Google surpasses $2T market cap | Hacker News Reader

Google surpasses $2T market cap

qz.com

85 pointsmrbishalsaha79 comments

Google is doing what the street wants, which is a proxy for shareholders. The increase in ads revenue, the first ever dividends, and the layoffs. These are the tools that the leadership have, and mostly short-term. The long-term innovations haven’t really taken hold. So, this may be the flame burning the brightest before it goes out.

They still have one of the best AI tech now and for the foreseeable future (despite their woke filters) and a decent cloud platform. And of course as you say they have Ads but also Android. I do feel like they could do 100x better but I think they're still relevant innovation wise (and financially obviously).

They certainly have a ton of relevant technology and product. But, much of that hasn’t taken hold — translated into large ever-growing, profitable businesses. Android, Chrome, etc are all mechanisms for their ads business and are not new innovations. AI is definitely new, but the jury is out.

While the cloud is an asset, I believe that it’s not innovative. Google Cloud is a distant third — they’re largely following. It exists because clouds require a certain scale and completeness, and they have the money to invest. Again, the jury is still out here.

I know Shopify uses GCP.

I'm curious, folks who use GCP, how is it?

There are plenty of customers using Google Cloud. It made $9.6B last quarter, that’s 28% increase from the prior year, and operating margin of 9.4%. In contrast, AWS made $24.2B, with 13% growth, and operating margin of 30%.

The point is that Google is buying the growth, which eventually runs out. While that’s a reasonable business strategy — it’s not the same as innovating a new business.

Bell Labs, HP Labs, IBM, and some other tech companies also had some of the best tech from their times. They couldn't execute good products out of it and eventually fizzled out. Perhaps that's what we are witnessing with Google.

But point is that they are still relevant businesses. IBM is like small country.

They are but they are not flashy, nor interesting, they are not what Google was in the early 2000s-mid 2010s.

And Google is becoming that, another megacorp that found its market (online ads) and will push to serve that as boringly as possible.

People have been saying that about Microsoft for ages but it keeps growing and chugging along. I use a minimum of 7 Google products everyday, they came up with all of the research for LLMs, they have the only self driving car that actually works, run the largest smartphone OS in the world by a mile etc. They’re not going anywhere.

Microsoft has built an Enterprise business that has too many lock-ins (Active Directory, Office specially Excel), that even if they make many missteps the business will keep pumping money, and makes it easy to sell new products to the same audience (Azure/teams). Enterprise companies run very very long even when they decline (IBM/Oracle).

Google's ad business while printing cash is very brittle. Consumer taste can change any day and can cause Google to suddenly look at some big percentage drop. Ad is still the only moneymaker of the company. All the products you listed above are not making money, most money comes via search ads (which Android surely helps to), and that can go the way of Altavista due to several reasons (people moving to chatbots, iOS changing default or allowing new engines, regulators forcing chrome/android to randomize default).

Just because of inflation you would expect more companies to exceed 1 and 2 trillion dollar market caps over time. Their existence is not a problem to be solved. Google search, maps, email, books, scholar etc. are wonderful services that have created immense value.

2 trillion dollars worth of value, though? Doubtful.

Market cap has almost nothing to do with value already created. It’s the consensus guess at the discounted value of future cash flows.

Future cash flows is usually pretty strongly related to the current state of things, but adjusted based on expectations of how it will play out in the future.

I'd be surprised if a non-negligible fraction of investors actually made that calculation. Most buy for other reasons.

Then we have the ginormous index funds who buy when buys are happening.

We just collectively decided that the best thing for society is if everyone just buys stocks for their savings. Either directly or through pension funds. And now we're pretty much stuck with that.

Well, that's not actually the stock price. But it is a rough floor on the stock price.

Meme stocks can get bid up into crazy territory and stay there arbitrarily long. But if a stock goes way below its fundamental value, someone will buy the company at that discount.

Indeed. Because of the price mechanism they don't have to. Provided that some do, of course.

