Jeff Bezos once said “Treat Google like a mountain. You can climb the mountain, but you can’t move it.”
He said this because of how powerful Google’s moat was against its search engine competitors like Bing. His approach to Google’s moat still holds true for the next 20+ years against other search engines
However indirectly the moat can be threatened without a competeting search engine.
For instance Meta has competed against so many social media sites like Tumblr, Vine and today against Tiktok which arguably is the most threatening competitor today. It’s managed to remain to the social media company in the world with 3 billion users worldwide. It’s likely to keep the number 1 position yet suffer the biggest financial drawdown it’s ever seen.
Recently Meta has been threatened by the Apple iOS changes for user privacy, government regulation concerns, and post 2021 the slowing demand for ad service. Probably the largest threat against Meta is itself for the pivot towards the Metaverse which is not clear if it can one done successfully.
In comparison Alphabet has 4 billion users world wide for all its offered services. It’s faces similar challenges to Meta for except the threat of Apple or itself. Despite this, Alphabet investors should consider that the fate of Meta is not immune for Alphabet and in the coming decades. Just like how Apple trounced 10 billion off of Meta’s balance sheet, what if congress did the same in a larger scale for the US v. Google antitrust case.
That’s not even the worst of it. We are in a new era of advertising where every company wants to expand into ad service. Walmart and Apple recently have expanded their ad services. With more companies being added on to this list like Amazon, and Tiktok. I know Tiktok or Walmart is not directly a competitor to Alphabet but in reality it’s becoming a competitor. More companies can steal this market share with their services that retain user attention span. All these companies listed were not just a threat to Meta, but today as well to Alphabet.
It might be worth asking why would a company choose to advertise on Youtube or Google search if they know they can get more sales centralizing their advertisements on websites that have higher success for product sales. This could be for many reasons like they know their target audience is more reachable on XYZ website or app than a google search. Perhaps people are more likely to have an adblocker activated on a Youtube video over a top search result on a e-commerce website.
In the end Alphabet will likely be fine in the coming years. But do not think Google and Youtube is not too big to fail in this increasing competitive environment where everyone wants to become an ad service company. If it’s threatening enough, you will see Alphabet pivot just like Meta did to keep it’s company a float.
Over 80% of Google’s revenue came from advertising where as Meta had over 90% revenue from advertising. Alphabet could be the next to pivot with its centralized advertising business model.
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