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Google is still an advertising tech company. As such it's highly levered to two things: 1. The fluctuations in stock prices. Like many tech companies, Google u

Google is still an advertising tech company. As such it's highly levered to two things: 1. The fluctuations in stock prices. Like many tech companies, Google uses its shares in place of currency. This work great when prices are going up. 2. Business spending on advertising. Despite ambitions in other areas, the company still just mostly sells ads. One of the first things companies cut back on when they start hurting is advertising. When the stock market declines because the business cycle turns, Google gets a double whammy. In many ways, it's the canary's canary in the coal mine. Doubly levered to the business cycle. There is such a taboo around pay cuts, that then the inevitable downturn happens, the only option is to first stop hiring and then start laying off. I expect GOOG to be the epicenter of tech worker pain for this leg of the cycle. During these booms, tech leaders take on a mythological quality. To even suggest that they could begin a protracted decline seems absurd. But it has happened time and again. Maybe it's this time or the next cycle that does it, but there's no version of the future where GOOG retains its dominating position.

onlyrealcuzzo 4y ago
I don't think your use of "levered" makes sense, and I don't think GOOG is the "canary in the coal mine" - basically the entire small-cap NASDAQ has already been obliterated - but otherwise your point stands.
ghaff 4y ago
>There is such a taboo around pay cuts Yes. But much less so about reduced bonuses, RSU grants (and esp. stock appreciation), and not matching inflation. At a lot of tech sector companies among others, you're already seeing pretty large effective comp decreases. It's also the case that, as people often observe, large comp increases often come from switching jobs and that's probably going to be more difficult in general for the next few years. ADDED: And one of the escape valves for people at smaller companies especially over the last year or two has been to try to get a job at Big Tech. (This doesn't only apply to developers.) Increasingly this looks to be a much tougher option.
spaceman_2020 4y ago
What percentage of Google’s ad revenue come from (unprofitable) startups?
- disgruntledphd2 4y ago
  Yes than you probably think. This was true in the dot com era, but much less true today.
marcinzm 4y ago
>There is such a taboo around pay cuts Huh? Every time the stock price goes down people's comp is cut since most of their comp is RSUs.
- ghaff 4y ago
  Yes, but it's mostly cuts in actual wages/base pay that are sticky. People obviously aren't happy if fairly predictable bonuses and RSUs get cut but most understand at some level those are variable and tied to company performance. And if the same thing is happening at most places they have little choice but to just deal with it.
  - marcinzm 4y ago
    Sure but OP claimed there are no cuts thus the only option is to stop hiring and do layoffs. In fact there are automatic cuts (via RSUs) and the follow-up approaches are hiring freezes and layoffs. I'm merely arguing that OP's point isn't valid.
    - ysavir 4y ago
      I think OP was referring to salary cuts. Stock is known to carry risk so it being "cut" isn't taboo, but salary, which is supposed to be guaranteed, is.
      - marcinzm 4y ago
        Sure but in the context of saving the company money to prevent layoffs they're identical. Companies don't cut salary because they have a found a better way to cut comp costs without upsetting workers as much.
        aetherson 4y ago
        They absolutely aren't identical. If you have a grant for, whatever, 1,000 shares a year, and the shares used to be worth $100, but now they're worth $50, the company is still giving you the same things it gave before (X% of the total value of the company). It will still have to go to the board and ask for more dilution to create new share pools at the same time as it did before. Its cash-on-hand situation is no better than before.
pjc50 4y ago
> There is such a taboo around pay cuts One side effect of inflation being ~10% is that if you want to give your staff a pay cut all you have to do is do nothing.
- xhkkffbf 4y ago
  But it only works if you're able to raise prices for your customers. Often that's hard and sometimes impossible.
  - matt-attack 4y ago
    Are raised prices the very definition of inflation?
88913527 4y ago
The average age of a public company has been declining for decades: 61 years in 1958, and currently 18 years. No company is immune to the practice. Google isn't going anywhere, but we should be expecting companies to come-and-go more frequently than the past. What's unusual today, and more Google-specific, is that it's one of a few companies absolutely dominating the S&P: just 6 stocks make up over one-quarter of the total capitalization. https://austinwealthmgmt.com/wp-content/uploads/2020/05/SP-500-Holdings.jpg https://austinwealthmgmt.com/wp-content/uploads/2020/05/SP-5...
- nly 4y ago
  And Apple is like 4% of the global investable equity market (weighted by market cap)
notacoward 4y ago
> I expect GOOG to be the epicenter of tech worker pain for this leg of the cycle. Given what you just said about how people cut costs during a down cycle, why GOOG and not AMZN? Seems like discretionary spending (and a lot of Amazon's sales are impulse-buy junk rather than essentials) is also likely to take a huge hit.
- onlyrealcuzzo 4y ago
  Amazon makes most of their money from AWS. The webstore is the majority of the business - but in some ways it's irrelevant.
  - nly 4y ago
    And AWS is expensive. Hard up businesses could cut serve costs
bagacrap 4y ago
"time and again"? We've only had two tech booms and one was a lot more speculative than the other. Yes, Google makes money from ads. Then again, advertising is to "describe or draw attention to (a product, service, or event) in a public medium in order to promote sales or attendance." Google is in the business of connecting people with what they want, more of a personal assistant than a billboard. Running a campaign on Google is a lot more like having a robot salesperson than a billboard. There are different kinds of advertising, such as general brand awareness which indeed might not be worth keeping short term. But if I were in the business of selling widgets, I think I'd cut the r&d budget rather than firing salespeople who are directly in the conversion path that brings in dollars today.
slaymaker1907 4y ago
With inflation, they don't need actual pay cuts to have real pay cuts. That's part of the reason why it's unusual to have high unemployment and high inflation (definitely not impossible though).

