for me, i can ignore all the peripheral commentary and anxiety about GOOG because of one core truth -- for the rest of our lives, maybe for the rest of human civilization, spidering, indexing and searching data is going to be amongst the most critical functions for society, business, culture, community, everything.
but even in the presence of huge weaknesses -- and GOOG has HUGE weaknesses, and arguably does not have the right management for the next era -- GOOG is the massive leader, with enough muscle and smarts and head start to be a hugely profitable and significant leader or competitor for a long time to come. $500/share is cheap for GOOG. $400 is maybe a bit less cheap, but it is not expensive by any measure.
the softness in GOOG is a reflection of a tumultuous market and time, not of serious issues with the company and its core businesses. BUY and HOLD
Steven Kane
· 1 year ago
ooops, guess i should always proofread.
$400/share is cheap
$500 is a bit less cheap
BUY
and
HOLD
fredwilson
· 1 year ago
Thanks steve. I feel better that you see it my way
Fred
stone
· 1 year ago
Great post. I am an avid Google watcher and fan, and truly believe they are one of the great companies of all time in terms of how they treat employees, growth, innovation, etc. I disagree with people that think Google is a one-trick pony --- IMHO they have too many things going on and there is a master plan, and many of these investments will benefit them in the future. Back to the one trick pony concept: Google has TWO (2) distinct business, AdWords & AdSense. One is a search advertising business and one is a very complex ad serving business having *nothing* to do with search. Why do people get this wrong? It's because of their brilliance in finding a way to share advertisers across both businesses. They even used to share ad creative across both businesses. I used to work with the person that built AdSense. He'll tell you that it is the single most complex product (by far) that Google owns.
But, your larger point about Google is right. Many of their little projects will contribute down the line and Google will be the first large cap Internet company to come roaring back once the economy and stock market get back on track.
jeremystein
· 1 year ago
"I do think many keywords have been bid up to a price that it's hard to get an ROI on them"
thats very true. many businesses think that you need to be in the top slot and end up overpaying. they actually lose money when you look at the conversion rates. the ideal slot in a paid search ad is 2-4.
Ashish
· 1 year ago
"I did a back of the envelope calculation that says if Google grows its operating cash flow at 15% per year for the next 10 years, then at today's price, you can own the company for the next 10 years of cash flow."
That's a great way to go about fundamental analysis .. but only if you plan on holding for ten years. Else you'll be at the mercy of Wall Street's ups and downs and what's in favor today. It is notoriously hard to do "value" investing on growth, especially on high tech, stocks, because you face such volatility in the face of changing market opinions.
Any opinion on the relative value of AMZN v GOOG? Over the past year, AMZN is up some 75% while GOOG is flat .. but AMZN's market cap is still just one fifth of GOOG's. Amazon is also getting started with a variety of very interesting services that have the potential to be big winners down the road (i.e. web services and the move towards more and more electronic content -- such as books for Kindle -- where the margins are obviously much fatter than physical goods).
amzn trades at about the same mutiple of cash flow as google does now.
i think google is a better buy at its current price
fred
cyanbane
· 1 year ago
I don't think it was a bad buy at all. My guess is that in 6 weeks you will be back to what you got it at. I don't think for a second Google is bulletproof for the coming market deltas, but regardless of yesterday it is hard to say they are not in a good position for it.
If I was a QB, I would much rather have G as my RB in the game as opposed to some other comps who "play" that position.
Marylebone
· 1 year ago
Fred I followed you into Goog on Covestor and completely agree. The market massivley overreacts to any sign of advertising slowdown - it will slow but is cyclical so unless you are daytrading this has to be the time to get in....
McLarty
· 1 year ago
Demographics Fred - you're GOOG purchase will amaze you in 10 years. Boomers don't use the internet nearly as much as echo's do. Echo's are getting older and richer, and are comfy purchasing online.
Also, the directions for innovation for google are limitless. Look what they have accomplished in the last 10 years. They are investing in ideas that could be just as big as their founding technologies. Eg. GrandCentral, you can see the widget on the side of my blog. it's the "call me" button. I know they aren't the first to invest in this sort of idea, but Google will make it great.
I was sitting at a pub last night, with my 20 somethin' buddies. Here's a glimpse of a small chunk of the conversation of what non-net-natives are saying:
"Did you know you can buy shoes online? It means I don't have to go to the store and wait in a line...plus I think it's a little cheaper." "Yah man, the other day, I bought a jacket online, saved $100." "I'm going to start shopping more online"
These guys are in their 20's and starting professional roles in the field of engineering.
