Archive | March, 2013

How Commodity Trading Works?

23 Mar


Do you think gold prices will go up further?

Are you sure that crude oil prices are going to fall?

Have you heard that the soya crop this year is bad and will result in soya prices going up?

If you believe that these predictions have a good chance of coming true and are willing to bet some money on them, you could try your hand at playing the commodity futures market.

The commodity markets have changed a lot from the poky, little hole-in-the-wall trading offices in narrow streets next to crowded markets where traditional dhoti-clad merchants used to trade.

Brand new commodities exchanges—the main ones are NCDEX and MCX—have been set up and these are fully computerised.

More and more stock brokers are setting up commodity brokerages as well, and trading volumes in commodity futures is widely predicted to rival the volume of derivative transactions (futures and options) on the stock exchanges.

What’s more, you can also trade online.

 Why commodities trading?

Well, let’s suppose you want to buy gold because you believe that the price of gold will rise.

You could then buy gold ingots, store them, wait for them to go up in price, and then sell them at a profit.

But, you have to be sure that the gold you buy is pure, you have to find a place to store it, you have to provide the security, transport it to vault and other such hassles.

A far better way to invest in gold would be to buy gold futures from the commodities exchange.

How do you do that?

When you buy a Gold Futures contract, you undertake to do three things.

1. Buy the amount of gold specified in the contract.

2. Buy it at the price specified in the contract.

3. Buy it on the expiry of the contract. This could be after one month, two months, three months and so on. Of course, if you sell the Gold Futures contract before it expires, then you don’t have to worry about actually buying the gold.

Let’s say you buy the Gold Future contract at say Rs 7,200 per 10 gm.

Your hunch comes true and the gold prices rally to Rs 8,000 per 10 gm.

You can sell the Gold Futures any time before expiry of the contract.

Gold and other commodity futures prices are quoted on the commodity exchanges in exactly the same way in which stock prices or stock futures prices are quoted on a daily basis in the stock markets.

How it works

When you buy a Futures, you don’t have to pay the entire amount, just a fixed percentage of the cost. This is known as the margin.

Let’s say you are buying a Gold Futures contract. The minimum contract size for a gold future is 100 gms. 100 gms of gold may be worth Rs 72,000.

The margin for gold set by MCX is 3.5%. So you only end up paying Rs 2,520.

The low margin means that you can buy futures representing a large amount of gold by paying only a fraction of the price.

So you bought the Gold Futures contract when it was Rs 72,000 per 100 gms.

The next day, the price of gold rose to Rs 73,000 per 100 gms.
Rs 1,000 (Rs 73,000 – Rs 72,000) will be credited to your account.

The following day, the price dips to Rs 72,500.
Rs 500 will get debited from your account (Rs 73,000 – Rs 72,500).

What you need to know

Compared to stocks, trading in commodities is much cheaper, because margins are much lower than in stock futures.

Brokerage is low for commodity futures. It ranges from 0.05% to 0.12%.

Because of this, commodity futures are a speculator’s paradise.

If you are a hard-core trader who follows the technical charts and do not really care what you trade, and if you are nimble and savvy, then commodity futures could be another asset class that you would be interested in.

The advantages in this line is that there are no balance sheets, no complicated financial statements—-all you have to do is follow the supply and demand position of the commodities you trade in very closely.

Go onto the commodities trading exchange – NCDEX and MCX – to see which commodities are offered for trading, their contract size and other criteria. You will have to get hold of a commodities broker but that should not be a problem. There are lots of brokers that offer commodity trading these days.

But, it would be wise to avoid commodity trading if you are a rookie. A better move would be to initially trade in stock futures before opting for commodity futures.

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Commodities Should Rise on Low Prices & Dollar’s Decline

22 Mar

Will the government soon collapse under its debts? Will Inflation take off? What events might affect our investments in the near future? How should we react to these risks?

Rick Rule, Chairman and Founder of Sprott Global Resource Investments Ltd., says that most market participants unwittingly consign themselves to failure, because they fail to critically analyze their own investment decision processes.

Rick explains, “Most market decisions are made with an expectation in mind of something to come in the future, but things may turn out differently from what we expect. Too many investors fall victim to wishful thinking. Properly evaluating outcomes and their probabilities will help you become a better investor and improve your performance.”

“Speculating on the events that are certain or almost certain to occur is almost always more profitable than gambling on a long-shot, unlikely occurrence,” he says. “Make investments based on unlikely scenarios only when the potential risks and rewards are disproportionately in your own favor and you can afford the loss that you may incur.”

So what scenarios are Rick and his team preparing for? What are his investment expectations?  He outlined specific scenarios that he foresees.

The debasement of the US dollar, says Rick, is a near-certainty. “It appears very unlikely that our society can sustain its level of consumption with its current level of disinvestment. The U.S. federal debt exceeds 16 trillion dollars and off-balance sheet liabilities exceed 60 trillion dollars, while our annual on-balance sheet budget deficit exceeds 1.5 trillion dollars, half of which we borrow and the other half of which we counterfeit by printing. So the government is attempting to service 76 trillion dollars in debt with just 2.5 trillion in revenue, while spending 3.6 trillion annually.”

In order to avoid a default, says Rick, the Fed will likely continue to debase the currency so that the government can repay its debts at lower cost.

This leads Rick to conclude a second scenario.  Because Rick projects that currencies will progress on this path of devaluation, he continues to view real assets as one of few ways to play defensively.

Commodities Prices high, even in the face of a very soft economy:

“Look at the escalation in commodities prices, even in the face of a very soft economy. The pricing numerator is less important, when the denominator – the U.S. dollar – is falling.”

Rick reminded me that prices are cyclical in the natural resource market. “Resource and commodity markets are cyclical, capital intensive and volatile,” he explains. “These characteristics are often inconvenient and frequently unnerving, but outcomes are often broadly predictable, though not necessarily the timing.”

He continues: “In natural resources, markets tend to work, and periods of low prices give way to periods of high prices, and vice versa. Low prices — as, for instance, uranium and natural gas are experiencing now — stimulate demand and constrain supply. Demand goes up because the utility of the commodity to users increases, and conservation and substitution go down. Low prices encourage fabrication methods to adapt by substituting the cheaper energy sources to a greater extent. Rick says that natural gas is so low-priced now relative to other energy sources that supply will come under pressure: “At today’s prices, producers of natural gas in the U.S. and Canada are often neither earning their cost of capital nor covering their operating costs. These producers are therefore unlikely to spend billions of dollars developing new supplies, and may shutter their projects entirely.”

The turnaround may occur gradually, he explains: “This process takes time, because producers will continue to extract gas even at low prices in an attempt to recover the capital already invested in productive capacity, producing down to or below their costs of production.”

Once you outline your expectations, and then deduce the probability of their occurrence and the reward you would expect to receive, you can guide your investment decisions with much less emotion and with much more success.

Get accurate commodity trading tips by share tips expert.

