The growing short case on Facebook and Google
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At least Google is desperately trying to diversify away from ads only. Facebook doesn't. And Facebook has even bigger problem: their ads are a distraction, and younger people are getting more and more adapt at subconsciously ignoring this distraction. I've seen young kids automatically reaching for the the skip ad button in YouTube. I would argue that in 10 to 20 years, most of humanity will be immune to forced advertisements.
You could hire a top tier genius computer programmer to check out groceries at the supermarket, and he could become the best supermarket checkout clerk in the world — but it's more efficient for him to be programming computers and leaving the grocery job to someone else, who isn't even particularly good at it, just as an entry level job.
Google's simplest tasks may be more important than many other companies' complex tasks, but in the long term, wasting capital (including human capital) by using it at a fraction of its potential is generally a losing game, for society and for the capitalist.
That said, it really hasn't helped Google much to expand their business. GSuite is probably the clearest mostly organic new area--and it's pretty good. Google Cloud somewhat although, like Java for Sun, Kubernetes will probably end up making other companies a lot more money than it will for Google. Hence the current spat over Istio. Certainly lots of things haven't gone anywhere. Anyone want to lay long odds on Waymo being around in 10 years?
And it's probably not healthy for the tech industry. Yes, some will go for the startup lottery ticket for reasons of passion or naivete. And others are just less driven by money. But having many of the notionally best and brightest spending years at Google mostly because they'll pay such large wads of cash to even fresh grads means a lot of companies won't even try to compete for them.
Maybe it's just that Google understands the value of testing in a way that the other companies don't.
I would think though GSuite/Chromebooks would be a success story because of the education market.
Nonetheless, billion dollar opportunities don't grow on trees. They have tons of neighboring area to grow into -- ADFS, directory, IdP, etc.
On the investment front, we had equity positions in Google for a while, but these days I see a lot more upside in Microsoft equity positions than Google.
Facebook - yeah it’s just a social media company at its core, but before mobile really took off, it made money as a platform for games and shortly after its IPO, everyone thought it was doomed and didn’t get mobile. Between their strong pivot into mobile ads and their very smart acquisitions. Now FB has four platforms - FB, Instagram, Messenger, and WhatsApp that all serve different demographics.
Apple. During the time that Google has existed, Apple has gone from making most of its money selling computers, to music players and a music store, phones, and now depending on the quarter, phone sales are less than 50% of revenue. Heck the watch and AirPods are each considered to be larger businesses than the iPods were at its peak.
Would Google ever invest in a product that only made up 10% of its revenue?
Amazon: (Disclaimer: I work at Amazon). Went from a retail store selling its own stuff, to a marketplace, smart speakers, AWS, Amazon Prime Video, and did a lot of successful acquisitions.
Microsoft - It’s basically removed it’s focus from Windows to Azure, Office in every imaginable platform, Sql Server even runs on Linux now, and has a successful gaming division.
Of course a product doesn’t have to be profitable on its own if you’re selling razor blades at a loss to sell razors. But neither product is doing that.
The console market itself is tiny in the grand scheme of things. The PS4 has only sold 102 million units since inception. The VR market won’t even be that big. In contrast, Apple alone sells that many phones over two quarters
Hardware sales are anyhow not quite as important as the software that runs on the hardware. The console market might be small, but the gaming market is absolutely massive. Facebook doesn't have to make money off Oculus hardware of it can, like Sony and Microsoft, get people into the ecosystem where $60 games are the norm and microstransactions total billions in revenue.
Doesn't sound particularly feasible at the moment honestly. But you never know. I'm not writing it off at least - the people who do like VR think it's the greatest thing ever created.
I was largely bought into the Second Life hype briefly. I certainly lived through all the brands setting up camp in Second Life.
But I'm skeptical VR was the missing ingredient. Most people don't want immersion most of the time. e.g. people hyping up VR for collaboration. I'm actually fine with video calls at least some of the time. But you're not getting me to wear a VR headset hours a day. Not happening.
In fact, the only 2 areas I think Google has really underperformed are:
1. The cloud. I'm a big fan of GCP, and I think in many ways it's easier to use than AWS, but Google still doesn't understand enterprise support and what big business customers value. I think a lot of this is just because Google doesn't have customer support in their DNA, and they had so much custom tech for so long (most big businesses want to use a relational DB, not Datastore).
2. Business applications. I feel like Sheets and Doc should have taken a much bigger chunk out of MS Office revenue than they have, but again enterprise support just isn't in their culture and hence G Suite lags.
