Why Google is Worth More than AOL and Verizon
As I write this, Google has a market cap of about $148 billion, compared to Verizon at $124 billion and AOL parent Time Warner at $82 billion. Google might rule the Web search market, but Verizon’s $88 billion and Time Warner’s $44 billion in revenue last year dwarf Google’s $10 billion.
Why would a smaller company that makes less money be worth more to investors than larger competitors? Are they just being irrational? Maybe so, but I think there is at least one good reason why Google has been so successful: it has focused on providing services, rather than content or infrastructure.
Why is this important? Think about it this way: whenever you do anything on the Internet, chances are you can break it down into three layers:
1) Infrastructure - your connection to the Internet, whether it’s Cable, DSL, dial-up, FIOS, etc.
2) Service - the application you use to get what you want done, for example the search engine you use to find things or the mail client you use to read you email.
3) Content - the stuff you read, watch, listen to, or create yourself for others to see.