Should Google Inc (GOOG) be Afraid of the Competition?

Page 1 of 2

The internet is a very competitive market. For less than $150 anyone can buy a small shared hosting package and start a website. With such low barriers it is easy to think that Google Inc (NASDAQ:GOOG) faces a great amount of competition. The reality is that the amount of financial capital and human capital required to make an operation which can compete with Google is enormous. It is easy to get lost in all of the talk of Google’s eminent demise. In reality Google is a secure player in multiple online sectors with huge barriers to entry.

Google Inc (NASDAQ:GOOG)Why do People Use the Internet?

According to one study, the major uses of the internet are e-mail, gathering information, online banking, sharing content, geographical navigation services, and online shopping. Google covers almost all of these services. Gmail, Google+, and Blogger help people communicate and share content. Google News is one of the most popular news sites in the world. Google Maps provides directions, and the recent fiasco with Apple’s map app shows just how difficult developing a good map app can be. Google Shopping helps people to shop online. Although it does not offer the same level of service as Amazon, it is still one of the top affiliate networks.

Google has built this empire while maintaining great financials. They have a total debt to equity ratio of .09 with $14.8 billion in cash and equivalents at the end of 2012. Their ROA of 11.8% and ROI of 14.9% are healthy. With a profit margin of 21.4% it is easy for the company to maintain steady free cash flow to invest in their operations and fund acquisitions.

GOOG Operating Income Quarterly data by YCharts

How Does the Competition Compare?

The above chart shows how Yahoo! Inc. (NASDAQ:YHOO)‘s operating income has not grown at the same rate as Google’s or Microsoft Corporation (NASDAQ:MSFT)’s. Yahoo!’s CEO, Marissa Mayer, has not been with the company for a long time but she still has her work cut out for her. Yahoo! does not have the strong search business to fall back on like Google. Yahoo! Mail and Yahoo! News are both popular products, but they do not offer the same competitive advantage as a profitable search business. For the first three quarters of 2012 display page views decreased 5%, while search page views decreased 13% relative to the same period in 2011. Nevertheless, Yahoo!’s ROA of 19.4% and ROI of 25.3% are encouraging. Even with a clean balance sheet with no debt, the lack of operating income growth over the past couple years is concerning. For years Yahoo! and Google have fought back and forth, and yet Google has been able to grow a larger product suite and provide more operating income growth.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!