Jason Kolb
· 1 year ago
Hope you've got some dry powder so you can buy it all the way down... this thing's going to 3xx by the end of the year. Consumer-driven paid search results are toast until the economy recovers.
fredwilson
· 1 year ago
I've got plenty. Just dabbling in goog right now
Fred
jeremystein
· 1 year ago
its not necessarily true that consumer driven paid search results are toast. although overall ad budgets may contract in a recession, its still possible for online ads to continue to grow. we will continue to see the spreads between offline and online campaigns narrow. as fred pointed out, marketers will go to higher roi channels such as paid search.
leigh
· 1 year ago
In fact, that's what all the marketing rags are saying. IMO what you're probably seeing right now is a general market nervousness with everyone cutting back on all their total budgets while they watch to see what happens and regroup. What you are likely to see is that as sales start to slump, marketers will regig their budgets and Google should see a big wack of that - what is likely going to be hurt are more traditional media (TV/Print) that have had a pause and likely won't see the same recover due to lack of direct ROI.
Jason Kolb
· 1 year ago
Doesn't matter to GOOG's bottom line if online ads grow but they only pay 25% as much. When we emerge from the recession it will, but that's going to be a big hole for the stock to climb out of before you start seeing profits.
ErikSchwartz
· 1 year ago
I would be much more comfortable about GOOG if they had proved that their success in paid search was not just market serendipity. It's not that they haven't tried to open other revenue streams (froogle, radio ads, print ads), they just haven't succeeded.
There's nothing wrong with market serendipity, it's just not necessarily repeatable.
Venkatakrishna Nalamothu
· 1 year ago
I fully agree with your opinion. Investors sometimes over react to bad news. Go long and earn money. I will invest in Google.
dantinpa
· 1 year ago
Have any analysts starting measuring this like they do pharmas? just like you mentioned Fred, consider the potential value of each "product in the pipeline" - aggregate them together and their is the basis of your future valuation. They have one "blockbuster" that has been a cash cow (without the whole expiring of patent protection) and a huge pile of products that are mostly in the equivalent of phase 1 or 2 trials > there is absolutely a "market value" for some of the product areas (office), but some of the most exciting would be conjecture at this point. Thanks for giving me a whole new way to think about this.
Karim Yaghmour
· 1 year ago
FWIW I think the "one trick pony" comment is to the point. My take is that this is the very reason why a Microsoft / Yahoo! deal will be hard on Google (http://blog.kryptiva.com/2008/02/good-enough-vs...) -- i.e. forcing Google to remain the #1 at the "search" pony trick. As you highlight, the problem is that they are likely spending the vast majority of their operating budget on non-revenue-generating work. Up to now the prevailing wisdom was that "they can afford it." With Microsoft / Yahoo! coming down the road, I'm not so sure that will hold.
fredwilson
· 1 year ago
So I think we all agree that goog has to show it can develop some new lines of business/new revenue streams
I am betting they can and will
Fred
Enis
· 1 year ago
Great post (and comments) - however, I feel that there needs to be a clear understanding that you are not "trading" Google but rather "investing" in it. Accordingly, paying too much attention to the price movement in a single day, can lead to too much analysis, which as the saying goes "leads to paralysis" as well as emotional reactions - neither of which make up the recipe for Profitable investing (or trading).
Having worked in the world of retail equity and currency trading for the past decade I can confirm that the markets at time (a great deal of the time) will not only over react to noise (news) but also defy the laws of logic when watched under a microscope, minute by minute.
Despite the numerous highly paid analysts on Wall St the harsh truth is that analysts and traders will always have a reason to either sell or buy at any moment in time and will have no problem jumping from one side of the fence to the other at the drop of a hat - lets not forget the old financial markets adage "Trend is your friend". As the herds go about over re-acting to "news" don’t be afraid to follow suit for a short term profit - but if you are "investing", be sure to understand the product and market you are buying and focus on the clear facts.
While Google may well be spending the war chest on products in development, the truth is that they may have been lucky once and found their Purple Cow, in Ad Sence and Ad Words, and are now milking it for every cent they can (right fully so). The true test of how they will do in the future may well be based on their willingness to "Destroy" their existing (cash cow) business model before someone else does (refer to Re-Imagine by Tom Peters for insights into the concept of destroying your business before your competitors do) .