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Stock to Buy on Friday, 15 March 2013

15 Mar

Nifty jump after lackluster session closed near 5900. Maruti, SBIN, Ranbaxy, Tata Power, BPCL gain today. The index gained after positive cues from European peers and gain in bank and realty index.

Market Expected to open positive on Friday, the BSE bench mark Sensex touch month high. The February inflation data is higher than expected. RBI rate cuts may give confidence to market.

Stock to Buy on Friday

Buy Cairn India Target 299/302 stop loss 290.
Buy Canra Bank Target 446.

Commodity Trading Tips for Natural gas

13 Mar

Natural gas settled -0.46% down at 197.40 as a recent rally began to wane after weather forecasts pointed to a warming trend settling over the heavily populated central and eastern swathes of the US Warmer weather cuts into demand for heating in the nation’s households and businesses and sends natural gas prices falling. Weather services predicted normal temperatures to settle into the East Coast US through the end of March, with some calling for warmer-than-normal thermometer readings. The reports began to chip away at a rally that sent natural gas gaining due to unseasonably cold weather patterns that have gripped the country for much of February and March. However, supply data released late last week continued to support natural gas. On Thursday, the US EIA said in its weekly report that natural gas storage in the week ending March 1 fell by 146 billion cubic feet, well beyond market expectations for a drop of 134 billion cubic feet. Inventories fell by 92bcfin the same week a year earlier, while the five-year average change for the week represented a decline of 107 billion cubic feet. Total US natural gas storage stood at 2.083 trillion cubic feet as of last week. Stocks were 361bcfless than last year at this time and 269bcfabove the five-year average of 1.814 trillion cubic feet for this time of year. The report showed that in the East Region, stocks were 73bcfabove the five-year average, following net withdrawals of 77 billion cubic feet. For today’s session market is looking to take support at 195.9, a break below could see a test of 194.4 and where as resistance is now likely to be seen at 199.4, a move above could see prices testing 201.4.

Trading Ideas:

Nat. Gas trading range for the day is 194.4-201.4.

Natural gas dropped after weather forecasts pointed to a warming trend settling over the heavily populated central and eastern swathes of the US

Updated weather forecasts released earlier pointed to milder temperatures across most parts of the U. S. in the near-term.

Total U. S. natural gas storage stood at 2.083 tcf as of last week, 14.8% above the five-year average for this time of year.


Originally posted at:

Weyco Group: Good Brands, Family Management, Growing Business

12 Mar

About: WEYS (Weyco Group, Inc.)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Weyco Group (WEYS), incorporated 1906, designs and markets footwear of the mid-priced men’s leather dress shoe variety. The company purchases finished shoes from third-party manufacturers, located in China and India, and sells them wholesale, retail and over the Internet. The company has been successfully acquiring brands and growing revenues, all while maintaining a solid balance sheet with no long-term debt (albeit with some short-term debt representing about 15% of total assets).

The company looks well positioned to prosper in the future, and while the market price is not necessarily discounted, the company is attractive for the following reasons:

1. Safe capital structure with liabilities less than current assets alone
2. Growing revenue and brands
3. It is still reducing its retail store count which has been a drag on performance until recently
4. Family ownership
5. Growth is not (completely) priced into the stock
6. Has never had a loss in the last 10 years


When Warren Buffett’s Dextor Shoe investment didn’t work, it was because Dextor Shoe was a manufacturer located in the United States. Labor costs made the business uncompetitive in short order and it was deemed his “worst mistake.” Weyco, however, is different and avoids the problems of shoe manufacturing. It, therefore, is mainly a steward of its brands, its marketing and its distribution (and, to a small and continuously decreasing extent, its retail stores).

Therefore the brand portfolio is the most important thing about this business, although it is basically impossible to value brands with any amount of precision. The company sports the following brands:

1. Florsheim (see at Nordstrom (JWN))
2. Nunn Bush (see at Kohls (KSS), official site)
3. Stacy Adams (see at Zappos (AMZN))
4. BOGS (see at Amazon, or at the official site)
5. Rafters (see at, or at the official site)
6. Umi – children’s shoe (see at the official site)

As the CEO Tom Florsheim Jr. noted, “all the brands in our portfolio had sales increases in 2012.” One can see this below in wholesale segment year-over-year revenue growth for the full year 2012:

Brand    |    Year-Over-Year Wholesale Sales Dollar Growth

Florsheim    |        8%

Nunn Bush    |    1%

Stacy Adams   |     10%

BOGS & Rafters [1]  |      7%

Umi [2]    |        19%

Total Average   |     10%

The wholesale segment, representing 74% of revenue, sells to over 10,000 clothing, shoe and department stores. JCPenney (JCP) was the only major customer representing greater than 10% of sales before 2010 – it has since fallen below the 10% threshold. If growth continues, the current market price of the company is very attractive.

The company’s management believes that BOGS, a branded purchase a little over two years ago, presents very favorable opportunities as they believe they can increase sales faster than the category will grow. They also believe it will have a presence in the industrial use market – although they note that such uses will take a long time to grow and develop.

In addition to the opportunities provided by BOGS, the company also launched a “successful kids business in the fall” which they see as “avenue of expansion in 2013.” Of all the brands above, I personally like Florsheim, Stacy Adams and BOGS the most (and Nunn Bush the least).


There is significant family ownership with the father and son Florsheim owning together some 824,490 shares, or 7.6% of the company. It is worthy of note, I think, that the Florsheims are the descendants of the original founding family of the Florsheim shoe brand (read about Florsheim’s shoes here). So, in essence, their 2002 takeover of the company was essentially a recapturing of an old family heirloom. Given that they are minority shareholders, like the other shareholders, they will not be able to tyrannize the business. Also, I personally like the families’ involvement because both men want, I assume, their namesake brand to be successful and therefore neither have a reason for letting the long-term business down. This is to say, that I believe both men are more likely to have a long-term time horizons. If true, this would be unlike most corporate cultures whose emphasis is on meeting near-term goals – since, of course, that is how managers are evaluated [3].


For the full year 2012, the company earned approximately $20.4m. Over the current market capitalization of $256m, they earned a yield of 7.9%. This, by itself, is not enough to justify purchase.

Because current cash flow is squeezed due to increased levels of working capital (to deal with growth) and due to some large one time capital expenditures, let us assume that GAAP net income is a good approximation of the company’s future cash generating abilities, rather than, say, the free-cash-flow metric.

If we assume a discount rate of 11%, the company will need growth at a rate of at least 3% going forward for a purchase at today’s prices to be worth it. If it can achieve rates higher than 3% the company is undervalued. This is by no means certain, but given the company’s plans, it would seem probable that such rates could be achieved going forward. After all, they just launched their children’s shoe line and most recent growth in their wholesale segment was about 10% year-over-year, as seen above. If we look at the company’s recent revenue growth we see the contribution of the BOGS and Rafters brand acquisitions, but we also see the trajectory maintained in other brands after the acquisitions were fully consummated:

Also, the company reported “comps” in its retail segment of around 8%. They state, however, that the retail segment includes e-commerce and Internet sales. Further, management states that Internet sales are expanding rapidly and that they expect further improvements in the future. These facts combine to suggest that Internet is pulling the retail segment along (currently at 8.2% of revenues) — hopefully Internet sales continues to increase in the future.


