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Waymo is in the value creation phase, business/marketing/analysts may not value it as much but there is a goldmine under it. Waymo may not be a revenue behemot

Waymo is in the value creation phase, business/marketing/analysts may not value it as much but there is a goldmine under it. Waymo may not be a revenue behemoth currently but there is immense value there not only to self-driving but to maps improvement and more. I am not a fan of software patents but they have surpassed Toyota in patents [1] and there are hundreds of patents from Waymo [2]. Everyday in Arizona Waymo vehicles you see them on every block. The value extractors may not like not being able to extract value yet, but the product, research and value creation is very high and contributes today to improving Google product offerings outside of Waymo such as Maps [3]. Waymo has waymo value than is being extracted because it is still emerging from the product value creation nebula that business/marketing/analysts can't see and don't value as much as product/engineering/creative people. [1] https://asia.nikkei.com/Business/Business-trends/Google-s-Waymo-unseats-Toyota-as-automated-driving-patent-king https://asia.nikkei.com/Business/Business-trends/Google-s-Wa... [2] https://patents.justia.com/assignee/waymo-llc https://patents.justia.com/assignee/waymo-llc [3] https://www.latimes.com/business/story/2019-10-09/waymo-mapping-los-angeles-driverless-taxis https://www.latimes.com/business/story/2019-10-09/waymo-mapp...

bayarrhea 7y ago
That’s a long way of saying Waymo isn’t making any money.
- drawkbox 7y ago
  Money making products don't start making efficient money day one. Value creation in this area takes time and it is not quick when dealing with physical/driving products. The patents alone will probably be worth more than the effort. Google is a data/information company and you are completely disregarding the impact Waymo has on that especially for the Maps product. Waymo is also already a market leader in their space. Just because it isn't registering big enough revenues to McKinsey level value extraction only MBAs like CEO Sundar Pichai and Wall Street doesn't mean anything. Most of those in that space have no idea how to create value, only extract it. This type of 'it isn't making money' thinking is similar to how Jeff Bezos at Amazon was attacked for putting all profits back into R&D, or how Elon Musk at Tesla/SpaceX pushes products, or even when Jobs came back to Apple. The bean counters do not understand value creation and do not have product/engineering/creative mindsets. What product/engineering/creative people do is value creation that create the engines for 'making money', the engine doesn't just pop in, there is a concerted effort of play, production, design, creativity, engineering, crafting and refinement that takes value creation to get that engine running which results in value extraction. The business/marketing/managers should just stay out of the engine room and just make sure there is enough runway. The product before the sales/marketing is key. A product of value can always be sold or marketed. You can't sell/market your way to a product.
  - scarface74 7y ago
    Amazon retail is still a low margin, low profit business and is not a good example. AWS on the other hand is printing money. Google hasn’t had a non advertising based hit besides maybe Android since it’s inception and even that has only made $23 billion a year in profit from its inception until the Oracle trial where the number was revealed.
    - drawkbox 7y ago
      The low margin e-commerce led to massive innovations and improvements including their services architecture that became their biggest product and the first to market in the cloud. AWS was created out of the continual re-investment by Bezos back into Amazon. Amazon also has many acquisitions from it and associated to all their businesses: IMDB, Twitch, Zappos, Whole Foods, etc. Google with search, maps and mobile won some intense battles via innovation and a better product in many cases. Google became the biggest OS on mobile with Android and beat out Microsoft that really should have been better positioned and won (Windows Phone was probably better as well). Google also beat Microsoft at their own Office game and storage with Drive, Docs, etc. That was huge. Mobile is a massive victory within the last decade, search the one previous, others in play. Those wins shouldn't be discounted. > only made $23 billion a year in profit from its inception Yep, only $23 billion, horrible. /s Microsoft also gets a chunk of that with their Android used mobile patents [1]. In a way I wish Microsoft didn't get a chunk of Android devices and instead we had three competitive mobile platforms. Android is fine but it isn't the best development platform, iOS and Windows Phone both better (was in the case of Windows Phone), Android was just positioned well and timed right. [1] https://www.howtogeek.com/183766/why-microsoft-makes-5-to-15-from-every-android-device-sold/ https://www.howtogeek.com/183766/why-microsoft-makes-5-to-15...
      - scarface74 7y ago
        Google didn’t “beat” Microsoft at Office by any definition. As far “winning” mobile. $23 billion in 7 years and they still pay Apple a reported $8 billion a year to be the primary search engine on Apple devices. Apple has made more money from Google than Google has made from Android. Android definitely didn’t “win” against Apple. The entire Android ecosystem is a profitless race to the bottom. As far as Google Drive, like Jobs said about DropBox, storage is just a feature - not a product. MS gives away 6TB of One Drive space with the $100 a year Office 365 subscription. Office 365 has much deeper penetration that Drive.
- lukasLansky 7y ago
  No, in the context of the conversation, it's an argument for a higher valuation of the entity. The value of every corporation primarily reflects expectation of future profits. That's the reason P/E ratios differs a lot even for established companies.
jariel 7y ago
I don't think you understand what 'value creation' is. Science and Engineering is not 'value creation'. 'Value' is the appraisal that customers give it. It literally has no economic value unless someone is willing to buy it. If nobody wants to buy it (or feasibly take it for free) then it's no use to anyone - and it's not 'valuable'. It's just a science project. There isn't necessarily any value in massively expensive 'science projects' - often just the ego of those behind it all.
quantdev 7y ago
Some analyst at Morgan Stanley made up that $100B number. It has ZERO meaning and no one should take it seriously. The market cap of a company is what investors are willing to pay for it. Given that Alphabet wholly owns Waymo, there is no way the market is implicitly valuing Waymo at $100B given the present value of Google's advertising business and Alphabet's market cap.

