Monday, September 12, 2005

GOOD GOOGLE GULP

Congratulations to my good friend for taking another good Google Gulp last week. She averaged up. The stock is up again today.

EBAY has also taken a big gulp. 4 Billion Dollars for Skype. Several of the account holders I communicate with regularly are considering adding to their EBAY holdings. EBAY is generating the cash from its core business to expand. The price paid for Skype is large but when EBAY purchased PayPal the story was the same. The purchase will initially be mildly dilutive to earnings but the potential is large. Does it not make common sense that a shopper would often jump at the chance to talk to the seller before making a bid?

As a small business owner for the past 19 years and as a stock broker for the prior 10 years, I would have loved for good prospects to have given me a call. I would have been happy to pay a fee for each lead. I disagree with folks who say that EBAY and GOOG are getting away from their core businesses. They are simply adding convenient ways for customers to use their existing services.

GOOG and EBAY will continue to compete more directly. GOOG and EBAY will introduce free internet web calls to millions of people. The revenue potential is huge. I love it. It is so neat to talk about free calls and huge revenues!

Meg (EBAY chairwomen) points out that the big dollar dealers such as those selling autos often need to talk to the bidder and the dealer would surely be happy to pay for the call. The pricing plan will be interesting. The listing and auction fees may cover the costs of calls on small items. On large items, the dealers may offer "teaser ads" to generate thousands of leads and they will pay per call.

Yes, a person, who uses Skype or Google Talk to make free internet calls, might easily be converted to a person who pays a small fee to make other calls. Yes, the likelihood is that these users will adopt the free service as their local and long-distance VoIP phone service.

My friend, the one who averaged up, at least thinks she appreciates the power of Google. The mobil applications are perhaps the most powerful. A driver does a three letter search, "gas". Google knows where this driver is and knows his buying and search habits. Google immediately displays a map showing all the gas stations within a certain radius. The brand and price is also given. If the driver has excluded EXXON from his preferences, he sees all the other stations but not EXXON stations. The driver might query further to learn if the station is a convenience store with Moon Pies in stock. Now don't tell me that this information is not powerful. Good advertising works because it reduces the price of goods and services. Knowledge is power.

What if the driver does a search for "pizza"? The information supplied by Google might include a 2 for one special at "Tony's". Don't tell me that Tony would not be happy to pay an advertising fee for this extremely relevant posting. Tony would happily pay a fee if the driver hits the call button to request a take-out order or to make a reservation. The driver might be excited to get his name on the waiting list while he is 10 minutes away from the restaurant. When the table is ready, Tony does not need a beeper system, he can simply send a reply over the Google IM.

One of many other neat things is that Google remembers that this particular driver calls Tony's frequently. This knowledge opens up many marketing avenues to Tony and builds the calling list for the driver. Don't you hate it when you want to call a place but you have forgotten to write down the number?

Google and associates are experimenting with city wide WIFI, power-line broadband, dual band cell phones and other techniques that will grant low cost broadband internet access to mobil citizens. Couch potatoes will certainly enjoy multimillion on demand TV and movies. Conference calling will also finally start to live up to its promises.

GOOD GOOGLE GULP! This buyer also purchased AMR, INTC, and GM last week. The GMdividend is about 6% and is 85% income tax free. The company is in for some rough times but it has been through them before.

STOCKS ARE CHEAP RELATIVE TO BONDS, REAL ESTATE AND MONEY MARKETS. THE S&P 500 PE RATIO IS REASONABLE IN RELATION TO INFLATION PROSPECTS.

Google + SKYPE = LOW INFLATION! Please note, it is not the savings on the phone call that drives down inflation (it helps but is only a small part of the savings). The driver who saves 10 cents per gallon on 20 gallons has saved much more than the value of the gas. The shopper who avoids the second trip to the store because of a Google list saves time and energy. STOCKS DO WELL DURING PERIODS OF LOW TO MODERATE INFLATION. FOLKS WHO ARE FOCUSED ON THE PRICE OF OIL ARE MISSING THE INFLATION STORY.

FOLKS SEEM TO HAVE FORGOTTEN THE FIRST LAW OF THERMO-DYNAMICS "ENERGY IS ALWAYS CONSERVED"! Our demand for energy is insatiable but energy never goes away! It is constantly recycled. DO THE Google GULP--YOU WILL SAVE MORE THAN YOU SPEND!

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