So many ads…

Edit: but it’s so apt. What that valuation is actually showing you is the value of sitting in between people looking for things and people looking to sell things to people looking for things, and turning that position into an ads engine increasingly at the expense of enabling people to find what they are looking for. The valuation goes up to the extent ads are prioritized over just getting out of the way and giving people what they are looking for.

I agree, but isn't that partially because the ads work? If they didn't, ad revenue would stagnate.

I wonder what % is from ads that are straight garbage. AI generated celebrity voices, information on how to get the latest "stimulus" money, marketing schemes involving things like audiobooks or real estate, health scams...

I've noticed an increase in really poor AI generated dubbed video ads, it's an interesting problem, they are not flagging these very well.

Do they have an incentive to stop those ads? They get paid to run them after all.

This is the perpetual problem with scammy advertising - the ad network would lose money if they controlled it, so they don’t try very hard.

Google Earning Q1 2024 [pdf]

https://news.ycombinator.com/item?id=40162354

What's interesting to me are:

- market cap

- random layoffs

- overstaffing

- falling competence

A lot of frictions build in there. I'm curious how it will play out.

I tend to translate market cap for big companies into dollars per person. 8 billion people in the world, so Google expects $250 profit per human being in average to be accurately valued.

That feels high, but what do I know?

> Google expects $250 profit per human being in average to be accurately valued

I don't think your calculation makes sense. You ignored the earnings multiple. Companies are valued at a multiple of yearly earnings. A reasonable multiple is 20, so divide 2 trillion by 20 first, then by 8 billion, and that's $12.50 per person per year. Their current revenues are already over $9 per person per year!

Now consider that in addition to search Google owns the single most widely used consumer operating system and web browser, the largest video site, a growing cloud business, the only alternative to Nvidia silicon for AI that's been deployed at scale, and other stuff like Waymo that has the potential to be enormous (it seems like a winner take all market to me, where the winner essentially owns all ground transportation, and Waymo is in the lead by far), plus still the largest AI research program in the world (even if it has had trouble turning that into products so far).

Companies’ intrinsic value is the present value of the future cash flows they’ll generate. One way to guess at this is some multiple of current earnings based on what you think growth possibilities and risks are.

google's revenue is 300b, the mayan calendar ends in 6 years, do the math + that's about 2 trillion

I never said yearly. I said total profits. If you want to be technical about it, sum of discounted future profits.

People in this thread are also confusing revenue, gross income, and net income.

People in this thread are also giving other companies, but those may be overvalued as well. Companies have a finite (if long) lifespan. If market cap is more than total discounted future income, it's overvalued. If it's less, it's undervalued. It's just a question of when the market corrects.

You didn't say "total profits", you said "profit" which in the context of business financials is traditionally measured quarterly or yearly. Anyway, as I pointed out, they already make $9 per person on Earth per year. If they make that for 20 years without growing at all, that's $180 per person which isn't too far off from your $250. Of course you'll say that's unlikely, to which I agree. Their revenue is currently growing, which I think will continue for a few years at least. It will likely fall someday, but even in that case I think it's not unlikely that they could make your $250 per person in profit before that. And they could make much more in a bull case where they figure out how to leverage their AI stuff.

Of course it's also possible that growth stalls next year, the stock tanks and the company goes under in short order. If you believe that then short the stock, you stand to make a fortune.

If I had infinite dollars and an infinite lifespan, I would. As is, my wallet isn't likely to be able to keep to with an irrational market, and my risk tolerance curve is very conservative.

Unless I hit jackpot, mo shorts for me (in general, not just Google)!

Market cap is not profit

Their P/E is 26. Same as Apple and Meta.

Microsoft is 35.

No idea how this translates to profit, but they're probably extracting revenue from a billion people at this point. I spend something like $150/year on youtube premium + music subscriptions, have spent probably a lifetime total of $300 on media content, and since I use their products a lot I'd guess advertisers are paying them more than $10-20/year for my eyeballs.

