Last weekend, I listened to the replay of Google’s earnings call/webcast – which sent GOOG up over 10% last Friday. It was Larry Page’s first quarter as Google CEO – he’s off to a pretty good start.
GOOG leaps 10% after reporting earnings and Google Plus early returns.
The market appeared to be most excited about the hot start Google Plus is off to. It appears to be the first serious contender to Facebook in at least five years, perhaps ever (if you discount Myspace’s chance back in the day). The product is being pretty well received, and if anyone can get quick adoption on a new social network, it’s Google – which already has a massive user base on its market dominating search engine and impressive array of productivity apps (most of which are free, to boot).
On the call, Page, emphasized product development as his #1 priority. While I don’t think Google necessarily makes the best products…their UI’s can get clunky when their geeky oriented engineers go too far, and they lack a product dictator like Steve Jobs to enforce simplicity on behalf of the common man.
Still, the bar for software remains quite low (thanks, Microsoft!), and the fact that Google gives most of their stuff away for free can’t be underestimated in terms of its long term impact. As we learned from Andy Kessler, nothing creates a flood like free. I actually applied this to my own company, Chrometa – we recently made our legacy product free. For 18 months, we sold the product for $99, and got about 3,000 downloads of our free trial. Since making it free? We got over 20,000 downloads within a few months!
The “free” model is a dangerous one if you have no way to potentially monetize those users upstream, but that is not a problem for Google. They can serve up ads, and they have started selling their Google Apps package into the small business and enterprise space.
The Founder/CEO kicking ass and taking names in tech seems to be the theme these days. Steve Jobs at Apple, Mark Zuckerberg at Facebook, and Jeff Bezos at Amazon continue to run circles around their competition. Meanwhile companies like Microsoft, run by beancounter non-founder Steve Ballmer, remain stagnant.
Founder/CEO Larry Page is off to a very solid start. Google should be an interesting company to watch, for the first time in several years. And amazingly, the valuation is not that rich either. They reported about $2.5 billion in Free Cash Flow for the second quarter – so a run rate of about $10 billion per year. GOOG has a market cap of $191 billion – about 19x Free Cash Flow. Not that gaudy for a company that should be able to grow 20-30% for a little bit.
I’d sure rather own Google than Zillow, LinkedIn, Pandora, or any of the other recent Bubble IPO Babies!
Further reading on tech: In January, we talked about going long Apple and short Microsoft for 2011 – that’s a trade that’d have worked out quite well, thus far.