This company is fairly valued if it never grows at all. Essentially, that would mean that the stock would have average returns over time. However, with the recent launch of the child’s line and their expansion of BOGS and Rafter brands in Canada, the company is clearly trying to grow revenues. In the midst of this, the company has no long-term debt and is well capitalized. The most attractive feature, however, is that the downside is limited since the shoe industry is unlikely to disappear. Stability and sureness of future returns are rare and attractive features. Provided the company can keep its brands in style, it is unlikely that demand for men’s dress shoes – and shoes in general – will face any substantial declines.

The most conservative move would be to watch the company and wait for a better price to off-set the risk that future growth is nonexistent. However, it seems more likely than not that the brands will continue to grow and therefore increase revenues going forward.

Therefore, one finds that we are in the position where the future is the vindication for the investment – which is not my preferred method of approach. In this case, however, I believe the downside is quite limited if one has a sufficiently long time horizon.

Please see my securities disclosure.


1.    Year-over-year sales were up 28% actually, but that only counted 10 months of sales in 2011. My figure is an estimated growth figure taking into account the period-to-period discrepancy.
2.    This is an estimate from the nine-month results released September 2012. All other percentage figures are from the December 2012 numbers.
3.    This sentence was written with the book Moral Mazes in mind.

Originally Published at SeekingAloha

Author: Intangible Valuation

Google’s Management Presents at dbAccess Media & Telecom Conference (Transcript)

6 Mar


Nikesh Arora – Senior Vice President and Chief Business Officer


Ross A. Sandler – Deutsche Bank Securities, Inc.

Google Inc. (GOOG) dbAccess Media & Telecom Conference Call March 5, 2013 1:10 PM ET

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay, we’re going to get started. If everybody can take your seats and quite down a little bit, that’d be great. So we’re very excited to have Google here with us today for the keynote. For those of you that I haven’t met, I’m Ross Sandler, Head of the Internet Research team here at Deutsche Bank and we’ve got Nikesh Arora, SVP and Chief Business Officer, basically, the guy in charge of all the revenue that Google is generating globally here to talk about trends.

So before we get started, Jane is going to give some of the legal disclaimers and then we will hop in.

Jane C. Penner

Hi, everyone. I am Jane Penner, Director of Google’s Investor Relations team. Just wanted to read the safe harbor statement.

Before we begin, I would like to note that our comments and answers to questions may contain forward-looking statements regarding Google’s business outlook. Our actual results may differ from those made in any forward-looking statements due to a number of risks and uncertainties. These risks are detailed in our public filings with the SEC. Also please note that a webcast replay of this session will be available on our IR website in a few hours. We routinely post important information on our investor relations website located at We encourage you to make use of the three charts.

With that, I will turn it back to Ross.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Thanks Jane. Okay, so Nikesh thanks for coming. I thought what we’ll start with is, what we would like to start with is all of the company, just can you characterize what you guys are seeing right now in terms of macro trends, advertising demand globally across your course of the business, are things any different, better, worse than where we were three, six months ago?

Nikesh Arora

I can talk about what happened in the last quarter. I don’t think I can talk about this quarter.

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

I think it’s fair to say that there are two effects that happened in our business. One is the cyclicality of the advertising markets, usually the fourth quarter is where a lot of advertisers are trying to attract users into their systems because of Christmas, because of retail et cetera, but also the second effect is obviously the shift that we continue to see from the offline advertising world into the online advertising world, because the online audiences continue to grow around the world whether it’s in emerging markets or in existing markets. So I think we’ll see both of those combinations and I feel we did see a dampened effect of economic events that are on the road. So various parts of Europe end up being weak, what’s going on economically over there, so a reasonably robust response in the United States, reasonably robust response in various – sort of larger parts of Europe. So it’s mix buy, but I’d say it’s pretty much days locked up with the economic impacts that we’ve seen around the world.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. And you talked to a lot of the agencies and advertisers directly all the time, have any of the more recent kind of European issues or the tax policy changes in the U.S. had any impact in your revenue with their decision-making, they’re thinking about 2013, can you comment to this?

Nikesh Arora

I think what’s fair to say is that if you and I were sitting here two years ago, to add to this point of view that, things go from a nice-to-have to a must-have. And when things go from a nice-to-have to a must-have, you usually see good business and good acceleration. And it works both in the consumer side and the commercial side. And you can trace this back to digital cameras, you can trace this back to mobile phones, you can trace this back to Google search. When things are nice to have, most people can make a choice, saying that’s interesting, I’m sitting in the room. It’s nice to have a mobile phone, but I don’t need it, it’s not a must-have, it’s nice-to-have Wi-Fi but I don’t need it. It’s nice-to-have digital camera, but I don’t need it. But then comes the point, an inflection point, or we say, wait a minute I can’t live without Wi-Fi connectivity. I can’t live without having a mobile phone. I can’t live without it. And I think the big trend from an advertiser perspective that has happened in the last two years is, it’s very hard to talk to a rationale advertiser or a rationale business person, and have them say, I don’t need to be on the web. I don’t need to be in digital advertising. So I think the turning point is that, where most advertisers say they understand that most of that are in the web, most business is on the web. And within that category, I think it’s fair to say that more recently talking on the end of Q4 of course, more recently video has become one of those things where people are beginning to understand the value of advertising on the webs as video or in mobile. And two years ago, you could not say that about video and mobile, so although some of the formats, some of the opportunities are still nascent, but clearly you can talk to CMOs, you talk to advertisers, and they are beginning to say, yes I want to be online, but I also want to understand the video phenomenon, I want to understand this mobile phenomena, which is good.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. Let’s talk about mobile since you brought that up. We are hearing mixed data points or seeing mixed data points about the traction that publishers are getting from the mobile web versus the mobile app and this pendulum has swung several times back and forth in the last two years, what are you guys seeing, I mean Larry made some comments in the last call that, he wished the advertisers wouldn’t build mobile specific websites, because you can basically see a regular PC website on these newer devices. So is the pendulum swinging back from app to mobile web or what’s kind of the state of mobile as you guys see it today?

Nikesh Arora

I think it’s fair to say that we’re still very early in this mobile revolution. And I don’t want to get philosophical in this conversation, because you guys like hard facts and hard numbers in these kinds of events, but it’s very hard to characterize mobile. I mean, many of you are sitting, I can see some people with tablets, some people with computers, some people with their phones. How do I distinguish the fact that you are travelling with your laptop, or is that mobile, or is the person next to you using the same thing, you are doing in the laptop, is that mobile. So it’s very hard to start distinguishing what is mobile, what is not mobile.

