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Google (goog) vs Ebay in a lowcost society. Who will win? April 15, 2006

Posted by deminvest in ebay, goog, growth stock, Internet stocks, investment, nasdaq, Single stocks, Social investing, stock I own, stocks.
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I own stocks of both companies… What I like is that it is free stock (it is simple to get free stock!). I wrote an article about Google vs. Ebay on this blog, in which I suggested Ebay as better investment because of its Paypal amazingly successful payment system. Now I am reconsidering my suggestion. Google is softly starting to start a low cost version of Ebay called Google Base. It is also softly and slowly starting to experiment with its sellers a payment system that may be called something like Google wallet or Google pay.

Will Google develop a lowcost Ebay and a lowcost Paypal? If yes, in a lowcost society, Ebay may tumble like an old style high cost airline!

What is Google Base? Nobody knows. I tried to go on http://base.google.com: not easy to understand, but somehow you can put a product there. The concept seems too wide: it tries to put in the same base a blog, a car or an article. It is not even clear that the system is meant to sell your stuff, but IT IS FREE OF CHARGE. We, the people, like free of charge stuff! It does allow selling and it charges no commissions.

Moreover I read some articles around about the fact that some of the sellers are experimenting with Goggle a payment system. It also seems that they are satisfied with it.

The situation is totally unclear. Google Base beta version honestly sucks. May be as unsuccessful as Froogle was, but Google may change it and it may become successful.

The advantages that Ebay has over Google are records. Hardly anybody nowadays buys from someone who has les than 95% of positive feedback on Ebay. Why should they buy from an unknown Google seller? Also on Paypal, you get some features on with time, as Paypal knows you’re honest. It may take some time and much money for Google to build its own records. We should also remember that Google puts about 200 million dollars into Adsense accounts every month. Once that money is unleashed to buy from Google sellers, it may give a kick-start to a new Google Economy. Google Sellers will also spend part of that money on Google Adword advertisement making it a closed virtual circle.
We proletarians love too much free service. We have also been waiting for a long time for the way to send each other 15$ over the Internet with no hassle and no commissions. Paypal made something like that complicated. Google may make it easy. Google is very good at making easy things that were complicated once.

Let’s give a look at key ratios on Google and Ebay:

GOOG:

Trailing P/E:

80.10

Forward P/E:

33.82

 

Qtrly Revenue Growth (yoy):

86.00%

Qtrly Earnings Growth (yoy):

82.40%

EBAY:

Trailing P/E:

49.73

Forward P/E:

29.46

Qtrly Revenue Growth (yoy): 42.00%

Qtrly Earnings Growth (yoy): 36.00%

From those numbers we see Google twice as expensive as Ebay (double P/E) but also Google growing more than twice as fast as Ebay.

I will keep both Ebay and Google (GOOG) in my portfolio, but only because I got them for free. My bet is now for Google, because Google is aiming at the heart of Ebay. If Google fails its attack, it will not loose much, because this battle will not by any means hurt Google’s Core Business, advertising revenue. If Google succeeds, Ebay will be engaged in a price war on its Auction – Payment core business, and it will be a bloody war for sure!

Comments»

1. retirein - April 16, 2006

Confusing you say mate ? What is new about this with GOOG , everything they do is confusing and weird. The entire enterprise is confusing.

Now we are expected to believe that Google can overtake Ebay by doing the same service free. Fact is when Ebay started they charged a very small fee for each transaction, then it increased etc. Assuming that this Google project works(very much in doubt) at some point they will charge something etc.

Google should first offer the click on advertising service for free to all the clients. New competion coming , so before an army advances , they must first protect their rear.

Notice today the Chinese President will be dining at the Bill Gates mansion , not the Google mansion or the White House. Try reading into this , it don’t look like the Google twirps count for much.

Bottom line , Google is sinking slowly but surely , the insiders know it along with many others. So when you read about all these new(old) ideas , that is nothing more than PR , smoke and mirrors and a warning of impending doom.

2. Democratic Investments by the people for the people » Ebay was beaten up by the market since my last Goog vs article. So what now? - April 28, 2006

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