For those looking at a Yahoo and Microsoft peaceful matrimony, an interesting article (even though dated 2002) is Size Is Not A Strategy published in Fast Company http://www.fastcompany.com/magazine/62/size.htm...
messels
· 1 year ago
enis. *great* article. reading it now and couldn't wait to come back here to comment that this is exactly what i'm talking about (comment below). it may be later in the article but there's no mention thus far of 'creative destruction' as a historical reference point for buttressing the 'smaller is better' paradigm.
i mean, if we think about it, we all have bosses that are really "comfy"; why change that if there's no real risk?
fred may not like me saying this but i think companies like yahoo! really fall into this type of conundrum. there's no real innovation coming from the internal teams so they look to other companies for innovation (like jumpcut in the case of yahoo!) and purchase those innovations. that's the easy route to innovation and the purchasing company ends up killing the innovative and 'small team' mentality of the people and thrust them into a different company culture with different "political" hierarchies and "set" ways of interpreting the world, essentially killing the formula that made the company successful in the past.
we could even interpret amzn w/ this lens. why is amzn releasing the kindle? why not spin the company off? put a little fire under their feet. the kindle can still be an amzn exclusive offering...at least for a time. kindle itself, as a separate entity, would be immensely better off by allowing people to choose the retailer they'd like to purchase from. obviously amazon has a protectionist stance and justifiably so. this doesn't mean it's the right decision in the long run. meaning, protectionist stances on market share can have a negative affect on innovation. rather than focusing on how to be "better" the company focuses on how to "maintain." there's a big difference in the outcome of those two different paradigms, one being offensive and the other strictly defensive.
hopefully i'm being coherent here and not letting my excitement obstruct my ability to express myself clearly...
fredwilson
· 1 year ago
I actually agree with this completely
Fred
andyswan
· 1 year ago
Add slowly to stocks that are going against you, add quickly and more often to stocks that are going your way :)
messels
· 1 year ago
ouch. i know that hurts. i'd imagine being a VC you have a long term outlook? that's basically what you implied when you did the forward cash flow calculations. i wouldn't worry too much about the sudden drop since you're looking out 10 years anyway. also, i think you're right: google will eventually figure out how to monetize its different offerings--hopefully they're able to do so without infringing on user experience. i mean, at the end of the day, it's all about user experience on the net. throwing up even a click of a barrier is enough for a competing service to start gaining ground--and quickly, at least imho. as for the per-share price, you can always average down. then when the market moves beyond all the FUD, you will be well positioned for bigger gains. i noticed from your covestor post that you don't have any dividend paying stocks. why is that? the markets seem to really reward investing cash flows into new businesses. i'd rather a company simply focus on its core business and pay a dividend. i mean, there really is no garuntee that after all the billions invested in a new product that a startup can't come along and usurp that work with a better market position. in the case of google, they have an amazing head start in the SaaS land (apps such as google docs) but it's by no means a done deal. from my perspective, companies in the internet sphere excessively rely on acquisition for growth. why not just spin off a small company, well funded but still hungry for more? that should create a better company culture of driving toward real growth with a smaller group, allowing for more nimble decision making. it also offers shareholders better future value since they're positioned as true investors--rather than just placeholders in the speculation game...i could go on for a while and i don't think this is the place.
good luck and happy *investing*
fredwilson
· 1 year ago
The lack of dividend paying stocks is not intentional but I like comoanies that have high roi opportunities that they can invest their surplus cash in
Fred
CoryS
· 1 year ago
Goog is an advertising based business and if you've followed consumer recessionary cycles, you know that a drop in ad spending is coming (which I'm sure you do), hence the expected drop in revenues and earnings is being played out by Google's admission to revenue slow down and Wall Street's move to other sectors. You want to be considering sectors that come out of the downturn first and invest in them while you wait for a bottom on Goog.
I'm continuing to be amazed that you like AAPL v. NOK, btw, given that same NA consumer headwind.
Brian
· 1 year ago
That is a very good point. It surely is a good time to buy. But I think in a short run, they are still going to be some more degradation until the market readjust itself in line with recession. Perhaps we should wait bit longer before committing ourself to it for another month or so?
fredwilson
· 1 year ago
Or start building a position slowly but surely
David
· 1 year ago
Just like companies such as Microsoft before it who were considered sexy in their heyday Google's time in the limelight will pass. They will probably continue to make lots of money but the next new thing for investors to focus on will have come along. Old timers who have made a ton of money from their Google stock will leave while newcomers whose options are underwater will get disillusioned and look elsewhere. They are still a one-trick pony (admittedly very profitable) and Google folks are amongst some of the most arrogant I have ever met, I do wonder how they will adapt when times are tough.
