[dylanjermiah]

>It's probably because the shareholders only care about ads and making more money.

Not necessarily. Firstly, the only reason people purchase a stock is for that stock to be worth more in the future, they're taking a risk and making an investment. Nothing at all wrong with that. Secondly, I'm a Google shareholder, one who hopes the stock will be worth more in the future than I payed for, the advertising business is very important, the advertising business is essentially funding all their other ventures, which have the potential to replace the ad business and continue the cycle.

[nationcrafting]

>the only reason people purchase a stock is for that stock to be worth more in the future

It depends on what you're interested in. Warren Buffett buys shares in companies he never plans to sell, like Wrigley's, Heinz, Dairy Queen, See's Candies and Coca-Cola, because he's more interested in the annual return on investment than in increasing the capital itself. To Buffett, owning shares in a company means owning a share of the company in every sense of the word. He's often quoted saying "you should only buy shares in companies you're happy to own for 10 years should the stock market close tomorrow".

[qubex]

Actually, no: the whole point is the net present value (NPV) of future dividend payments. The stock rises if there is a collective expectation that the discounted cashflows will rise. That this creates an opportunity to sell the stock at a higher price (foregoing those heightened dividend payments) is largely secondary. Bubbles occur when investors loose track of the fundamentals and focus on the second aspect you mentioned.

[klipt]

Dividends aren't strictly necessary - stock buybacks have the same effect of returning money to those who want it, while being superior (in terms of taxes) for those who would just reinvest dividends anyway.

[walshemj]

But its not real money in the share owners hands buy backs are bad you need to reform taxation of dividends make scrip dividends taxfree if reinvested.

Of course the IB make a nice chunk of change for arranging the buy back

[TeMPOraL]

Isn't it the other way around? I.e. sure, dividends are cool in principle but the actual reason people buy stocks is to sell it later, because it's a faster way to make money?

[eru]

But why would the next fool buy the shares at a higher price?

[dylanjermiah]

By this line of logic it would be a mistake to buy Microsoft shares on day 2 of trading, Apple shares on day 2, 'insert any successful company' shares when they're higher.

People buy shares because they think it will be worth more in the future, they think the company will be worth more than it currently is. People buy Google at it's current market cap because they think it's going to be worth more.

[eru]

And the ultimate value of any company is the stream of dividends it generates discounted to the present value.

[crdoconnor]

>the advertising business is essentially funding all their other ventures, which have the potential to replace the ad business and continue the cycle.

I'd never make a bet on any corporation being willing to branch out into something new that will cannibalize its core business. It just doesn't happen. Ever.

[NamTaf]

He's not saying it'll cannibalise the core business, he said it'd replace it by becoming a bigger profit centre. For example, Nintendo started out in playing cards and went via hotels among other things before arriving at electronics.

[dylanjermiah]

Yep :) One day search will not be relevant, Google is trying very hard to figure out what will be important.

[pchristensen]

Apple replaced the iPod Mini (their best selling product) with the iPod Nano. Apple's iPhone project has vastly superseded their Mac and iPod lines. I don't know the split on Facebook's mobile vs web advertising, but if mobile hasn't passed web, it's heading that way fast. Honda cars outsell Honda motorcycles. IBM sells business services, not mainframes, etc.

[ElijahLynn]

In the new book "How Google Works" Eric Schmidt talks quite frequently about the need to be able to innovate even if that means cannibalizing your own products. Because if you don't then someone else will. And when that happens, you die off.

Most incumbants die from not cannibalizing their own products. Innovation is the key to survival.

[nostrademons]

Android. Google's core business is searching & indexing the web, and then they went and created a mobile OS that siloes information in individual proprietary apps. It seems to have worked out for them, because a.) Android has the potential to be bigger than Search anyway and b.) they've worked out deals to crawl the content of apps.

[crdoconnor]

>Google's core business is searching & indexing the web

Google's core business is selling ads. Android doesn't cannibalize that, it extends their dominance in ads to mobile.

It ain't like people have stopped googling things on their phones now that they have apps, either.

[nostrademons]

Mobile ads are less effective - there's less screen space available for them, and CPCs are lower, as Wall Street analysts have pointed out every conference call since 2013. Most of Android's revenue comes from the 30% cut Google Play takes.

[jfoster]

Amazon started Kindle & Kindle books, which heavily cannibalized their sales of physical books.

[crdoconnor]

Their book business has not been their core business for more than a decade.

Nonetheless, I suppose cannibalizing their ex-core business is pretty exceptional.

[eru]

> Firstly, the only reason people purchase a stock is for that stock to be worth more in the future, they're taking a risk and making an investment.

Investing for dividend income alone is fine, too.

[DanBC]

> Not necessarily. Firstly, the only reason people purchase a stock is for that stock to be worth more in the future

There is the edge case of people buying a single stock so they get invited to AGM and get some kind of vote.