Youtube is still thought you be at best slightly above break even in terms of profitability.
What happens to the ad network between ad blocking and businesses keep realizing that you can do better targeting with Facebook?
I can guarantee that being in control of the world's dominant mobile OS, and all the default Google search engine installs, Google Maps installs, etc. that entails, is worth much more in terms of mobile ad revenue than any directly-attributed OS revenue.
Being in control of the major mobile OS when the most affluent customers are on iOS is a Pyrrhic victory. There is a reason that Google is willing to pay Apple more than $8 billion dollars when it only has a 13% global marketshare. Advertisers care much more about reaching people who are willing to pay $650 for a device than people who are paying less than $250.
On top of that Google has a rev share with OEMs for ads.
Google is non existent in China.
I work remotely on the consulting side. It’s about the same work life balance as I’ve had my entire career. It’s actually better than my last two jobs. At those, I had to be the “adult supervision” trying to overall their processes while juggling releasing a product and for my last job, trying to figure out ways to cut costs and increase efficiencies post Covid. I’m just a much better paid peon now.
My experimentations causing a large AWS bill is not exactly a problem now....
Does anyone not? Anyone who doesn't run uBlock Origin, I mean.
Hell, by the early 2000s I automatically tuned out anything banner-shaped to the point where it sometimes took a while to notice menus if they looked too much like a banner.
I try to do my bit to pay for stuff I like if I can get it without ads. What really annoys me is stuff I pay for that still has ads.
However ads are not going away, for example although I pay for YT premium and run ublock origin, there are plenty of ads within the video itself . if you have browsed education videos on YT you will know brands like CuriosityStream, nebula, nordVPN, brilliant, skillshare. etc.
Similar and far worse practices happen in other mediums, with influencers on instagram and sponsored posts masquerading as neutral content etc.
It is becoming lot harder to filter it out, lesser and lesser ads are effective we will see more of this .
Well, youtube-dl is technically not the same thing as uBlock Origin, right?
Me. Because if I like the content, I believe that letting the ad run is the very least I can do to support the person who created it and encourage them to create more content. I'm not a leech.
He got out of FB claiming the company is shit ( no arguments). But his new ventures and Twitter commentary is at odds with his position: Social Capital seems like a farcical take compared with the likes of Gates, Buffett who have actually proven with their actions not empty egocentric Twitter threads.
Classic VC turned Savior mentality: except underneath it all these people are regular 'get lucky' hedge fund greedy hacks.
As TikTok and other companies become more popular, you'll see the US government more protective of FB and Google. An abusive duopoly with Western alignment is better than a social media monopoly from China. The continued rise of TikTok actually simultaneously reduces government's will to act on big US tech.
Neither FB or Google are in China; so the Chinese government's ability to hurt those companies are limited.
social media platforms are extremely durable until the next hot new thing comes along.
There is a new generation you need to engage every ~5 years or so, and they see facebook as the platform to talk with grandma.
FB made some genius acquisitions with instagram and whatsapp, but eventually they are going to fail to acquire the challenger, and when that happens the fall can be swift.
https://ourworldindata.org/rise-of-social-media
Facebook surpassed MySpace in monthly user count by April 2008. MySpace hit its peak in December 2008. This wasn't a "migration" from MySpace to Facebook. It was Facebook out growing MySpace.
But that doesn't necessarily mean it could happen again.
"The percentage of US adults who use social media increased from 5% in 2005 to 79% in 2019."
Facebook grew at a time when social media usage was also growing. We don't have a huge, untapped pool of users from which to fuel a "Facebook killer". There was also a significant difference in how the sites we originally used, so there was interest from a lot of early users in using both.
My feeling is that any site that might eventually supplant Facebook as the dominant social media force would need to grow in an underserved market before expanding into the general market, and do it in such a way that Facebook doesn't notice and come crush them first.
What strikes me is that the peak year for MySpace and the year Facebook surpassed it was also the year that smartphones started to take off. Facebook, being the far "simpler" site, would have been much more usable in early smartphone browsers. And smartphones were a huge part of the growth of social media. So it suggests that not only does a Facebook competitor need an untapped market to serve, it needs a platform on which it can create a significantly better experience than what Facebook can do.
Unfortunately, Facebook is ahead of the game on this issue. Why do you think they spend so much money on Oculus and VR? There are leaked memos from Zuckerberg that explicitly spell out this strategy. They are taking over the platform early to avoid ceding the space to a future competitor.