The way we would like to think about it is that we think of the long-term people are going to interact with a set of services of multiple screens. Some screens will give you context, some screens will not give you context, i.e. if you are interacting with your tablets right now, there is a reasonable probability the service that you’re interacting with notes, you’re in Palm Beach or at the Breakers. Therefore your experience on that device becomes different. Now what you are seeing from an advertising point of view, what you are seeing from an apps versus web site point of view, I think our interim steps in that evolution as people are building products with specific instances. Our point of view is that over the long-term from a user point of view, we want to make sure that services work seamlessly across various screens.

So if you’re using Goggle service the search should work across any screen and if I have context about you I should be able to provide you better experience. If I know where you are I should be able to give you a better experience because location becomes another filter and may be able to provide the service for you. I’m pretty sure social becomes another filter that allows you to cut down all the different optionality you’re having. Also point in time, I think it’s fair to say if you think of the services like Google Now, we should be able to within recent try and take some of the things that you do constantly on the pattern basis and Triumph prompt to you before hand and give you that answer before you ask that question so that’s sort of the long-term point of view from a user perspective.

I think similarly in the advertising side, we just launch the enhanced campaigns, but the idea is that as an advertiser you really are not that keen in trying to understand whether I want to target for us, one is mobile phone, and then app, on a web site, on a tablet, on the screen which is a laptop or is TV what we want to say is did advertisers looking for. We understand computed. What we’d like to do is give you the best aura as possible and therefore we’d like to give you the opportunity to engage with Ross in the most optimal scenario that we think Ross is going to react to is going to react to your ad, whether that’s just browsed on a tablet, whether that’s browsed on a phone, whether that’s browsed with the app, whether that’s browsed on a PC and part of this effort is to try and take the individual screens out of it, try and take that individual product aspect out of it and see how to connect the advertisers and the end-user. Does that a vague enough?

Ross A. Sandler – Deutsche Bank Securities, Inc.

No, it’s helpful. We’ll talk about enhance campaigns as you brought it up. So from people we’ve talked about on this subject on the industry, one of the biggest overhaul that you guys have done to adverse ever potentially. So where would you rank order it in terms of magnitude and for those that unaware of what enhanced campaigns, can you just give me a quick 30 second on what you’re doing with that?

Nikesh Arora

Yeah, sure, I think it sort of ties into what I just said, but I think it’s fair to say in the evolution of our company in the last 10 years on the revenue side. It gone from being a search advertising business, we’ve added display advertising to that, we’ve added mobile, we’ve added video. So we have been doing substantial enhancements to advertising platforms over the years. I think the big thing from enhanced campaigns I think it’s the beginning of the shift in the industry from selling impressions to selling audiences in the long-term, because so far in the past, all of our advertising has been sold.

In the industry, generally speaking on impression, I want to buy click, I want to buy the one DFD website, I want to buy them on Google, I want to buy them on Yahoo!, I’m buying clicks, and clicks are interesting is like I’m buying an impression of an ad in the newspaper or what’s most interesting in the advertiser is who is the person on the other end of that click, because a click where, we’re also trying to buy a Ferrari and then trying to buy a Tesla. It is very important to understand that he is the person who can afford a Ferrari and I can afford a Tesla, but if somebody else clicks, that’s not as useful. So you have to be able to understand the audience, did I get that right.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Yeah except for the Ferrari part…

Nikesh Arora

So the audience becomes very important and what we’re doing is we’re trying to take away the notion of devices, screens and products and clicks away from the advertiser, we’re trying to create that shift as we go in the future to get it more and more closer to audience, then this is one of the steps that allows us to get there, also it takes away tremendous amounts of complexity, because it’s getting more and more complicated, what format should I use or should I target iOS, should I target Android, should I target NAPP, should I target a mobile website, should I target a desktop. And all those decisions where advertisers have to figure out how to figure out the best ROI for themselves. They shouldn’t have to. We have all the data underlined that we should be able to figure out the ROI, and say actually you better off giving $1 in from this system and we should give you the best ROI we can irrespective of screen content device that you have, and that’s a journey we are sort of undertaken this enhanced campaign, those are what do you think is good for the users, is good for the advertisers and good for the market.

Ross A. Sandler – Deutsche Bank Securities, Inc.

And if you look at, say the Ad Age 100 or your biggest advertisers, most of these guys are already, they have got lots of resources, they have got teams of people figuring this stuff out, and they are bidding on smartphones and tablets and then PCs, but when you get into the chunks of revenue for you guys that come from the local business, the smaller business that may not have those resources, so are they actually in mobile today, this smaller advertisers and when they just tell Google any current advert system, sure I’ll take all these devices, do you by default put them in mobile or is that going to change within enhanced campaigns?

Nikesh Arora

I think it’s fair to say that the local or small business revolution in advertising hasn’t happened as quickly as the larger guys. Larger guys get lower volumes, they get lot of in-trade, we have a lot of smaller advertisers in our system. We would like to have a lot more. But I think just taking the same point and trying to sort of think about it, imagine if an off to use example let’s use a pizza example. Right, there is a pizza store down here and the guy is trying to buy a click trying to get somebody to buy pizza, he is more interested in a click which is at 6 pm or just somebody locally whose in a mobile phone, who is within two miles of his store as opposed to a click of somebody 10 miles away or 20 miles away who is sitting at home.

So if you can provide that filter, it’s more likely to create a higher ROI for him, if I can target the ad he wants to those specific people within his vicinity. Now there is two ways to it, either he can develop the expertise to go into our systems and get a very sophisticated about trying to find those clicks or we can say that, I understand based on all the clicks that have happened in the past with the ROI has been and the conversion has been for a click of a guy sitting on the laptop at his house 20 miles away, for this pizza guy there is no point showing his ad to that guy, it’s more relevant if I show this ad to somebody within a mile of him, at 6 pm as opposed to 12 p.m.

So all those decisions, which individual advertisers have to make, have to be taken away from their concepts that they should be able to put $1 amount of this end, and get an ROI at the other end. If you can do that, we’d take a lot of complexity out of the system. Is it all out? No, it’s the first step to getting there, I hope so.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. That will make sense. And so from our standpoint, if we kind of bring it back up to a high level, we like numbers, we’d like to talk about things this way?

Nikesh Arora

I’m trying to stay away from, see this is the nice attention we have in here.

Ross A. Sandler – Deutsche Bank Securities, Inc.

And not on these specifics, but if you look at the gap, we always talk about the gap, what’s the monetization gap between call it smartphone and PC.

Nikesh Arora

We’d like to call it the opportunity.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Yeah, opportunity.

Nikesh Arora

That implies.

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

You’re not working hard enough, when opportunity implies that I have tremendous future.

Ross A. Sandler – Deutsche Bank Securities, Inc.

So how big is that opportunity and maybe, if you look back 12, 24 months, you’ve already kind of closed some of that opportunity. How would you characterize the improvements that you’ve seen before going into enhanced campaigns?

Nikesh Arora

So I think you now have a horizon gap to use your word.

