Monday, February 07, 2005


Google has registered to offer web domains. Google has the habit of offering services free. The posting you are reading is hosted on a FREE BLOG SITE. The service is free but visitors who click on the Google Ads cause the advertiser to pay a small fee; I get a portion of the fee. Note the address has a .blogspot on the end. The number of sites that can be hosted by Google on is a very large number but not the same as offering .com addresses.

One can only speculate about Google's intentions. One reason to offer domains is to more efficiently direct advertisements to relevant sites. Those registered to offer domains can check to see if domains are active.

The cost of a domain is small. A few years ago companies charged a hundred dollars a year and a couple of years ago companies were buying domains at the wholesale rate of $5 per year and reselling them for $35 per year. A number of companies now offer offer domains for $3 to $5 per year.

I respect the logical thinking process practiced by a chemist friend of mine. He looks at life or at any data to find patterns. If he were told that Google has historically (since 1999) offered a number services free of charge in exchange for advertising space, he would suspect that Google will probably offer free web domains and free hosting. Again, this is consistent with past behavior. A blog is nothing but a hosted web domain wrapped around a template and Google offers blogs free of charge.

The really exciting step will be the next one. I type articles directly into this blog. I hit a compose button to see see how the posting looks and I hit a spell checker to correct spelling. I could type these postings into Microsoft Word and cut and paste to the blog. MSFT Word is a superior program for composing a document, but I am here and Word is there. One must assume that Google will introduce improved web application features to this blog site or to a future web site. In other words, Google is likely to go head to head with MSFT in a number of areas. Another example is that it appears that Google will offer a version of the free Foxfire browser.

If a web site offers unlimited posting and is free to the user, is it not likely that almost every person in the world will eventually have at least one web site? A true home page with newspaper, magazine, TV and other feeds would be very attractive.

The concept is not new but has far reaching consequences. Prior free sites were not .com sites and prior free sites were not loaded with free word processing, free spread sheets or free data base applications. They did not offer free built-in phone directories, free address books, free email accounts to the domain, free photo albums or other advanced features. Instant messaging is neat but what if it were integrated with your free internet phone such that a "caller" could purposely leave a voice or text message without ringing your phone or with just a ping of your phone? Or what if it only took one call to leave a voice message with any group of people in your directory?

The possible uses of the latest technologies is endless. One must stretch ones imagination to see many services that are natural off-shoots of advertising supported "free" services.

Mark Hulbert of the Hulbert newsletter service panned Google last week. He used trailing earnings and a growth rate of 20% to show that the stock is very over priced. Using trailing earnings on a company that increase earnings by 600% during the year has to be a mistake. Using a twenty percent growth rate on a company that just increased earnings in one year by 600% has to be a mistake.

Twenty percent growth for a large company is very strong, however, what other large company makes money offering free services. There are lots of free offers out there but there is always a big catch. You have to pay for something; not true with Google services. This situation reminds me of the young fellow who advertised "Free Condoms" on the internet. He charged $4 shipping and handling and sent two "free condoms". He sold "shipping and handling" millions of times and made himself millions of dollars. This "free service" was in high demand even when the consumer had to pay $4. The consumer of Gmail pays zero. It is the advertiser who receives a click who pays a fee.

The more folks who write articles using trailing earnings and unrealistically low growth rates, the more positive I am on Google. There is no doubt the stock trades on emotion. Sometimes there is a reason for a stock to trade at very high multiples. Google has powerful competitors in Yahoo and Microsoft. So far, Google is staying two steps ahead in major categories of business. Many words come to mind, destructive capitalism rule breaker and large moat to name three concepts. I have used the example before but I will never forget how controversial it was to buy Xerox stock in 1963 for $73 per share. Within a few months it traded for $340 and it kept going for many years.

The applicable question remains; how much demand is there for free services? It is true that if ice cream were free, we would eat a tremendous amount, but we would still eat other foods. I do not know the percentage of companies who have ad sense accounts but I know the number of free ads placed is going to continue to grow for several more years. Google has a 35% share in America and a 50% share world wide. MSFT and Yahoo can grow their ads by a large amount and still not gain on Google.

What is the down side? There are many potential problems to my thesis. I am certainly not the first to know about the new services to be offered by Google. The company works on a project for a long time before it is ready to offer even a beta version. The market has certainly considered all the potential. Early investors own billions of dollars of stock and will naturally cash-in portions to diversify their holdings. Of course there is always the risk from competition. The competition may come from Yahoo or MSFT or it may come out of the blue. Two more college kids may invent the next killer application. I can not recommend the stock. I write only for education, entertainment and pleasure.

Free emain (Gmail), free web sites, free blog sites, free software, free photo albums, free web search, free computer search, free library search, free definitions, free encyclopedias, free airline schedules, free train schedules, free 411 phone service, free maps, free phone service, free news feeds, free.............. surely you get the idea.