Google’s Bid for Benevolence
Over the last few months, I’ve been trying to figure out which of the tech stocks I was most bullish on. We’re in a massive period of change right now, and it isn’t easy to tell what the future of privacy law, anti-trust regulations, and potential disruption will bring.
As I wrote about a few days ago, Facebook seems like it may come under fire from the government soon. Amazon is also in the cross hairs of several governments for anti-competitive practices, but is on a more inevitable path of growth. I see Netflix trouncing Apple in the content division, as they can profitably outbid almost anyone for new properties.
The last big question is Google. They just held their annual I/O conference for developers and there was a notable shift in where their strategy seems to be going. Rather than merely being an information aggregator and search engine, they are beginning to offer services that employ AI (and our information) to get more done.
Following a week where many were obsessing over Facebook’s incredible power and access to our information, Google took a very different approach. They didn’t hide it or downplay it. Instead, they said it was a good thing and that they could best serve the public at large by taking our information and putting it to a higher use.
Google’s New Positioning
Among all this tech-talk is the higher level question of whether technology will end up serving us or destroying us. The answer is somewhere in the middle, as it depends upon who is wielding the technology and what is done with it. Google is trying to make the argument that they are the ones most capable of doing good with our information, and that we should trust them.
Implicit in everything Google presented at this keynote is the idea they would need access to your data… but you should be happy to do so for the benefits. Rather than being told your data would be used to serve you better targeted ads, this is highly refreshing to hear.
Much of the keynote address went on to show all the different ways Google was going to help improve the health, wealth, and relationships of its users. In their words:
“We feel so privileged to be developing products for billions of users, and with that scale comes a deep sense of responsibility to create things that improve people’s lives.”
This is a bit grandiose, but as they showed with one piece of software that would help illiterate people navigate the web, they are making heavy inroads on progress.
The Investment Case
But how does this affect the stock price? Many of the most desirable customers for advertisers are already on the network, and this just helps Google obtain more of their information. But at the same time, Google is incurring a fixed cost in the development of all this software and AI. It will cost the same whether they roll it out to the 1% in the U.S. or the entire world. Therefore, it is in their best interest to serve as many people as possible.
Google’s stock is down almost $150 since the beginning of May, but it is starting to look like an appealing buy based on their ability to bring in new customers over the next decade. Growth seems assured, and they aren’t strategically under fire in the same way that Amazon or Facebook are. This makes them feel like the safe bet for a buy, unless the privacy winds shift in the next five years (almost impossible at this point).
Featured image courtesy of Shutterstock. Chart via Yahoo Finance.