Now that Google has a higher market cap than Berkshire Hathaway, I feel compelled to go against about 99% of financial bloggers, who all seem to be long Google, and ask… does quality of assets matter? What is the risk that Google's assets (their massive traffic, for example) suddenly generate a lot less cash flow than the assets of Berkshire Hathaway? I'm an investor, not a speculator. I'm very concerned with risk and with protecting my capital. And here is what worries me.
1. Google has limited success outside of their core search product. Gphone? OpenSocial? So what? Maybe those will be two other areas where Google will fail. Weren't people talking about how revolutionary GoogleBase was at one time? Until I see them make serious money from a second act, I'm not willing to pay a price for the "potential" of the Gphone.
2. Somewhere, someone is working on a natural language search engine that will blow Google out of the water. The company is too tied to old ways of thinking about search (does anyone care about Pagerank anymore?). Once I can go to a site and ask "What is the average rainfall in Kentucky" without having to use funky ANDs and ORs and quotes, and instead of getting pages that have similar words, I get an answer, I think Google's traffic could drop dramatically within just a few months. I follow A.I. research, and I think this day is coming, and it won't come from Google. (This is why I like Yahoo better. Content is a more stable play.)
Don't get me wrong. I'm not shorting Google. I think the stock will continue to go up as the irrationality mounts. By all means, ride the hell out of it if that is your thing. But, I think the quality of Google's asset base is much lower than most other web companies, because their primary product is still one that needs dramatic improvement. That exposes them to a competitive risk that isn't as much of a concern for Amazon or Ebay or Yahoo.