Alphabet Inc (GOOG) Stock Is No Moonshot
Google is the undisputed leader of online search and digital advertising
By Ryan Fuhrmann , InvestorPlace Contributor  |   Jan 17, 2017, 1:29 pm EST
Source: Brionv via Wikimedia (Modified)
Yet Google is no moonshot, which is the term it has used to describe the venture capital activities in its “Other Bets” segment. This includes self-driving cars and its Nest franchise, which actually has some sales and helps consumers more efficiently heat and cool their homes.
The question for investors going forward is if Alphabet can continue to dominate online advertising. It and Facebook Inc (NASDAQ: FB ) controlled 50% of the $60 billion online ad market in 2015. Google controlled half of the market, or $30 billion. Facebook’s take was $8 billion, but is also growing rapidly.
GOOG Stock Isn’t Stopping
Alphabet’s sales growth has been meteoric. It is projected to report sales of nearly $90 billion for all of 2016 (the final year results have yet to be fully reported) and that should jump to above $100 billion this year (calendar 2017). That will mark a roughly 10-fold increase from the $10.6 billion it reported in 2006.
Extrapolating those figures out another decade, Alphabet stands a chance at generating over $1 trillion in revenue. That is certainly a tall order, but the network effect (where a product or service grows more valuable as more people use it) is proving to be one of the greatest growth drivers capitalism has ever seen.
Of course, there is a downside to such dominance. The European Union has been attacking Google, alleging it is abusing its dominant position to block out competition and keep internet surfers dependent on its services. Specifically, it has suggested that Google pushes hard to make its search engine the default on smart phones and computers. It’s not always easy being on top.
The worries over Google’s dominance echo the control Microsoft Corporation (NASDAQ: MSFT ) held over personal computers back in the 1990s. In similar fashion, the U.S. Justice Department accused Microsoft of using its personal computing software dominance to push its Internet Explorer internet browser, which helped end the Netscape browser era that helped pioneer online search and browsing the world wide web.
Google’s dominance won’t last forever, but there is little reason to see it going away any time soon. In the next two years, analysts see earnings growing at a mid-teens percentage rate to above $41 per share for all of this year. It is a huge beneficiary of the growth in everything digital as consumers increasingly shop and socialize online.