Sure, they could be displaced by a better search engine, but that's a whole different kettle of fish.
Most people probably don't even have a conception of what search engine is, and that it's not just a part of the browser or their phone, but it's an independent service.
I don't see how that's remotely possible. The capital costs are just too high. Currently there is only one other formidable English language search engine (Bing - all the other search sites like DuckDuckGo use Bing), and it's been a distant also-ran for over a decade now.
If anyone has any plausible scenario where Google looses their search supremacy, would love to hear it.
(1) social networks provide better basis on which to give answers/results to users, so FB “replaces” google.
(2) advances in deep learning make googles secret sauce not so critical, and lots of competitors provide good enough search results (and VC funding makes the build out of the massive data enters possible (I.e. the u er/Lyft scenario)
Side question: is google’s dominance really built on search these days? If they shut down the search engine, would it have a significant effect on their bottom line?
Is that a serious question?
This is exactly why I sold my Facebook shares a few months ago. The next Instagram might not sell to Facebook so cheaply, or the sale might well be blocked by regulators.
Having said that, I still have a large position in Twitter because the brand seems a lot more durable.
My point is that digital data is a commodity that has been found and being excavated at high margins and will be protected by their countries, just because some other countries are trying to do the same thing.
So while California and the European Union are making it more expensive to do this, DC and Beijing are only protecting the golden goose.
Legislative changes and protections that raise the cost around monetizing user data can debilitate them heavily. Just watch for those. But on autopilot these companies will be fine as they convert quarterly revenue into a big cash warchest instead of reinvestment fuel.
Microsoft (or Apple) is America's Saudi Aramco, if we're speaking of important & highly profitable corporations.
They're vastly more profitable than Google or Facebook, and far more sustainable (in terms of market position, regulation, anti-trust, etc). In fact, Microsoft ($52b) will soon have as much operating income as Google ($35b) and Facebook ($26b) combined, and will soon surpass Apple ($65b; which has barely grown its operating income in four years and has weak prospects for income growth).
To make matters worse, Google is stagnating and losing their hold on the ad market (while being pursued for anti-trust). Google also suddenly lost their leadership, Larry & Sergey cast Alphabet adrift after creating that mess, said good luck and adieu (to run & hide from the legal tsunami). Microsoft by contrast is booming, has a solid regulatory context, and has one of the world's best CEOs at the helm.
Here is Microsoft's income growth: $22b -> $35b -> $43b -> $52b
If I were a nation, I'd rather own Microsoft than Aramco, much less Google & Facebook. Easy choice.
Aramco has a collapsed future and they're trapped in low oil price hell indefinitely. Microsoft is probably going to $75-$80 billion per year in operating income in five years, on their way to $100 billion this decade. As far as individual corporate entities goes, nothing like the Microsoft profit machine has ever existed before (Apple comes the closest, and they're stuck in a zero growth smartphone market). Apple's cost of revenue is 61.8% of sales; Microsoft's cost of revenue is 31.7% of sales, their operating income margin is a wild 37.4% (given their scale it's something beyond extraordinary).
From a quick search, I found the "Forbes Global 2000" list of the most profitable business sectors (in 2019). From the top, in trillions:
- Oil and gas - 4.797
- Technology and communication - 4.726
- Banking - 4.424
- Retailing - 3.814
- Automotive - 2.847
Source: https://www.nsenergybusiness.com/news/oil-gas-revenue-forbes...
Seeing how Microsoft accounts for only a portion of the second most profitable sector, I'd imagine the whole lot of top tech companies in the U.S. would be considered essential for national interest.
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Then I found "The World's 10 Most Profitable Companies" (2019).
- Saudi Aramco - $110.9 billion
- Apple - $59.5 billion
- Industrial & Commercial Bank of China - $45 billion
- Samsung Electronics - $39.8 billion
- China Construction Bank - $38.4 billion
- JPMorgan Chase & Co. - $32.4 billion
- Alphabet - $30.7 billion
- Agricultural Bank of China - $30.6 billion
- Bank of America Corp. - $28.1 billion
- Bank of China - $27.2 billion
From their summary:
> Saudi Aramco is by far the world's most profitable company.
> Most of the global leaders in profits are based outside the U.S.
> State-owned Chinese banks are among the profit leaders
..So I guess Saudi Aramco is still America's Saudi Aramco.
Its insane what is possible in the commodities market.
And to think there are so many players that aren't publicly traded, and it has been this way for a century? There are some extremely wealthy people out there we have no clue about.