I may be ahead of 7.6-7.8 billion people in terms of the total lifetime amount I'll end up funding Google's funnel, but of the portion that spends more than me there's room to spend a lot more (and you're forgetting about people who haven't been born yet who will also be paying money to google one day)

Market cap isn't really an estimation on how much money the company might make anyway, since Google doesn't pay it's shareholders dividends. It's just a way for people to speculate on how much a thing will be worth in the future.

In theory there should be some relationship with current profits, but... did you take a look at Tesla any time in the last couple of years?

> Google doesn't pay it's shareholders dividends

Google just started paying a dividend.

there are ~300-350m companies in the world also.

No company should exist at that size in a society that has a healthy distribution of power and fair competition. These businesses need to be split up ASAP. And if they aren’t, they should be heavily taxed and heavily regulated. If you’re that big and powerful, you are pretty immune to competition since you can eat losses, copy ideas from others, push your services unfairly, bundle things, etc. We need higher taxes and new anti trust laws that actually do something based on size or a lower threshold of market share, even if there’s no evidence of consumer harm. Getting bogged down in lawsuits around old toothless antitrust law is why nothing ever changes.

Also, at that size you’re basically like a government service. Companies like this should be held to standards as if they were publicly owned utilities, on topics like pricing or transparency or free speech or whatever.

Why did Google+ fail, but Reddit succeeded?

Why was it so easy for Duckduckgo to establish itself?

Was was Brave able to take a bit from Chrome, even when Microsoft Edge failed?

Google faces strong competition. Even on its core revenue stream, advertising, Facebook was able to beat it.

It's amazing that you're the third person on this thread to not understand what market cap is.

Market cap refers to size. The comment you are replying to is talking about size

If this were true, Tesla would be (almost two times) ‘bigger’ than any other automaker, but it actually has less than one third the revenue of Toyota. By what measure is TSLA bigger than Toyota?

Market cap obviously /s

Market cap refers to perceived value to shareholders as measured by the stock price, which may or may not have anything to do with the size of the company or the amount of profit that it's making.

But having a large market cap necessarily gives a company a large amount of influence and power because they can sell stock to buy things.

This is not how it works at all. Companies do not sell stock except in specific circumstances that are tightly regulated. Often they don't sell stock at all once they're public, because that increases the number of shares outstanding, causing the share value to drop, something investors generally do not like. I don't know the last time Google sold stock, but it would have been long ago because you only need to do this when you want to raise cash that you cannot get through operations, and Google has had billions of dollars in the bank for many years now.

Publicly traded companies create new stock, constantly, in the form of RSUs.

It is true that they aren’t technically selling the stock, they’re diluting existing stock and then using the created stock as compensation, but this seems like an unimportant distinction.

This does grant the company some power. Not obvious to me that power is nefarious, but it’s quite real.

The stock they use for this is not created constantly, it's created in a block set aside for that purpose by board action. Companies do this relatively infrequently.

Some companies sell stock regularly and all the big tech ones constantly use it as payment for employees.

You're confused. It refers to the price of all available shares. We don't say "The size of Meta shrunk in one day by 20%" because the share price fluctuated. That would be retarded. No one refers to the 'size' of a company is referring to market cap.

Your presumtion of others' inability to understand is making you confused. No one said market cap equals size of a company. But market cap does measure financial power if we talk about percentage of shares owned. Anyway no single private entity should have that amount of market cap.

“medo-bear 2 hours ago | parent | next [–]

Market cap refers to size“

Short term memory isn’t great?

Market cap refers to size. Whats confusing you ?

> No one refers to the 'size' of a company is referring to market cap

Market cap is certainly used to evaluate the size of a company.

https://www.investopedia.com/terms/m/marketcapitalization.as...

Nothing in the linked article says anything about market cap representing the “size” of a company. It talks about typical market caps of various size companies, but it never claimed it was bidirectional relationship. It seems you just googled market can and size and decided to link it. Unbelievable.

