If one searches for “has Google peaked”, one could find two interesting articles. The first article, dated Oct. 10, 2005, is from Slate and written by Adam L. Penenberg. Adam had very interesting observations, such as
About 99 percent of Google’s revenue comes from advertising. …… Not only does Google depend on ads, it relies on one source—AOL—for about 12 percent of its AdSense revenue. If AOL terminated its contract, Google would feel some pain and its stock price could take a significant hit. …… For a company that depends so much on a single type of revenue, Google has stretched itself awfully thin.
However, Adam missed an important point, which is that online ad revenue is growing faster and faster, from 25% in 2007 to ~40% this year. As the market leader, Google could enjoy the growth even without doing anything.
The second article — Google love waning: Has Google peaked? — is from Donna Bogatin at ZDNet and is published in October 14th, 2006. Obviously, Donna missed the fact that Microsoft’s financial success is based on its monopoly position. If Google behave as bad as Microsoft, Google will do very well financially in the next few years. Every company would behave like Microsoft when they have monopoly positions. which has been approved by the history. That’s why we have anti-trust law. Donna is right that Google is not the Good Witch. As its position secured, it starts to play evil.
Google’s biggest problem is on its own success. First, it grows too fast. According to its own public data, it has grown from 682 in 2002 to 9,378 in Q3, 2006. Any company growing that fast could have management issues in the long run. The company could end up lack of necessary processes for a sustainable long-term growth. We had Gmail Disaster near the end of 2006, which caused the loss of user emails. The good news is that the fast-growth issue is not only for Google, but also for Microsoft. Techcrunch has a good article about it.
Second, Google needs to upgrade adsense to 2.0. The problem for the current version of adsense is that it requires that one homepage ONLY contains one topic. Otherwise, the homepage wouldn’t be classified correctly. Thus, I keep getting useless ads on this blog site.
All the above concerns are for the long-term. Google’s near-term future is very bright. Its stock chart shows that it will break through in this year, at least reaching $600. What’s your bet?