At what point does a company get to say "hey, we probably don't need to grow income much more"? At $65b Apple would qualify as the 72nd highest GDP in the world if it were a country[1], my understanding is even now they have more income than they can feasibly spend. It just doesn't make sense to me that they're getting penalised for not growing their income at this point.
Executives and the board negotiate stretch goals of stock based compensation for themselves based on marketcap or revenue targets.
It is inconsequential for them to create and sell these shares as the market keeps absorbing it at any marketcap.
The rest of the shareholders like the idea of capital returned back to them no matter what price they bought in at.
And finally the legal system will support private litigation regarding the CEO being expected to do things that make the most returns for shareholders.
So if you have a whole marketplace of people trying to navigate this incentive structure, there is a selective evolution towards a few that create this growth machine successfully. And when they dont share prices will fall thats it.
A series of tweets telling me why I should short... Yeh, right! Calling my banker on a Sunday.
Director at BigTechCo, when asked why that happens: "That's actually by design. We want internal competition. We can afford to spend 2 or 3x on building that product. We can't afford to have a competitor build it better."
And if you let these all go to market, you risk eroding user trust (think Google and messaging products). Confusing your users is not a good thing.
That said, the high level point is even without the M&A lever, these companies can still succeed by doing things that seem wasteful. FB is a good example with Snap. They didn't have the M&A lever (for different reasons in that case), but they just built Stories into Instagram, WhatsApp, and Messenger. If you were willing to spend billions on M&A you can just spend them internally. And you don't even need to build a free-market best product, because you have a brand and user base that startups don't.
In any case, I do hope that alone isn't enough to keep big companies entrenched.
Also hi Scott!
People aren't stupid. If one team is simply failing to deliver, then the internal competition is a hedge on that.
I mean, (just to show how confusing it is) I sorta thought Hangouts had already become Meet after they made Meet available to consumers. And it doesn't feel like Duo ever had much traction.
Frankly I don't believe that an explicit ethos of internal competition is really what drives it. That might be how people at the top explain it, but it's really driven from the bottom up by dev teams who want to launch something in order to get promoted.
(Disclosure: I work for Google speaking only for myself)
> BigTech has a huge yearly R&D budget. In fact, with two years’ worth of R&D, BigTech could recreate the Apollo program. But they haven’t. Why? Incumbency’s biggest drawbacks are lack of creativity, sloth, internecine politics and waste.
Think for example all Alphabet products that came from acquisitions: Youtube, Picasa, Android, DoubleClick, reCAPTCHA, ITA Software, SageTV, Meebo, Waze,DeepMind, Fitbit...
They have also bought something like 50 ad tech companies and 20-30 web search companies.
Why? One could argue that advances in AI and Quantum Computing are at least as significant as landing on the moon, and of more value. Big tech investment has pushed the field forward significantly.
How can we trust economic judgement from someone who uses a project which was only approved due to political grandstanding, as an example of successful corporate direction?
If anything, FB and GOOG will be strengthened by US economic protectionism and assault on China. They just have to continue navigating the political mindefield outside the US markets.
Apple is never going to make a $25 smart phone like you can get in India.
"Consumer" tech hasn't improved at all in my estimation since about 2002. The hardware has gotten better and the software has gotten more bloated, but a modern gadget can do roughly zero things that a gadget from 2002 couldn't.
In 2020 you can buy a second generation iPhone SE for €489, with a 1334x750 screen (at >6x pixel density) and 12MP camera.
These are not roughly equivalent pieces of hardware, and the software they run differs immensely. MMS is not Instagram.
With respect to the "Apollo Program" metaphor — Google's X projects and other projects (like Waymo) are formidable, and may lead to serious breakthroughs and changes to society. The narrative that FB/Google are inefficient is questionable and is offered without coherent context; it would be helpful to compare them, say, to Genentech, Merck, Lockheed Martin and other large companies with serious R&D budgets, which have survived and are doing okay, despite not being as nimble as, say, the occasional dark horse like SpaceX (with respect to Lockheed Martin).
Yes, Google and Facebook may not loom like the giants they were. But there is a good chance they will continue to thrive. Another example: Microsoft is doing fine, despite not being the giant it was in the 90s.
Disclaimer: I am in GOOGL 2020-Jul-17 1580 Calls @ 8.20 and it is currently at $12.00 and I am looking for $1620 targets.