As an investment proposition I would have my doubts about Google stock as a long term investment. And no, I don't think Facebook will be the next Google. :-)
Clay
· 1 year ago
Fred - I think you've identified a knee-jerk market reaction that will reward you in the long run. CTR is one of my levers Google can pull to increase overall revenue. With their tremendous query growth rates (http://www.comscore.com/press/release.asp?press...) they don't need to worry about CTR.
Jarid
· 1 year ago
"...many keywords have been bid up to a price that it's hard to get an ROI on them"
Is that anecdotal or what you're seeing from your portfolio companies? The reason I ask is because I don't think that statement applies to the overall keyword market at all. Sure, ROIs are going down, but that doesn't necessarily mean you're going to spend less on search. In fact, ROI in keyword search is still so good that many people I speak to would be willing to spend more if more inventory was available . And, as you pointed out, people are always going to move money to the higher ROI areas, especially compared to areas where you can't even measure ROI. So, as long as paid search still delivers better ROI than other marketing channels (online and offline), it will continue to grow.
Speaking of ROI, the other area that's started to make leaps forward is the measurement of paid search, and online marketing in general. For many years, people just credited the last campaign clicked (be it a banner ad, text link, email, etc.) with the sale. Now, with more sophisticated and cheaper (dare I say 'free') analytics tools available, people are using the technology to more accurately measure and understand the true ROI of each online marketing channel (see Yahoo Keyword Assists, Microsoft's Engagement Mapping, Omniture's Keyword Stacking, etc.). That also can only be a good thing for Google in the long run.
fredwilson
· 1 year ago
Jarid
You are correct and I wasn't specific enough in my post on this topic.
What is happening is it takes more work to get and ROI in paid search these days. But of course, it can still be had
Fred
howardlindzon
· 1 year ago
google is public?
I need to start watching cnbc
fredwilson
· 1 year ago
What does it take to get a serious comment out of you Howard?
Saffron27
· 1 year ago
GOOG is a buy though you may have to suffer more book losses over the course of the year. I sense the bottom has yet to be reached in the banking debt log jam, the depth of the US recession is still unfathomable and the effectiveness of a new administration unknown. As for advertising spend 08 is the last year in 4yr bull run that peaks with the Olympics and Euro football spend and will plummet next year so there is some good reasons for the correction. Though much of this correction was due to MSFT proximity to YHOO so we could judge it to have overshot.
My investing strategy is short quickly and possibly repeatedly as markets fall and buy for the long haul (5-10 years horizon). GOOG is in essence a global monopolistic utility with potentially another winner in its kit bag so there is still plenty of upside once the new grass starts growing.
Those of us in the advertising business know that ad dollars dry up to some extent during recessions, which is what is going on now. Since Google is just a new fangled media, they are not immune. The weakness of all Web 2.0 business models is the reliance on ad dollars. Hopefully, this recession will not be as bad as some think or it will be a reckoning for many.
phoneranger
· 1 year ago
Fred: Nothing is forever. And these days ten years is longer than forever. A much surer thing than GOOG is that many many companies and industries will get ripped to shreds by GOOG, AMZN et al. I point you to RHD - they make phone books. They are imploding in front of our eyes. Will GOOG pick up the pieces? Some of them. But there are lots of smaller public companies that stand to double and triple their CF in GOOG's wake. Let's figure out who they are.
Charlie Crystle
· 1 year ago
Fred,
relate your question "Well what if paid search doesn't grow any more? " to the free, ad-supported model. What are the factors limiting success of free, ad-based models?
--capacity for clicks (limited numbers of clicks per ad displayed in an app) --price per click (what the advertiser pays) --commission per click (what google giveth, google taketh away, perhaps by 20% as times get tougher) --saturation (combined with capacity, it's a real problem when nobody using your app clicks on links anymore) --willing advertisers
While the pie can get bigger, the ad-supported free model is not without limits. CPM will be important again, and as with any decent marketing plan, ad-based marketing needs to be coordinated with PR, promotional stuff, yadda yadda.
So I guess I'm saying there are limits, there will be weakness in the market overall that effects Google, Yahoo, etc, and all of the dependent businesses, and that at some point marketers will demand/need a more sophisticated ad model than what adwords has to offer.