The article lists it as one of 3 key takeaways:

    Market cap is used to determine a company's size, and then compare the company's financial performance to other companies of various sizes.

But it doesn’t actually say that in the article

Maybe this will help you: https://abc.duolingo.com/

> No one refers to the 'size' of a company is referring to market cap.

Saying a company is "the largest by market cap" is very common. Just saying "largest" on its own is ambiguous. "Largest by revenue" is also very common.

"Biggest by market cap" -- https://www.investopedia.com/biggest-companies-in-the-world-...

"Microsoft is the largest company in the world, with a market cap of $3.13 trillion." -- https://www.fool.com/research/largest-companies-by-market-ca...

I think "large" usually means revenue, but it can mean market cap too.

Tax them on revenue. And introduce due process and minimum expectations for services - e.g. if you mess around with banks, you can get a basic account just to survive with. If you mess with Google, you can lose your lifetime worth of emails, contacts, photos, etc.

They are taxed on revenue.

In which jurisdictions?

The Google tax is still going after profits: https://www.investopedia.com/terms/g/google-tax.asp

This merely encourages more creativity in accounting.

> In which jurisdictions?

The jurisdictions that have sales tax. Sales are revenue.

I bet there will be short peaks in the next years. Basically, ads declining and we discover they are a kind of scam for most companies (we don't know the real algorithm to handle the inventory) and/or legal actions around the world (e.g. Europe).

I can't wait to use Google's own research on AI for content identification to strip out all ads forever.

Even inline ads and submarine / subliminal advertising can be detected and excised.

The open source LLMs are working fine for image recognition. We have used the technology internally. For example, someone took a selfie in front of a mirror and the description as a result of the prompt also recognized that there was a mirror image there.

> its announcement of a first-ever cash dividend of 20 cents per share

Ok so there has never been a dividend payment so far, so all the money investors get out from Google is from new investors that get in?

Is that even allowed?

All the money investors have gotten from Google has been in capital gains (i.e. buying low, selling high). There's nothing illegal or nefarious about that. In fact, it's extremely common, most stock investors gains will be from the underlying equity increasing in value. Dividends are just distributions that the company pays from it's available cash.

No, the money for the dividend comes from Google's profits. Google is a very profitable company.

Our national debt is so much that we need to give half a Google to China each year

China owns < half a Google of US debt (i.e. ~0.84T). I think you conflated that with yearly debt payments instead.

Other nations holding us debt is a natural result of both the trade deficit and the USD being the world reserve currency. There is nothing really special or sinister about china holding US bonds.

To be fair, debt isn't an indicator of anything but credit being used to build something now (aka an investment in the future).

So we should be focusing on what that debt is being used to fund, more than the debt itself. In my opinion at least.

Overall I agree though, the debt is massive and isn't actually being used to better anything within the USA.

The interest on that debt will become debilitating unless we inflate away our currency.

The average inflation rate over the last 50 years is higher than the debt interest rate already so it won't really "become" anything.

China only owns about $800 billion is US treasuries, so a one-time payment of 40% of Google should do.

Layoffs are paying off, congratulations. I guess.

Trading the core of the business (or whatever is left of it - ie, "do no evil") in exchange for short term gains.

Maybe we will see more "Project Nimbus" initiatives. Maybe a collaboration with North Korean, or Russian governments. Maybe this time they will sell out for $10B+ or more.

So a company can make more than Australia but not be a monopoly?

[1] https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(no...

GDP is similar to revenue, not to market cap. Google's revenue is significantly lower than the GDP of Australia.

Actually no:

Australia GDP: 1.7T

Google annual revenue: 0.3T

Australia effectively creates an entire Google every single year.

Not that it's very relevant, but your comment made me wonder: for the purpose of making these comparisons, does it make more sense to compare GDP to a company's revenue or earnings? Why?

Reply on news.ycombinator.com