I used to have gsuite for my personal e-mail, file/photo and office stuff. I’ve been using the cheapest office365 business plan for a year and a couple of months now. Not because I was concerned about privacy, but because google made it harder for me to use their services as a private consumer on a business plan. On the flip side of this is my job in the public sector of Europe, where we’re using more and more cloud solutions, but don’t use google cloud or gsuite because of their poor business-to-business support and failure to work with EU legislation.
Privately google search used to be the best in my native language, but these days I find myself doing !g less and less on DuckDuckGo, again not really because of privacy concerns but because the whole first page of my google search results are commercials for places that I’m not going to use. Just try searching for something baby related on google and see what happens. We have some very good public health sites with tons of info, run by our government, first results on DDG but burrowed deep below a heap of advertisements on google. Professionally we’re moving to the new Edge rather than Chrome because it’s easier for IT operations and support to control it, even though the google enterprise tools aren’t bad, they are just not as good.
All of this is completely anecdotal of course, but I’m always worried about investments into companies that don’t make stuff I’d personally or professionally want to use. Then again, most of my investments like in green energy companies, so I’m probably just too conservative for tech investments and you likely shouldn’t take my advice.
Costs about the same, but you pay for a year instead of a month at a time.
OneDrive isn’t really better on iOS than google drive and google photos, even with the weird way google photos work on gsuite, but stuff like word and one note are really nice compared to what you get at google docs. The change was mainly because using gsuite privately turned out to be such a hassle for photos.
Of course we're discussing anecdotal evidences here, and Google searches have deteriorated for me, too, but for a lot of things DuckDuckGo fails to find the most relevant results and I tend to use !g quite often (~20% of the time). This might be due to SEO fighting making Googles results less relevant, but DDG is not steeled against this either.
I agree on your general point, though; Google has lost a lot of competitive headway. On the other hand, however, it still has a lot of market penetration: YouTube is the largest video platform by far, Google search is "the internet" to a lot of people and while Android is technically a free OS, it practically belongs to Google. Also, there's still gmail, and for people to take the effort of switching mails takes quite some convincing.
You never use youtube or google analytics?
Remember how there was a time where everyone here said that Microsoft's products are complete trash, Windows 8 is a failure, the company is doomed to failure and no self-respecting person would ever use their products and would never invest in it? And the stock kept growing and growing and growing.
Investing based on your personal product usage is about as sensible as using Las Vegas casinos as a way of increasing your wealth.
People don’t buy Windows. OEMs and to a lesser extent big enterprise.
Apple was almost doomed because of bad strategy. Jobs was a once in a lifetime event.
I will note that there is a difference between what everyone says, and what everyone does. Microsoft may have taken a lot of heat over the years, but it’s remained one of the best tech partners to non-tech enterprise corporations and organisations for decades.
Not sure why Netflix makes the list. The other five are the largest US companies by market cap (order varies by day). Netflix is closer to 20th.
Despite years of trying, they are still a one trick pony - advertising - where 90% of their revenue comes from.
I am not sure the best way to articulate the specific names for these, but I generally categorize our tech companies into 2 buckets when viewing this through the lens of an investor:
Bucket A: Facebook, Google, Twitter, Snap, Pinterest, Netflix, et. al.
Bucket B: Microsoft, Amazon, Apple, Intel, AMD, et. al.
Bucket A seems to be the riskiest to me because there are virtually no barriers to entry on the markets and products these companies target. Sure, Google & Facebook have some hardware/cloud hosting angles, but the companies in Bucket B make those revenue streams pale in comparison. E.g. AWS/Azure vs GCP, Microsoft Surface vs Oculus Rift, Macbook vs Pixelbook, iPhone vs anything, etc.
Bucket B contains all of the companies that I would feel comfortable buying and holding long. These companies have a deep pool of products, IP and larger barriers to entry for their markets. For instance, if someone came along and made some change to the world where Microsoft no longer makes any money off of advertising, they would be able to proceed without much difficulty. If someone chopped Google's ad revenue stream, I think there would be a serious problem for the company.
Maintaining a short position also costs money, so this is a further complication. As a retail investor, I don't know if there are any instruments for shorting these big tech co's. I'm guessing that you can do it on interactive brokers (for example) if you post enough margin. DYOR.
EDIT: here's a better idea. Just buy apple and/or half a dozen other big tech stocks that you like!
A systematic analysis would probably get published in a prestige finance journal, whatever it concluded.
[1] https://mattstoller.substack.com/p/break-ups-and-stock-price...