Jason Kolb
· 1 year ago
Hey not to rub it in, but... how's that GOOG stock working out for ya? ;)
fredwilson
· 1 year ago
Buying it all the way down to $300 (if it goes there, which I don't think it will)
All Comments
but even in the presence of huge weaknesses -- and GOOG has HUGE weaknesses, and arguably does not have the right management for the next era -- GOOG is the massive leader, with enough muscle and smarts and head start to be a hugely profitable and significant leader or competitor for a long time to come. $500/share is cheap for GOOG. $400 is maybe a bit less cheap, but it is not expensive by any measure.
the softness in GOOG is a reflection of a tumultuous market and time, not of serious issues with the company and its core businesses. BUY and HOLD
$400/share is cheap
$500 is a bit less cheap
BUY
and
HOLD
Fred
But, your larger point about Google is right. Many of their little projects will contribute down the line and Google will be the first large cap Internet company to come roaring back once the economy and stock market get back on track.
thats very true. many businesses think that you need to be in the top slot and end up overpaying. they actually lose money when you look at the conversion rates. the ideal slot in a paid search ad is 2-4.
That's a great way to go about fundamental analysis .. but only if you plan on holding for ten years. Else you'll be at the mercy of Wall Street's ups and downs and what's in favor today. It is notoriously hard to do "value" investing on growth, especially on high tech, stocks, because you face such volatility in the face of changing market opinions.
Any opinion on the relative value of AMZN v GOOG? Over the past year, AMZN is up some 75% while GOOG is flat .. but AMZN's market cap is still just one fifth of GOOG's. Amazon is also getting started with a variety of very interesting services that have the potential to be big winners down the road (i.e. web services and the move towards more and more electronic content -- such as books for Kindle -- where the margins are obviously much fatter than physical goods).
here's my portfolio
http://www.covestor.com/mbr/fredwilson/holdings
amzn trades at about the same mutiple of cash flow as google does now.
i think google is a better buy at its current price
fred
If I was a QB, I would much rather have G as my RB in the game as opposed to some other comps who "play" that position.
Also, the directions for innovation for google are limitless. Look what they have accomplished in the last 10 years. They are investing in ideas that could be just as big as their founding technologies. Eg. GrandCentral, you can see the widget on the side of my blog. it's the "call me" button. I know they aren't the first to invest in this sort of idea, but Google will make it great.
I was sitting at a pub last night, with my 20 somethin' buddies. Here's a glimpse of a small chunk of the conversation of what non-net-natives are saying:
"Did you know you can buy shoes online? It means I don't have to go to the store and wait in a line...plus I think it's a little cheaper."
"Yah man, the other day, I bought a jacket online, saved $100."
"I'm going to start shopping more online"
These guys are in their 20's and starting professional roles in the field of engineering.
Fred
There's nothing wrong with market serendipity, it's just not necessarily repeatable.
I am betting they can and will
Fred
Having worked in the world of retail equity and currency trading for the past decade I can confirm that the markets at time (a great deal of the time) will not only over react to noise (news) but also defy the laws of logic when watched under a microscope, minute by minute.
Despite the numerous highly paid analysts on Wall St the harsh truth is that analysts and traders will always have a reason to either sell or buy at any moment in time and will have no problem jumping from one side of the fence to the other at the drop of a hat - lets not forget the old financial markets adage "Trend is your friend". As the herds go about over re-acting to "news" don’t be afraid to follow suit for a short term profit - but if you are "investing", be sure to understand the product and market you are buying and focus on the clear facts.
While Google may well be spending the war chest on products in development, the truth is that they may have been lucky once and found their Purple Cow, in Ad Sence and Ad Words, and are now milking it for every cent they can (right fully so). The true test of how they will do in the future may well be based on their willingness to "Destroy" their existing (cash cow) business model before someone else does (refer to Re-Imagine by Tom Peters for insights into the concept of destroying your business before your competitors do) .