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

I think in the long-term, there’s tremendous opportunity. At today, I think less than 10% of global advertising is online. I think most people who have discretionary income are now online. So the fact is, all the people you want to advertise are on the web, are interacting with online mechanisms of various devices, so I think there is a gap to use your word between what the potential of online advertising can be versus what it is today. I think that on one level we’re waiting for I think the biggest screen that doesn’t have IP connector user TV on global basis. The day the televisions have IP connector that becomes an addressable platform from online perspective; it just opens the door phenomenally for people like us, who are trying to get ready for that day to come.

So I think that gap gets bridged, that’s one way of bridging the gap. The other way of bridging the gap is also continuing to improve the targetability, the efficiency of advertising, so you don’t have to have clicks, serve to people who don’t need to see them and as we see technology, as we see context, as we see various filter showing up, it allows us to get more and more efficient in advertising with those people. And the more efficient you can be the higher the opportunity to use my word. Did that answered your question or not?

Ross A. Sandler – Deutsche Bank Securities, Inc.

No, it did

Nikesh Arora

I did, is that good. I just looking at my IR President making sure I’m doing well.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Now, it’s good. The opportunity I like that, and if we talk about mobile not in terms of the opportunity or the revenue piece of it, but the cost piece of it, so there is some debate out there as to whether because you have gatekeepers like OEMs and carriers and theses types of folks in mobile that you don’t have in an IP-based PC world as those clicks transition from PC to tablet or smartphone that is just west to go around for Google, some of your numbers would suggest that even if that’s happening it’s getting less ad, but how do you think about the profitability of mobile today versus where that was call it 2-3 years ago when you started this journey?

Nikesh Arora

I think it’s fair to say that every profitable dollar of revenue is a good dollar of revenue, right? In terms of this specific aspects of how that shift happens between desktop versus mobile, I think we are fairly comfortable with where our tack is, we understand what our traffic acquisition costs are on the distribution side, on the advertising side, and at the end of the day, we believe we have built this phenomenal advertising ecosystem, which allows us to monetize not just our own traffic, but other people’s traffic. We think in certain cases much better than somebody else can, and that allows us to sort of defray the cost of this large, ad sales force in that business that you have created. So it’s a good thing for us to have a mix of our own traffic and other people’s traffic. I don’t share your point of view in terms of the economics being drastically different between the desktop world and the mobile world.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Good to know. If you look at the amount of well on this mobile profitability subject, the amount of searches that are happening where Google doesn’t pay any tax, whether it would be a consumer that downloads the app themselves or they go navigate in any of these browsers directly to is the incidence of that increasing as you kind of put more Chrome browsers out there?

Nikesh Arora

That question is where I end up in trouble based (inaudible).

Ross A. Sandler – Deutsche Bank Securities, Inc.

Fair enough.

Nikesh Arora

But I appreciate your attempt.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay, on the Android side, so there has been some discussion in the press release recently about OEM relationships, and you kind of got, you got Samsung out there with the tremendous amount of market share, you have Nexus phones being launched with a bunch of different partners, Samsung hasn’t had a Nexus device from what we can tell…

Nikesh Arora

Although current one is an LG device, the one before that was a Samsung device….

Ross A. Sandler – Deutsche Bank Securities, Inc.

How would you characterize the Samsung relationship, and/or your Android relationships, are they healthy today, is there friction?

Nikesh Arora

Well, I like this because a few years ago, when I was sitting at one of these conferences, people ask me, why are we doing Android, and there were perfectly good alternatives out there. So I’m glad, we’re no longer talking about, whether Android is going to be successful or not, so thank you for that.

In terms of the ecosystem, I think part of what Android has done very, very successfully; it has increased the pace of innovation, because most common denominator at a piece of software that most OEMs are using that allows them to innovate them hardware, that allows them to innovate in marketing, allows them to innovate on just execution of distribution, and I think Samsung has done a phenomenally good job, and so have other people in the industry. We have very good relationship with all OEMs, because we have this in biotic relationship right. They like the fact that we innovate on Android. They like the fact that we’re creating an innovation ecosystem where they can all collaborate with us as a third-party, and we also work with each of them individually or at different periods of time to create leading out the experiences in the market.

So we can keep setting the bar a bit higher for everybody else to try and compete with that bar. And we’ve done that successfully with Samsung in the past, we’re doing right now with LG. We have done that with Motorola in the past, so there are different people out there, who we worked with to create a higher bar for innovation in the Android ecosystem, and I think it creates healthy competition, it creates innovation, and generally we’re very happy with the relationships we have with OEM partners.

Ross A. Sandler – Deutsche Bank Securities, Inc.

And you guys have recently launched more products with Chrome operating system.

Nikesh Arora


Ross A. Sandler – Deutsche Bank Securities, Inc.

So this is with conjunction…

Nikesh Arora

And also Samsung Chromebook.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Yeah. A different operating system and different set of folks working on that inside of Google. So can you just talk about the different strategies for each and the one thing we hear from various partners with the Android ecosystem is decreasing the fragmentation in the complex, that is something that we’d want Google to help this with over time, does this increase the level of complexity or is this just totally separate? Can you just talk about Chrome and Android together?

Nikesh Arora

I think it’s fair to say that at least in our mind, we have two successful platforms. One is the Android platform and the other is the Chrome platform. I don’t think in the history of browsers there has been such a situation where browsers have come from nowhere and actually created a significant market share for itself over a long period of time, and that’s translating into an operating system that is sort of built for the Internet, it’s build for security et cetera.

So I think it’s fair to say from our point of view, it’s better to have two successful platforms than none, which would have been the case a few years ago if you have not embarked in both of these journeys. We’re still committed to both the platforms; we think they are exciting because they provide once again for innovation in the hardware space that allows us to create better user experiences out there.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. If we shift gears a little bit, we’re at the Internet Media Telecom Conference here. Can you talk about YouTube and….?

Nikesh Arora

Sure, whatever you want to talk about.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Sure, so YouTube the strategy thus far in the content side has been kind of want have made for Internet approach, and you have full stream videos that are available on a card basis, you haven’t really gone down that path of a subscription or you can [eat] products. What is the content strategy at YouTube today and how could that evolve?

Nikesh Arora

I think it’s fair to say, sort of goes back to our conversation about nice to have a month – in the way I think about it is that, if I ask my 15 year old to look up to find a video, her instinct is just to go search in YouTube first, because she believes that if the video exists out there in the online space, it must be on YouTube, that’s a good thing because that makes you YouTube one of the top three search engines in the world in addition to Google because people believe that if entertainment content is out there, you’re going to go find them on YouTube, so in a way for us, it already is an entertainment platform that people go looking for content and therefore it provides a window to distribution for video content.

As I said the one big tipping point to arrive in the world of online video is going to be when it is going to be very simple for me to watch that video on my large screen at home. Right now I can do it. It requires a little more sort of manipulation in my part to make sure that my Android devices talk to my TV, but I think that becomes very simple as every device out there has a broadband connection behind it. As that happens so let’s keep that on one side, on the other side, if you look at the evolution of content, YouTube in the early days people thought it was majority of videos in YouTube had an audience of one, which is the person uploading it, but now it has changed. We have people who become huge music stars, huge pilot for various television content of today because of YouTube being a huge distribution platform.