They still have some growth left as they optimize their workforce for WFH and cut costs elsewhere. Worst case they can still push their ad delivery in more “annoying” ways, but that’s more of a break glass in case of emergency situation.
It’s also unclear how damaging their antitrust result will be.
Geopolitically, there is an argument there for, say, Europe or Asian countries to ban Google/Facebook/whatever and choke off the revenue leaving their country. That is a pretty decent short-term nationalist argue to try and avoid large amounts of money leaving the country for foreign climes. The Chinese wall-off-the-internet strategy hasn't obviously failed them, and it gave them a bunch of serious technology contenders.
It isn't a problem for this week, but that perspective raises longer-term questions about what the risks are to Google's and Facebook's business models of government intervention.
From a strategic point of view, India should be allied with the US as India is quite naturally at odds with China.
Besides geopolitics might shift quite fast. If, and that's a gigantic if, China lets go of is habit of looking at a map and declaring "yeah, that region is ours!", or Pakistan gets rid of its shadow deep state (that'd be ISI + military) India could have way better cooperation with them than it had ever had with USA, or will ever have. This again, obviously, is hypothetical.
I remember reading about an incident when the US sold a lot of fighter jets to Pakistan, and decided after collecting payment not to deliver. Probably that was about when the relationship went sour?
Imagine how those premises apply in covid-remote-enterprise world and any existing major player built on the foundations of on-prem corporate function and real estate ... especially the inner-city & inner-building support businesses (food/beverage, commute, telecom, hotel).
Im more inclined to think large tech companies are prone to further growth here.
Assume their thesis is true. How would you short it? What's some real figures and returns if true.
I'm not sure I even understand the bet/prediction.
Is the bet it will drop in the next 5 years and drop lower than now and then stay lower until the 5 year mark, then we profit? How much do we profit to investment?
Saying there will be a substantial fall sometime in the next 5 years seems to me still hard to profit from, but I don't know the numbers.
Another method might be to sell calls or call spreads, date it out a few years and hope the underlying doesn't rise too much.
The "Market Can Remain Irrational Longer Than You Can Remain Solvent" comes to mind, no doubt one day they'll crash but until then...
The videos are also very short compared to YouTube and to have a new video play is as simple as a swipe down.
I don't have much experience with Instagram, but Instagram doesn't seem to have the memetic component. It's more just traditional social media. Users don't really build off of other users content as much.
The format also makes the content universal. Since there’s just music, there’s no language barrier for consuming the content. Certainly this helped to get traction on smaller markets.
Also it is addictive. Short videos, visual and aural stimuli which you control by clicking to next or liking. Checking who liked your videos. Very much like slot machines in casino.
And an utter disregard for traditional business mores
Fighting the fed in this environment though? Not a chance.
Maybe I'm holding it wrong, but I find retweets of threads extremely an extremely unreliable way to find my way back to the actual thread.
This particular link works, but it's still very a very annoying form to read it.
That said: Shorting these companies, that OP admits have huge R&D budgets, is a bet that they won't invent something new. Or that they will be taken over by something that does.
With a 10 digit R&D budget you can afford to be second mover.
In the last 20 years, has GOOG invented? Wow, yes. Question is do you think the past 2 years (or whatever) is a better predictor of next 5 years than the last 20 years was?
I dunno. And saying you do (especially when shorting) is saying you know better than the market, which is not always wrong, but it does have some arrogance in it.
the real question is: is the ad model overvalued?
I think so for the following reasons: ad blockers, users getting desensitized to ads, diminishing returns of the amount of data one needs on a user to sell.
I think OP has the right conclusion but the wrong reasons.
what do you think?
Shorting GOOG is betting not only that ads will decrease long term, but also that the other fields won't increase.
Yes, I realize even cloud has a long way to go, revenue wise, compared to ads. But on the other hands ads has a long way to fall. And public cloud (including Google's cloud) is still growing exponentially.
In other words: I have no reason to think I know better than the invisible hand of the market.
That's GOOG. FB I've not looked into as much.
I don't understand how anyone can talk any more about the market having mystical powers after what we've seen in the past few months.
If the market was priced correctly in late February, and now that it's regained almost all it lost, how could it be priced correctly in late March at 1/3 lower? And if you swallow that, how is it that it went lower in a basically linear fashion over a month rather than instantly as whatever information was absorbed got out?
This really is bugging me as an "emperor's new clothes" situation, you can argue any which way on which is the right price, but how can you believe for an instant that they are all correct, reflecting all available information at all times?