Google's (GOOG) stock price has been rising in September but for two odd days. It closed the market yesterday at $477.54. The stock could breach $500 soon. Why are the investors so upbeat about this stock?
Key positives driving up the stock
Flip revenue-sharing agreements
About three dozen publications including The New York Times, the Atlantic, Newsweek and others -- have signed up for the Fast Flip revenue-sharing agreements with Google.
Fast flip is about recreating the print media experience online. Once you click on an article Fast Flip lets you flip through the pages as if you were flipping through a traditional print magazine or newspaper. Google hopes fast flip will attract more readers and help its partner publishers' transition more smoothly to delivering information over the Internet.
Users who visit the Fast Flip site are greeted with large thumbnail images of various articles sorted by their source, topic, or current popularity. Presenting fewer elements reduces the number of opportunities for generating revenue on a single page, but enabling users to quickly browse from page to page, and hopefully keeping the user's attention longer in the process, has the potential to yield more ad revenue overall. The benefit to the publishers participating in Fast Flip is that they get to share that revenue. The publications that signed up share flip revenue by Click-through rate (CTR) system. CTR is a system of measuring an online advertisement, coming up with a percentage of the number of clicks on an ad compared to the number of unique viewers. More publishers are expected to sign-up for flip revenue-sharing agreement.
Acquisition of On2 Technologies
Google (NSDQ: GOOG) is reportedly buying On2 Technologies (NYSE: ONT) in a stock deal valued at $106.5 million. This relatively small acquisition could have a big impact on video quality and delivery for Google (NSDQ: GOOG). Acquisition price seems cheap as it doesn't even double the $58.4 million On2 paid for Finnish mobile video tech firm Hantro in 2007.
On2 Technologies, the Clifton Park, N.Y.-based video compression developer produces video compression solutions for Adobe (NSDQ: ADBE) Flash Player, Web2.0, VoIP, mobile video and embedded devices. Clients include Adobe, Nokia (NYSE: NOK), Skype, Move Networks and Brightcove. The deal is subject to On2 shareholder and regulatory approval is scheduled to close in Q4. On2 Interim CEO Matt Frost said the company will continue to develop and sell products during the transition.
Google exec Sundar Pichai was vague in the announcement, saying that "high-quality video compression technology should be a part of the web platform" and On2 will help further goal of innovation in video quality on the web.
Browser market share likely to gain traction
With a market share of 2.8%, currently, Google is lagging at a distant no 4 in the browser market dominated by Microsoft. Google has rolled out a new version of its Chrome Web browser and a version of the Mac browser for mainstream users and hopes to double its market share soon. Within three years of Chrome launch Google hopes to gain a market share of 10%.
Google Public Sector is likely to improve government liaison and may be revenues
Taking a cue from U.S. Government's Apps.gov, Google is also launching apps designed specifically for the public sector. The new product, Google Public Sector, is essentially a directory and information site that helps city, state, and national government agencies and organizations coordinate, promote, and work more efficiently. The launch of this new product could help the company improve its liaison with local governments and possibly enhance revenue generating potential as well.
Currently, the stock is trading at $477.54 with a P/E of 33.13. The company is expected to end 2009 with an EPS of $18.98. Even if the P/E falls to 26.4, the stock should be trading at $501 by end 2009.