There are brands out there, who are using it for promoting the videos et cetera. So we think it’s has become a reasonably robust platform, and we’re seeing that in speed because now advertisers want to advertise on it, not just on the home page of it, but on various videos that are out there.

What we’re beginning to see is that is professional content, which is making its way to YouTube. There is lots of interesting professional content that is out there whether its clips from various majors out there, whether it’s short form content out there, and you’re beginning to see long form content arriving, so you are seeing content happen now.

On our side, we are also trying to stimulate that by getting people to create content for the Internet. That has two purposes; one is to show that it can be successful, but also it is so much easier to do with the right issues with content that is created exclusively for this platform than deal with the rights issues that is for content created for TV because typically a great show is sold 100 times in 100 different countries, with 100 legal contracts with 100 different providers, so it becomes extremely owner of just try and disentangle the rights associated with content that was made in the past for television, but I think as we get more distributions online video, the more you’re getting incentive in the content ecosystem to create product for that distribution, and you’re beginning to see examples of that already and in parallel you get entrepreneurs who believe that they can go achieve fame, achieve critical mass by being on a more global open platform, so that’s a better sense of our content…

Facts About Google

Did You Know?

Ross A. Sandler – Deutsche Bank Securities, Inc.

That definitely helps and where does music streaming fit into this, then there is, you have investment in vivo there has been some discussion of launching a subscription music service, does that?

Nikesh Arora


Ross A. Sandler – Deutsche Bank Securities, Inc.

Some press reports, not from you guys.

Nikesh Arora

Trying to clarify.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Some media reports have talked about a streaming subscription service in music, is that how does that fit into the content strategy and separate.

Nikesh Arora

Look, I think it’s fair to say a majority of time people spend is on entertainment. Whether it’s video, whether it’s music, whether it’s social networking, whether it’s communicating and what do you want to ensure in the long term is that every one of these services is available on various Google platforms across multiple streams and we are building a partner that have their own apps and sort of we’ll just make sure we look at the market and see what’s the most optimal way of delivering innovation in various expense spend users.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay, on the monetization side, for YouTube you guys have had a real home run with true view ads. It has been a real winner, so can you talk about what those are and then what are doing to increase advertise read options of that ad format.

Nikesh Arora

Yeah, I think it’s fair to say, I’m not sure how many people are familiar with TrueView but basically if you think about advertising, I’m going to tell you straight the problem is I’ve told this story before so if you ever go see a video of anything I’ve done publicly you will find this before so, that’s a disclaimer, if you’ve already seen it I apologize, but I like to use this as example because it’s something I can relate to. So what was your question? True View?

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

TrueView, yes sorry I know the example, I forgot your question. So I went back and did some research, because there is selection points and media where a new medium shows up, and people sit there and you can find skeptic, you can find enthusiast, and that’s what makes the market, right. When television came out in 1949, the first ad which I found was in 1959 and is a Barbie ad. So I am sure many of you remember Barbie, I still think just from around. So the first ad was a man hand moving the Barbie doll to a radio jingle and that was the first TV ad and as you and I said, that’s crazy, why would you ever created that, we are using a radio jingle and using somebody’s hand to move a Barbie doll, right that’s kind of pervert.

However, if you look at today and you look at ads, video ads on the web, it’s actually a 15 second re-cut of a television ad in front of the video that you watch on the web and if you watch the video on the web, I am sure everyone of you have, you will see the first 15 seconds of an ad, which looks very much like a an add made for television. Now I am pretty sure 20 years or 20 years later when somebody is going to sit in this conference, they are going to use that example as the Barbie example, seeing how silly of them to take a re-cut of TV ad and use it because it’s not interactive, it’s not personalized, everybody watches the same damn ad and that’s so stupid of those guys to do it.

So what we tried to do is, we tried to figure out a way, how do you innovate in the online video space, right? First of all, it’s an ad you can interact with, second you can make that ad personalized, so we work in the back to the see if we can get multiple creative on the screen advertiser to say, let’s try and target the ad a little more to the audience. Now that’s not part of TrueView, but that’s generally what we do, trying to get more targeting. But TrueView is a way, where we can actually skip the ads, because I don’t watch the ad, right because you know it’s very hard to tell on TV when the ad is playing in your living room, I think most people have programmed themselves to take their breaks in the middle of the ad and all of us actually know when the ad is about to run.

So, I think we are getting programmed that way. So TrueView is a way for us to use the interactive features of the web and allow you to interact and say, I don’t want to watch the ad, and then if you go to the advertiser and say look, you don’t have to pay me, somebody skipped the ad, because I must have been silly in trying to personalize the ad for that person and believe that that person would like to watch the ad.

It’s a case of very interesting efficiency requirements on advertising as it relates to online video advertising. But good news is, we’re starting from zero. So if you can get most effective ads at the end, in the eyes of the user and we can get the advertisers to only pay for the ads, it actually slowly revolutionizing the notion of efficient video advertising, so that’s why TrueView has been extremely successful for us and it also gives us, – if you notice certain users keep skipping ads or certain ads keep getting skipped, we understand how to go back and change our ability to predict who’d wish to see the add. And also work with the advertisers saying, Think Read is something more interesting, because people don’t seem to like it.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay, that’s well met on that wok in mobile and software…

Nikesh Arora

It already odes, so if you watch videos in YouTube, on your favorite smartphone, you can’t see TrueView adds, which play against videos on mobile as well.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. And then speaking with some of the kind of display like topics, so you guys recently signed an agreement to sort of where it looks likes just continually just contractually targeted ads, text ads on to the Yahoo! Properties. Is this something that we think could evolve into a graphical relationship at some point or something bigger.

Nikesh Arora

I’d like it to.

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

But I mean for all of you, we announced a recent dealer where we’re serving at all properties, and part of sort of go back to our notion, we believe that in certain markets around the world and certain products, we provide the best monetization alternative for people who want monetize ads. So it’s a way to separate your user facing business and your advertising business. We believe in some cases, we provide a better advertising solution, sometimes then various type of publishers who have smaller footprints under that people or smaller footprints globally generally in countries they are operating.

So we’ve announced a deal with the – we are taking the other properties and putting out something. It’s defined ROI and there is opportunities I hope and I wish that expands to furthering a better relationship with advertising more, but that depends on a specific circumstance.

Ross A. Sandler – Deutsche Bank Securities, Inc.

And when we start talking about this search opportunity at Yahoo! I mean we’ve tried this before back in 2008, you guys were talking to each other, could there be a scenario where an arrangement whether it would be a backfill arrangement or certain geographies you guys could work together again one day in search?

