; regaining ground in China and pushing into other emerging markets; updated software, adoption and media partners for Google TV; and progress in other newer initiatives (location-based services, mapping, gaming, etc.). The stock trades at approximately 15x Enterprise Value / EBIT, inexpensive relative to historical trading levels and the broader Internet group.

Investors Concerned With How 6000+ New Employees Will Hit Margins (Wall Street Journal)
Credit Suisse analyst Spencer Wang addressed investors concerns about Google's hiring plans. He has been fielding questions over how that surge will impact margins. While Google has something of a reputation for profligate spending on hires, in reality, its hiring has been well correlated by top-line growth, meaning that it hasn’t impinged much on profit margins. If that historical pattern continues, it could be seen as a positive indicator for 2011 revenue growth and he remains confident in his 2011 EPS estimates.

Android Could Be A Billion Dollar Ad Business By 2012 (Fortune)

Google could generate over a billion in Android-related advertising revenue in 2012, according to Piper Jaffray analyst Gene Munster. Munster notes that Android generated $5.90 per use in mobile advertising in 2010; he sees the total increasing to $9.85 in 2012. He adds that the Android Market app store also could boost monetization per user from in-app advertising over the next two years. By 2012, he thinks there could be 133 million Android users generating $9.85 a year, which would mean $1.3 billion in Android-related revenue.

Google Showing Some Interest In Buying Twitter (Wall Street Journal)

Twitter thinks it can become a $100 billion company, according to the Wall Street Journal. The company has had "low-level" acquisition talks with Facebook and Google and other companies and wants an $8-$10 billion takeout price. Google and Facebook apparently still have "latent" interest in buying Twitter, but the talks are on and off and don't sound particularly serious. According to Henry Blodget at Business Insider, Google needs to buy Twitter immediately (and by immediately, he means 2 years ago when he first suggested it).

Google Isn't Teaming Up With Nokia According To Executive's Inflammatory Tweet
(Wall Street Journal)

Senior Google executive Vic Gundotra has the tech world abuzz with a somewhat inflammatory tweet dispatched ahead of Nokia’s new software strategy announcement this Friday: "Two turkeys do not make an Eagle.” Many believe that the Gundotra, a 15 year Microsoft veteran, is exposing the a partnership between Microsoft and Nokia early, meaning Android won't be powering Nokia smartphones. And there’s some serious history behind quote; it’s what former Nokia VP Anssi Vanjoki said in 2005 about BenQ buying Siemens’s failing handset business. Ouch.

Are Investors Going To See Google $1200 Over The Next 18 Months? (Daily Finance)
Not likely, but one investment shop is dreaming. Philip Tasho, CEO, and Timothy Holland at Tamaro Capital Partners believe Google is the best balance of value and growth in the large-cap technology sector and over the next 12-18 months, Google should soar to a new high of $1,200 a share. How does the stock get there?

The stock currently trades at a price-to-revenue ratio of 6.7 vs. its historical multiple of 12. This could jump back to at least 15x.
Newly appointed CEO and co-Founder Larry Page should spark innovation and competitiveness (he could also go down in flames, ask Jerry Yang).
Android is just the first wave in a stream of innovative products in the Cloud.
the Internet display advertising business is expected to grow exponentially.

Pretty optimistic for a more mature company.

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