While Twitter and Facebook shares skyrocket on private exchanges, stock in the world’s largest search engine Google Inc. (NASDAQ:GOOG) has flatlined. Google shares are down 2 percent since the start of the year. Over the past 12 months, the Dow Jones Industrial Average has out-performed Google by more than 10 percent. Social networking, it seems – not search – is the tech sector du jour.
Still, there are signs that now might be the perfect time to make a big bet on Google. Here are three reasons to consider adding the stock to your portfolio today:
1) Google Android eats the iPhone OS for breakfast. Android, Google’s free operating system for mobile phones, has started cannibalizing market share. The OS should be running on 49 percent of all smartphones worldwide sometime next year, according to research by Gartner Inc. (IT). Google gives away the OS to phone manufacturers, but the company gets a 30 percent cut of all paid apps that are purchased in the official Google app store – aka the Android Market. Apple’s App Store fueled the company’s record-breaking profits for several years now, and Google finally appears poised to catch up.
2) YouTube gets serious about bringing home the bacon. In a move aimed at taking market share from Netflix, Inc. (NASDAQ:NFLX), Google’s looking to turn YouTube into something like a Web-based television station. The company’s planning to invest as much as $100 million to finance professionally-produced original programming, according to MediaPost. As YouTube moves from computers to home televisions, the site’s ad revenue should start climbing – particularly if they can create and stream compelling original content.
3) Death to the iPad. Just as Google’s challenging the iPhone’s supremacy in smartphone app downloads, Android tablets could do the same to the iPad. A number of Android-powered tablets have already gone to market or will do so soon including the Motorola Xoom and the Samsung Galaxy. As more Android tablets land in consumers’ hands, app sales in the Android Market should start heating up. Google’s 30 percent rake on each app download will be like money in the bank.
Still not convinced Google’s a buy? Consider the fact that the company’s new CEO Larry Page seems to realize Google’s sagging. An internal memo that went out last week informed employees that their bonuses could rise or fall by 25 percent depending on the success of Google’s social strategy in 2011. Google realizes search isn’t the be-all end-all, and I expect that will mean good things for profits moving forward.
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