Nikesh Arora

Anything is possible. Could there be a scenario, it’s hard for me to say.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Is that there is both likely in the next…

Nikesh Arora

You’re asking now about a likely scenario. That’s different type of scenario. Both things are likely…

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

Probably you won’t get a specific percentage than we get.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Shifting over to vertical search for a sec, so where are you guys today with the vertical initiative, I mean there is we’ve heard Larry and Patrick characterize, but it’s still very early, and there is certain verticals that like travel for instance, where you have ITA flight search and hotel finder, but we’re not seeing a lot of it yet.

Nikesh Arora

Actually you’re seeing a lot of it, so let me try and explain it. I think the way to think about it is, I think most of us relate from a user perspective, for those of you who hopefully have been searching from the early days of Google, I used to be happy getting an answer in Google, when I started working there, as long as the answer was findable in the web.

And I remember clicking to page two and clicking to page 3. I think it’s fair to say that majority of our users don’t click to page 2, or page 3 anymore in Google, unless they are searching for themselves, because then they want to see everything that’s about them out there. But usually if you don’t find the answer on page 1, you believe one or two things, that either you haven’t searched for it properly or Google doesn’t have anything interesting about it. So what you notice is that people search for the first page, they don’t find the research, they go back and rewrite the search, and do it in a much better way, thinking I must not have crafted my search well enough than click on page two and page three to find the answers.

And if you take that evolution what’s happened is overtime, I use search for specific things, your aspirations of what should come back is more specific. So if I type the name, if I type the breakers, I did it in phone last night of (inaudible) I will expect to see a map to get me to the breaker, I expect to see a phone number and other information about it, but actually don’t want the blue link saying click here, and read about the breakers in the website. So my needs are getting more and more specific and the way we think about it as, we call it going from 10 blue links to entity level search.

And what we mean by entity is that there is a finite number of entities that are on the road, there is hundreds of millions of them, maybe billions of them and every individual is an entity, every location is an entity, every product is an entity, and what we are trying to do is, trying to figure out, how to create an understanding of all the entities out there. So when you are searching for something, we can in the reasonable likelihood, predict what that entity you are looking for is, right.

To give you example, if there is a restaurant in three miles from here called the Taj Mahal and there is a Taj Mahal in India, if I was searching for Taj Mahal at 6 pm, what is the probability that I am looking to find out more geographical information about the Taj Mahal in Agra, India or I am looking for the Taj Mahal restaurant over here. So it’s the same name, different entities, which entity should I surface depending on as much I know about the attributes of the entity and when people within that location search of the entity, I should give you that different answer.

So this thing is extremely complicated, right. Every answer could change, depending on different context that you get. So what we have been working on is, trying to solve the entity problem. The entity problem is a different solution in hotels; entity problem has a different solution in products. If I type D800, I am looking for a Nikon camera, actually don’t want to go to the Nikon website now, I want to know more, more about the Nikon camera, I may actually want to buy it.

So we have efforts going on around products type, the name of the person now you’ll notice that some of you have that you produce a knowledge card that right tells you about that person, because within reasonably likelihood we can tell you that when you type that name, you’re looking for that person. If there’s more news about that person, we know that you should showcase the news about the person, because that’s what most people want.

So we’re taking that intelligence from website understanding to entity-level understanding, and we’re driving entities. And that’s the big shift, because when you go from there, you increase the probability that you’re giving the answer to the user what they’re looking for, but then you have to go to entity-level advertising. But if I type Taj Mahal and I found that restaurants, I want to advertise against restaurants as opposed to against the historical monument in India. And I don’t want anymore Googling, I actually want to find an entity-level ad, if I type D800, I want to see camera advertising against it, I don’t want to see websites of cameras, because you have to keep lock in lockstep between the user ask and the advertising result. We don’t have websites advertised with entities being asked for. We have to take the advertising to the next level, with the entity-level.

So a lot of our efforts you have seen our most recent efforts and product listing ads, our most recent efforts sort of the light search stuff that you sees about, we are trying to take out advertising to the entity level, because that’s where the user expectation is.

Ross A. Sandler – Deutsche Bank Securities, Inc.

That makes sense.

Nikesh Arora

So we don’t think about things and verticals anymore. We don’t think what about the real estate vertical, what about this other vertical, because sometimes it’s hard to disintegrate what vertical that entity falls in. And then I don’t have it at the top off my head, but you could find an entity, which sits in multiple verticals, and should I go as a user to a different vertical search to find the answer.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Sure. That makes sense, all right. I am going to add two more and then we’ll open it up to the audience for questions. So Google Fiber, a lot of folks here very interested in what you guys are doing there. Do you see a real economic model for Google Fiber and is this something with a high percentage probability that we could see in other cities this year or is this just a trial that’s designed to kind of get the rest of the ecosystem to kind of speed up the level of service that we’re providing in order to make the user experience better for folks in Kansas City or New York or wherever?

Nikesh Arora

I’m not going to answer this specific question as it relates to more cities, and look at see or not, in terms of generally Google Fiber I think it’s fair to say, we come from a technological upbringing, we come from a technological background which is we believe in Moore’s law, we believe in (inaudible) law. We believe in the fact that if you create capacity if you create memory, if you create bandwidth there will be services that would be created to use up that bandwidth. Right, with none of us could have anticipated the aspiration that all of us would have, to sit in a room and stream video on our smartphone but we can today. And if somebody has said that nobody is there going to do that, it reminds you of the famous study, which is not many years ago, which says only 2% of the people in the world are going to use mobile phones because it’s a phone and on the corner from everybody in their home and around I people sitting at their desks, sue mobile phone not willing to go the extra foot to grab that phone on the desk to pick it up, so it’s kind of hard to say that we are not as society going to consume all the technological ambition that’s creative.

So we come from that upbringing. So we believe that a radically disruptive idea of providing 1 gigabyte of service is going to be interesting because why do incremental things when you can do radical thing. Right, so we believe in 10x as opposed to 10%. With that in mind, I think it’s fair to say this to any concern that you have, we don’t wake up in the morning, and say let’s do something we’re going to lose money.

I don’t do it personally, I don’t do it professionally. So I think it’s fair to say anything we do in Google Fiber will be done rationally by us, part of what’s going is, we’re trying to test what’s going on, we’re trying to see how it works. We’re very happy with the results that we have in the Kansas. So I think it’s phenomenal that if you haven’t had the opportunity to build these guys to go in particular. It’s actually very revolutionary. How that translates from here on, it’s too early for me to see anything about, but I think it’s fair to say that whatever we do will be rationale.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Most fastening thing I read was that there’s actually companies being formed inside of houses that our Google Fiber helps us.

Nikesh Arora

I heard that.

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

That too, that’s festinating, right?

Ross A. Sandler – Deutsche Bank Securities, Inc.


Nikesh Arora

I mean we didn’t think that was going to happen. Houses are being sold there saying, if you lent over here, you get Google Fiber, if you lent over there, you don’t. Does that help?

Ross A. Sandler – Deutsche Bank Securities, Inc.

Yeah. All right, well of course last question from me and then I’ll do questions from the crowd, Facebook. So what are you generally, and this is just from the cash orders opinion. What do you generally think…

Nikesh Arora


Ross A. Sandler – Deutsche Bank Securities, Inc.