For those looking at a Yahoo and Microsoft peaceful matrimony, an interesting article (even though dated 2002) is Size Is Not A Strategy published in Fast Company http://www.fastcompany.com/magazine/62/size.htm...
i mean, if we think about it, we all have bosses that are really "comfy"; why change that if there's no real risk?
fred may not like me saying this but i think companies like yahoo! really fall into this type of conundrum. there's no real innovation coming from the internal teams so they look to other companies for innovation (like jumpcut in the case of yahoo!) and purchase those innovations. that's the easy route to innovation and the purchasing company ends up killing the innovative and 'small team' mentality of the people and thrust them into a different company culture with different "political" hierarchies and "set" ways of interpreting the world, essentially killing the formula that made the company successful in the past.
we could even interpret amzn w/ this lens. why is amzn releasing the kindle? why not spin the company off? put a little fire under their feet. the kindle can still be an amzn exclusive offering...at least for a time. kindle itself, as a separate entity, would be immensely better off by allowing people to choose the retailer they'd like to purchase from. obviously amazon has a protectionist stance and justifiably so. this doesn't mean it's the right decision in the long run. meaning, protectionist stances on market share can have a negative affect on innovation. rather than focusing on how to be "better" the company focuses on how to "maintain." there's a big difference in the outcome of those two different paradigms, one being offensive and the other strictly defensive.
hopefully i'm being coherent here and not letting my excitement obstruct my ability to express myself clearly...
Fred
as for the per-share price, you can always average down. then when the market moves beyond all the FUD, you will be well positioned for bigger gains.
i noticed from your covestor post that you don't have any dividend paying stocks. why is that?
the markets seem to really reward investing cash flows into new businesses. i'd rather a company simply focus on its core business and pay a dividend. i mean, there really is no garuntee that after all the billions invested in a new product that a startup can't come along and usurp that work with a better market position. in the case of google, they have an amazing head start in the SaaS land (apps such as google docs) but it's by no means a done deal.
from my perspective, companies in the internet sphere excessively rely on acquisition for growth. why not just spin off a small company, well funded but still hungry for more? that should create a better company culture of driving toward real growth with a smaller group, allowing for more nimble decision making. it also offers shareholders better future value since they're positioned as true investors--rather than just placeholders in the speculation game...i could go on for a while and i don't think this is the place.
good luck and happy *investing*
Fred
I'm continuing to be amazed that you like AAPL v. NOK, btw, given that same NA consumer headwind.
As an investment proposition I would have my doubts about Google stock as a long term investment. And no, I don't think Facebook will be the next Google. :-)
Is that anecdotal or what you're seeing from your portfolio companies? The reason I ask is because I don't think that statement applies to the overall keyword market at all. Sure, ROIs are going down, but that doesn't necessarily mean you're going to spend less on search. In fact, ROI in keyword search is still so good that many people I speak to would be willing to spend more if more inventory was available . And, as you pointed out, people are always going to move money to the higher ROI areas, especially compared to areas where you can't even measure ROI. So, as long as paid search still delivers better ROI than other marketing channels (online and offline), it will continue to grow.
Speaking of ROI, the other area that's started to make leaps forward is the measurement of paid search, and online marketing in general. For many years, people just credited the last campaign clicked (be it a banner ad, text link, email, etc.) with the sale. Now, with more sophisticated and cheaper (dare I say 'free') analytics tools available, people are using the technology to more accurately measure and understand the true ROI of each online marketing channel (see Yahoo Keyword Assists, Microsoft's Engagement Mapping, Omniture's Keyword Stacking, etc.). That also can only be a good thing for Google in the long run.
You are correct and I wasn't specific enough in my post on this topic.
What is happening is it takes more work to get and ROI in paid search these
days. But of course, it can still be had
Fred
I need to start watching cnbc
My investing strategy is short quickly and possibly repeatedly as markets fall and buy for the long haul (5-10 years horizon). GOOG is in essence a global monopolistic utility with potentially another winner in its kit bag so there is still plenty of upside once the new grass starts growing.
www.raineyrosenberg.com
relate your question "Well what if paid search doesn't grow any more? " to the free, ad-supported model. What are the factors limiting success of free, ad-based models?
--capacity for clicks (limited numbers of clicks per ad displayed in an app)
--price per click (what the advertiser pays)
--commission per click (what google giveth, google taketh away, perhaps by 20% as times get tougher)
--saturation (combined with capacity, it's a real problem when nobody using your app clicks on links anymore)
--willing advertisers
While the pie can get bigger, the ad-supported free model is not without limits. CPM will be important again, and as with any decent marketing plan, ad-based marketing needs to be coordinated with PR, promotional stuff, yadda yadda.
So I guess I'm saying there are limits, there will be weakness in the market overall that effects Google, Yahoo, etc, and all of the dependent businesses, and that at some point marketers will demand/need a more sophisticated ad model than what adwords has to offer.
will)
fred