The offline half doesn’t have that much money to spend, right? Making some assumptions and approximating, would it be wrong to say that potential gains from bringing new people online ≈ global GDP growth? Currently that’s in the low single digits.
Incumbents ignore low-margin, cost-conscious customers.
Innovators cater to customers the incumbents don't want and build a product that is worse than incumbent's in every area except cost.
Then innovators improve the product to capture the lower tier of incumbent's customer base, then work their way up to more profitable customers.
Incumbent wakes up too late, finds their customers moved to a product the incumbent always thought was worse.
Lesson: don't ignore large, underserved populations or you'll find your lunch has been eaten.
The 1000% growth when you're a startup does not exist when you're worth half a trillion.
In theory yes but not in practice.
Many companies run ads as strict losses, until they stop spending or die, then another company will eventually the spot.
The revenue equilibrium is about where Google is paid all revenues from the customers it brought. The company gets more customer but makes neither a profit nor a loss. It's very close to that in practice.
It's really brutal. Google can effectively capture all profit margin from every web business in the world. That's what is happening.
I don't see what this has to do with Google taking your profit.
Lots of companies make a lot of money on the web. Google doesn't have a monopoly of profit.
Take theoretical company (Company A) worth $100MM and with a single shareholder (Shareholder A) who owns 100% of the 10MM shares of stock. They "buy" Company B which is also worth $100MM and has a single shareholder (Shareholder B) who owns 100% of Company B's 10MM shares. Company A executes this by issuing 10MM _new_ shares in Company A that will now be owned by Shareholder B. Company A now has 20MM shares and is worth $200MM because it has added Company B's assets, income, etc.
Of course in practice it frequently goes terribly wrong (ref: Microsoft & Nokia, Verizon & Yahoo, many others) and I don't think Google would actually have much incentive to go along with this. Just saying it COULD be done if both companies truly believed the outcome would be favorable.
Hm? He's talking about the multiples on their earnings, aka their profit. How does anything you just said justify a high multiple?
Original content and physical parks are very hard to invest in and make profitable, and Disney has had plenty of missteps recently. Also Google has Youtube which is replacing TV for many young people and full of original content that required no investment.
b) So what? You're going to value a moat at a 100% premium NPV?
The moat has nothing to do with that and is formed by their scale, which is almost impossible to break at this point. This is valued highly when it defends a multi-billion profit machine that nobody else can match.
That speaks to margins, not moat. Margins are already incorporated in the 'earnings' number. High margins do not factor into your multiple.
Apple does not have a chance at buying Google because they have the same market cap. Google and Facebook have a massive advantage in scale and precision which is why 2 of the top 10 biggest companies on the planet are ad networks. The valuations come from the sheer profit they generate, not their assets, and how much Disney spends on content is utterly irrelevant. You cannot easily replicate what they do otherwise it would've already been done. Half of the world's population still isn't online so there's plenty of room for growth in the future too.
Everyone loves to talk about waste but skip over how much worse it is with TV and print ads. What matters is getting a positive return. Even if you can't measure anything else, you can see what sales were like before and after doing any advertising, and that's as simple as it gets. Advertising is a key component of marketing, and marketing is how a company grows and creates customers, so unless you change human behavior advertising is not going away.