Generally think of what they’re doing, you talked to a lot of advertisers, what do you think of the efficacy of the ads that are showing up on Facebook and then last part of my question is this most recent initiative in search, do you see that as something like a traction on how do you think we can’t potentially monetize. These are a lot of folks that used to work for you guys that are over there doing this. So I’m guessing you think a like on a lot of these concepts?

Nikesh Arora

Your question is.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Is your advertising working, what do you think about they’re doing in search?

Nikesh Arora

I think it’s fair to say that Facebook is an interesting phenomenon, a lot of people use in the world, lots and lots of people. I think they have as a consequence some great assets, they have great assets in the terms of all the people who are on Facebook, people go there very often. I think they’re doing some interesting things in advertising. I mean the good news is that I think as we go from 10% of the world online advertising to hopefully 70%, 80%, 90% of the world being online advertising, there will be main players in that ecosystem, they’re lot just be out. I hope there are many players, because that creates a piece of innovation that creates that competition allow things to happen. So what they are able to do with all the assets they have is up to their imagination and the quality of people they have. They are good people. That’s how that great things happen.

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. Questions, anyone? Just got to be a couple. All right, right, sure right in front here. We have got another mic over here in case. Why don’t you guys raise your hand and I’ll redirect.

Question-and-Answer Session

Unidentified Analyst

Well, maybe I will phrase that question in a different way, you had mentioned social graph is a filter to provide context, do you wish you had the social graph as a filter to the right context or again in terms of your priorities, is the entity level more important or the connectivity that entity to other extraneous factors via that map more important as well?

Nikesh Arora

Well, I think it’s fair to say with a lot of resource and a lot of great people, we would like to have everything, not just one thing, so I don’t think there is need to run. We understand the value of social. I think it’s fair to say that our Google+ effort was designed to make sure that it works for us. We have seen great amount of success in Google+. We have hundreds of millions of users in each of our services, about billions in certain cases. So we think the work we have been doing in the last two years are pulling that together, trying to get commonality in the way we understand the user and how to use that services, we have made great strides there.

So we think we probably will have hopefully as good as understanding of our users in the medium term as of the people outside. Sometimes, it’s not important to be the first, it’s important to get it right. So I think it’s fair to say we are not the first search company in the world.

Ross A. Sandler – Deutsche Bank Securities, Inc.

We will go over here.

Unidentified Analyst

Yes. Could you explain little more on why TrueView is working, I know one of the satellite companies tried to have the DBR skips there, which offended some of the advertisers, I am just trying to wonder why you have a growing business and some people don’t?

Nikesh Arora

Well, our advertisers like it because they only pay for what people see. I’m not aware of the specific instance with the DVR story whether advertisers will still think or people just want seeing them because we provide metrics to show how many people saw the add, and we provided CPM based on has viewed not ad served. That’s one is I think the reason it’s working is that lot of people not are skipping them, in this case a reasonable number of people are not skipping them and watching the ad. And the good news is that the advertisers only pay for what is viewed so they have a budget with us, if you are able to serve the ads and our users are watching the ad and the advertiser pay if they don’t serve anything they don’t loose anything. And I think it’s fair to say that a significant proportion of our advertising is TrueView as it relates to video.

Unidentified Analyst

Questions on mobile, what do you think the effects at since you guys bought Motorola Mobility to be one of the separate unit because of your friction with the other OEM’s, I’m just wondering how that’s going to affect you now that Firefox, Mozilla foundation is going to release its OS anyway friendly carrier space and there is a lot of adoption what we see from the mobile congress in Barcelona went we get your thoughts off.

Unidentified Analyst

Take your subscriptions.

Nikesh Arora

I think there’s two different comments we made one was it on Motorola and the other was around the perceived threat of new and new operating systems which is going to be friendly, is that fair? So, I think on a Motorola topic, I think Motorola has been part of Google for the last nine months and I had the personal pressure of working with Dennis for the last eight years I’ve been in Google. He is a phenomenal leader, he has built a great team and I think if you look hard you’ll see how cutely they’ve streamlined the business the last nine months. We’re already focusing on what’s important, we divestitures to own business, focusing on how to run the company in a streamlined way, because we believe it’s important to be nimble in that space of smartphones, because there were a lot of people out there who are trying to innovate. So we have lots of positive hopes on Motorola. And we think the leadership team hopefully will deliver the expectations we have.

Switching that notion to the more friendly, operator friendly OS like somebody out there, I think that’s not just a mode of our specific question, that’s a question about the Android ecosystem, because it has the possibility even packing up just Motorola, but every other flow out there. But more part it I hope they’re successful, but I used to be the mobile phone industry before I was in Google, and I cannot imagine, and I cannot tell you how many mobile operating systems I’ve heard of or seen which are developed out there. So I think having a mobile operating system is just one part of the equation, working with the ecosystem to get them to adoptive to create success out of it, to get users to adopt those phones is hard. The fact that somebody have plans amongst a friendly OS was all that took and they should be another third very successful operating system which has been out there for many, many, many years that tells them the interaction. So a more part of it, I hope we get traction. If we get traction, we’ll do with that. But for now, I think our key is to focus on continuing to innovative with Android, continue to create a great OS, which OEMs love in getting used to adopt as well. .

Ross A. Sandler – Deutsche Bank Securities, Inc.

Okay. I think we’re going to wrap up there. Nikesh, thank you very much.

Nikesh Arora

Thank you very much.

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Originally Published at : SeekingAlpha

21 Investing Principles Utilized by Peter Lynch

1 Mar

Peter’s Investing Principles:

1. When the operas outnumber the football games three to zero, you know there is something wrong with your life.
2. Gentlemen who prefer bonds don’t know what they are missing.
3. Never invest in any idea you can’t illustrate with a crayon.
4. You can’t see the future through a rear view mirror.
5.There’s no point paying Yo-Yo Ma to play a radio.
6. As long as you’re picking a fund, you might as well pick a good one.
7. The extravagance of any corporate office is directly proportional to management’s reluctance to reward the shareholders.
8. When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more, sell your stocks and buy bonds.
9.Not all common stocks are equally common.
10.Never look back when you’re driving on the autobahn.
11. Never bet on a comeback while they’re playing “Taps”.
12. The best stock to buy may be the one you already own.
13. A sure cure for taking a stock for granted is a big drop in the price.
14. If you like the store, chances are you’ll love the stock.
15. When insiders are buying, it’s a good sign — unless they happen to be New England bankers.
16. In business, competition is never as healthy as total domination.
17. All else being equal, invest in the company with the fewest color photographs in the annual report.
18. When even the analysts are bored, it’s time to start buying.
19. Unless you’re a short seller or a poet looking for a wealthy spouse, it never pays to be pessimistic.
20. Corporations, like people, change their names for one of two reasons: either they’ve gotten married, or they’ve been involved in some fiasco that they hope the public will forget.
21. Whatever the queen is selling, buy it. (when the government privatizes a company, buy it).

Originally posted at: Investorwords