Wednesday, June 29, 2005


My forecast is that Google Pay or what ever the product will be called is going to be very big. Based on comments by the company and by other bloggers, my best guess is the Google approach will be very different than the PayPal approach. EBay has raised the price of doing transactions. The price of listing the product, the auction fee and the payment fee. In my opinion 2.9% is a steep fee for making a payment. The online payment costs should be less than the cost of using a credit card at a gas pump!

EBay has been one of my families core holdings for several years. The stock has been good to us and we believe it has a great future. On the other hand, we believe the Google approach to online payments will be significantly better. In the long run the competition will likely be good for EBay. When the transaction costs go down, millions of new accounts will be opened and trillions of transactions will occur!

The business is tougher than it looks. EBay could not crack the business so it bought PayPal. I suspect Google find it easier to build a payment business. Millions of advertisers already make regular payments to Google and millions of host sites receive payments from Google. Many web sites send and receive payments. It wouldn't require much encouragement to allow the payments to accumulate in an online account.

It is my hope that the Google "cut" will be low enough to finally make "micro payments" attractive. If someone could toke a web site $.25 with the click of a button, folks may be willing to pay for content. Subscriptions might be for one article, an hour, day, week, month or year. Online news, video, music and blogs might be sampled for a modest fee by millions of folks. Most sites would likely offer a free viewing before the payment clock starts to tick.

What if you could subscribe to the Wall Street Journal for 5 hours and use those 5 hours in any increment? This trial subscription might last some folks a long time. It might cost them $5 to check the headlines once a day for several months. Chances are they would get hooked on reading a good article and decide to upgrade to a longer term subscription at a lower hourly usage rate. It might cost those who read a newspaper from cover to cover $1 but those who only check the sports page a quarter.

I am one of many folks who are frustrated by too much advertising. A lot of time could be saved and a lot of clutter could be eliminated if one could pay a modest charge for advertising free content.

A friend of mine sold a little piece of Google yesterday. He asked me if I have been lightening up? NO WAY! I HAVE BEEN THINKING ABOUT BUYING MORE! My families portfolios have done very well. For example, our AMTD holdings passed our Google holdings in value. Our airlines were super hot, down a couple of days and now hot again. Google is not our biggest holding and not our biggest winner but we love the company. The strength of the company is still being underestimated. The comparisons of Google to TWX have been a big joke. With Google's earnings and growth it will likely pass the enterprise value of TWX. TWX has the assets but it is a slow moving battleship without air support next to the fleet moving Google.

Only aggressive investors should have more than 5% of their portfolio in a high priced stock like Google but those who have not committed 5% are missing the boat. Google is changing media systems around the world. EBay is too.

The cost of newspaper classified advertising was reasonable when there were no alternatives. The coming Google Payment system will make it all the more easy for content to be provided at lower cost over the internet. Google Pay is going to be BIG.