Alphabet Inc. (GOOG, GOOGL) Analysis

[bea1271]

@marizzapan I agree with you, sadly Alphabet's 10-k is not very detailed on it's smaller companies (only around 90 sides long). I didn't thought it would be rational to use them in the DCF model, but I guess you can consider them a big fat bonus on top of Google's main businesses

 

[resjudicata]

@marizzapan Deepmind is about 4-5 years from changing the entire world forever by most serious estimates. The fact it's not on here in any serious consideration is why "value" people don't understand growth.

 

[retsepile]

@marizzapan If Tesla is worth 1T, Waymo should be worth at least 100B as a spinoff.

 

[magicalelf73]

@marizzapan The valuation and potential growth for the "Other Bets" section is absurd. However, I do feel that it is a good approach to leave them out for now, due to the fact that they still aren't generating significant revenue or cashflow without heavy losses, something that doesn't seem to be so quickly addressed over the next few years.

While I certainly look forward to them as a fellow GOOGL shareholder, it's a good and more pragmatic way to do his analysis.

 

[ait]

@magicalelf73 The way I look at it is youre getting a ton of high quality start you'd fit free with a Google share purchase. These are startups with top level talent at various stages in life cycle.

 

[samu]

@bea1271 I know YouTube has done some weird stuff like take away the dislike button. But how they are taking over the video game streamer world is amazing. Twitch seems to care less and less and YouTube is listening and trying things and working with the big streamers.

 

[bonoah]

@samu I feel like between Youtube, Youtube Premium, Youtube gaming/streaming, and Youtube TV, they are sitting on a potential goldmine. They just have to figure out how to package it all appropriately. Right now it's kind of a mess -- e.g., it's crazy to me I have to pay for Premium and TV separately. They already have family plans. As streaming gets bigger I could imagine them packaging these services in a really enticing (and profitable) way (e.g., Youtube premium for the kids, streaming for the teenager, and TV for the parents).

 

[retsepile]

@bonoah Even if they keep making money at their current rate forever, it's not a terrible value.

 

[zooplankton]

@samu With YouTube Live, creators can transfer their viewers to channel subscribers, which gives them an additional revenue stream. I can easily see Twitch’s market share decreasing in the future as YouTube improves its Live-streaming product even more

 

[resjudicata]

@samu I wish YouTube would work on their algorithm a bit more for YouTube music. I find it gets stuck in a repetitive suggestion mode where it continues suggesting the same songs/artists over and over instead of suggesting new ones.

 

[tinaman]

@bea1271 Thanks! Something that I never understood: why does Google Cloud lose money, while Amazon AWS and Microsoft Azure are so profitable?

 

[moshlawd]

@tinaman Because when you're a late entrant (GCloud) into a crowded market (AWS, Azure, DigitalOcean, IBM etc), one of the ways you can win customers is by giving them big discounts, literally on years of usage. That costs money.

 

[tinaman]

@moshlawd Ok thanks. So it’s price? Google Cloud is less expensive for customers? How much less? What about COGS for Google Cloud vs AWS / Azure? Does Google Cloud have higher unit costs due to lack of scale?

 

[moshlawd]

@tinaman One data point is that my company got 12 months worth of credits for free, just by talking to sales, writing a couple of proposals and agreeing to migrate from our old provider. We spent about $40k a year at the old provider. We essentially got $40k for free from GCloud.

 

[tinaman]

@moshlawd Cool data point. Thanks!

 

[resjudicata]

@moshlawd Would your company ever consider switching back to your old provider, or different provider after using Gcloud?

 

[moshlawd]

@resjudicata Yes, because compute is a commodity. We will go to whichever reputable provider will be cheapest or offer us sufficient credits to be worth the engineering time to perform the migrations. The savings need to be material -- if it is something like 5% cheaper, then that's not enough to be worth it at the moment. It’s not a fixed percentage though, if we had more usage, it may be worth it.

Basically, it is a trade off between how hard it is to move, how much it costs to move, what are the risks (eg something important goes offline for hours would be bad) and what are the savings.

 

[bea1271]

@moshlawd They also stated that a lot of additional revenue didn't lead to better operating income (loss) because it is offset mainly by an increase in compensation expenses (alias more employees)

 

[retsepile]

@tinaman Why does Google seem so disinterested in anything that isn't ad revenue or YouTube? I dunno.

Google Workspaces (G Suite) was a far better service than 0365 when I used it, but MSFT is turning theirs into a business model and Google doesn't really care it seems.

 

[annaliseh]

@retsepile I would kill for some simple functionality adds to the G suite.