Alphabet Inc (GOOG)

[SeriousMoney]

If You Doubt Google, Make Leap of Faith; Stock Is Good Value

I'm not blind to the fact that Google cannot keep growing forever at double-digit rates. But the long-term case for Google isn't based on paid clicks or traditional advertising. Google has created a radical new advertising model in which clicks can be linked directly to purchases. Call this click fulfillment. This is so valuable that I've heard advertisers say they would pay far more for this than they currently do under Google's auction-price system. You could argue that it's especially valuable in a recession, when the yield on advertising spending is even more critical.

Google gained even more market share in Internet search last month. But apart from dominating its core ad-search business, Google has other long-term virtues. The migration of advertising to the Internet is still in its infancy. Google's acquisition of DoubleClick will enhance its capacity in display advertising and offer advertisers a comprehensive, one-stop approach to Internet-ad spending. Google's YouTube video service grows more ubiquitous by the day. Someday Google will find a way to monetize this remarkable asset, just as it did Internet search.

Even after the price run-up last week, Google shares represent good value. They've gained about 10% since I last recommended them, but if you believe in Google's long-term prospects as I do, and are prepared to stay the course, that 10% will eventually seem insignificant.

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