onlyrealcuzzo 4y ago

I don't think your use of "levered" makes sense, and I don't think GOOG is the "canary in the coal mine" - basically the entire small-cap NASDAQ has already been obliterated - but otherwise your point stands.

ghaff 4y ago

>There is such a taboo around pay cuts Yes. But much less so about reduced bonuses, RSU grants (and esp. stock appreciation), and not matching inflation. At a lot of tech sector companies among others, you're already seeing pretty large effective comp decreases. It's also the case that, as people often observe, large comp increases often come from switching jobs and that's probably going to be more difficult in general for the next few years. ADDED: And one of the escape valves for people at smaller companies especially over the last year or two has been to try to get a job at Big Tech. (This doesn't only apply to developers.) Increasingly this looks to be a much tougher option.

spaceman_2020 4y ago

What percentage of Google’s ad revenue come from (unprofitable) startups?

disgruntledphd2 4y ago
Yes than you probably think. This was true in the dot com era, but much less true today.

marcinzm 4y ago

>There is such a taboo around pay cuts Huh? Every time the stock price goes down people's comp is cut since most of their comp is RSUs.

ghaff 4y ago
Yes, but it's mostly cuts in actual wages/base pay that are sticky. People obviously aren't happy if fairly predictable bonuses and RSUs get cut but most understand at some level those are variable and tied to company performance. And if the same thing is happening at most places they have little choice but to just deal with it.
- marcinzm 4y ago
  Sure but OP claimed there are no cuts thus the only option is to stop hiring and do layoffs. In fact there are automatic cuts (via RSUs) and the follow-up approaches are hiring freezes and layoffs. I'm merely arguing that OP's point isn't valid.
  - ysavir 4y ago
    I think OP was referring to salary cuts. Stock is known to carry risk so it being "cut" isn't taboo, but salary, which is supposed to be guaranteed, is.
    - marcinzm 4y ago
      Sure but in the context of saving the company money to prevent layoffs they're identical. Companies don't cut salary because they have a found a better way to cut comp costs without upsetting workers as much.
      - aetherson 4y ago
        They absolutely aren't identical. If you have a grant for, whatever, 1,000 shares a year, and the shares used to be worth $100, but now they're worth $50, the company is still giving you the same things it gave before (X% of the total value of the company). It will still have to go to the board and ask for more dilution to create new share pools at the same time as it did before. Its cash-on-hand situation is no better than before.

pjc50 4y ago

> There is such a taboo around pay cuts One side effect of inflation being ~10% is that if you want to give your staff a pay cut all you have to do is do nothing.

xhkkffbf 4y ago
But it only works if you're able to raise prices for your customers. Often that's hard and sometimes impossible.
- matt-attack 4y ago
  Are raised prices the very definition of inflation?

88913527 4y ago

The average age of a public company has been declining for decades: 61 years in 1958, and currently 18 years. No company is immune to the practice. Google isn't going anywhere, but we should be expecting companies to come-and-go more frequently than the past. What's unusual today, and more Google-specific, is that it's one of a few companies absolutely dominating the S&P: just 6 stocks make up over one-quarter of the total capitalization. https://austinwealthmgmt.com/wp-content/uploads/2020/05/SP-500-Holdings.jpg https://austinwealthmgmt.com/wp-content/uploads/2020/05/SP-5...

nly 4y ago
And Apple is like 4% of the global investable equity market (weighted by market cap)

notacoward 4y ago

> I expect GOOG to be the epicenter of tech worker pain for this leg of the cycle. Given what you just said about how people cut costs during a down cycle, why GOOG and not AMZN? Seems like discretionary spending (and a lot of Amazon's sales are impulse-buy junk rather than essentials) is also likely to take a huge hit.

onlyrealcuzzo 4y ago
Amazon makes most of their money from AWS. The webstore is the majority of the business - but in some ways it's irrelevant.
- nly 4y ago
  And AWS is expensive. Hard up businesses could cut serve costs

bagacrap 4y ago

"time and again"? We've only had two tech booms and one was a lot more speculative than the other. Yes, Google makes money from ads. Then again, advertising is to "describe or draw attention to (a product, service, or event) in a public medium in order to promote sales or attendance." Google is in the business of connecting people with what they want, more of a personal assistant than a billboard. Running a campaign on Google is a lot more like having a robot salesperson than a billboard. There are different kinds of advertising, such as general brand awareness which indeed might not be worth keeping short term. But if I were in the business of selling widgets, I think I'd cut the r&d budget rather than firing salespeople who are directly in the conversion path that brings in dollars today.

slaymaker1907 4y ago

With inflation, they don't need actual pay cuts to have real pay cuts. That's part of the reason why it's unusual to have high unemployment and high inflation (definitely not impossible though).