bayarrhea 7y ago

That’s a long way of saying Waymo isn’t making any money.

drawkbox 7y ago
Money making products don't start making efficient money day one. Value creation in this area takes time and it is not quick when dealing with physical/driving products. The patents alone will probably be worth more than the effort. Google is a data/information company and you are completely disregarding the impact Waymo has on that especially for the Maps product. Waymo is also already a market leader in their space. Just because it isn't registering big enough revenues to McKinsey level value extraction only MBAs like CEO Sundar Pichai and Wall Street doesn't mean anything. Most of those in that space have no idea how to create value, only extract it. This type of 'it isn't making money' thinking is similar to how Jeff Bezos at Amazon was attacked for putting all profits back into R&D, or how Elon Musk at Tesla/SpaceX pushes products, or even when Jobs came back to Apple. The bean counters do not understand value creation and do not have product/engineering/creative mindsets. What product/engineering/creative people do is value creation that create the engines for 'making money', the engine doesn't just pop in, there is a concerted effort of play, production, design, creativity, engineering, crafting and refinement that takes value creation to get that engine running which results in value extraction. The business/marketing/managers should just stay out of the engine room and just make sure there is enough runway. The product before the sales/marketing is key. A product of value can always be sold or marketed. You can't sell/market your way to a product.
- scarface74 7y ago
  Amazon retail is still a low margin, low profit business and is not a good example. AWS on the other hand is printing money. Google hasn’t had a non advertising based hit besides maybe Android since it’s inception and even that has only made $23 billion a year in profit from its inception until the Oracle trial where the number was revealed.
  - drawkbox 7y ago
    The low margin e-commerce led to massive innovations and improvements including their services architecture that became their biggest product and the first to market in the cloud. AWS was created out of the continual re-investment by Bezos back into Amazon. Amazon also has many acquisitions from it and associated to all their businesses: IMDB, Twitch, Zappos, Whole Foods, etc. Google with search, maps and mobile won some intense battles via innovation and a better product in many cases. Google became the biggest OS on mobile with Android and beat out Microsoft that really should have been better positioned and won (Windows Phone was probably better as well). Google also beat Microsoft at their own Office game and storage with Drive, Docs, etc. That was huge. Mobile is a massive victory within the last decade, search the one previous, others in play. Those wins shouldn't be discounted. > only made $23 billion a year in profit from its inception Yep, only $23 billion, horrible. /s Microsoft also gets a chunk of that with their Android used mobile patents [1]. In a way I wish Microsoft didn't get a chunk of Android devices and instead we had three competitive mobile platforms. Android is fine but it isn't the best development platform, iOS and Windows Phone both better (was in the case of Windows Phone), Android was just positioned well and timed right. [1] https://www.howtogeek.com/183766/why-microsoft-makes-5-to-15-from-every-android-device-sold/ https://www.howtogeek.com/183766/why-microsoft-makes-5-to-15...
    - scarface74 7y ago
      Google didn’t “beat” Microsoft at Office by any definition. As far “winning” mobile. $23 billion in 7 years and they still pay Apple a reported $8 billion a year to be the primary search engine on Apple devices. Apple has made more money from Google than Google has made from Android. Android definitely didn’t “win” against Apple. The entire Android ecosystem is a profitless race to the bottom. As far as Google Drive, like Jobs said about DropBox, storage is just a feature - not a product. MS gives away 6TB of One Drive space with the $100 a year Office 365 subscription. Office 365 has much deeper penetration that Drive.
lukasLansky 7y ago
No, in the context of the conversation, it's an argument for a higher valuation of the entity. The value of every corporation primarily reflects expectation of future profits. That's the reason P/E ratios differs a lot even for established companies.

jariel 7y ago

I don't think you understand what 'value creation' is. Science and Engineering is not 'value creation'. 'Value' is the appraisal that customers give it. It literally has no economic value unless someone is willing to buy it. If nobody wants to buy it (or feasibly take it for free) then it's no use to anyone - and it's not 'valuable'. It's just a science project. There isn't necessarily any value in massively expensive 'science projects' - often just the ego of those behind it all.

quantdev 7y ago

Some analyst at Morgan Stanley made up that $100B number. It has ZERO meaning and no one should take it seriously. The market cap of a company is what investors are willing to pay for it. Given that Alphabet wholly owns Waymo, there is no way the market is implicitly valuing Waymo at $100B given the present value of Google's advertising business and Alphabet's market cap.