Why I'm still bullish on Google

Three years ago when Google went public, I was in the middle of writing my book and had a little bit (I emphasize "little") of advance money burning a hole in my pocket, and felt pretty good about Google's prospects.

But we also needed a new couch.

Which, if you've ever owned a 4-year-old futon, you know is a pretty compelling use of some excess cash. What to do?

On the one hand, at the time I had never purchased stock directly (only through my 401(k)), and was a bit intimidated by the mechanics of the IPO. On the other hand, I worked (and still do) in technology, and knew I wasn't alone in thinking there was a lot of good stuff coming out of the Googleplex.

In the end, instead of buying the minimum 5 shares ($425 at $85 each), I bought a couch and two ottomans (which oddly enough were delivered in a box--the only way they'd fit up the teeny-tiny stairs into our teeny-tiny apartment at that time).

Of course, hindsight's 20/20, and while it's a bit annoying to know that $425 would now be $2,535 (as of closing today), I still think there's plenty of upside potential. True, GOOG is already up 496% from that IPO price to $507, but hear me out:

• Google today is often compared to the Microsoft of the 90s -- high growth, high excitement, at the epicenter of innovation and a darling of Wall Street. Microsft's stock has split 9 times, with one original share equal to 288 current shares. So even though Microsoft is now trading at $30.72, had they never split their stock (just like Google), they'd be trading at $8,847 (yes, yes, I know that comparison is a bit of a simplification). So why isn't Google there now? Good question; that leads me to my next point ...
• Microsoft had a much more predictable market, a relatively straightforward business model, and clear competitive advantages. An analyst could look at year-on-year growth, compare it to the potential market for operating systems and office applications, and feel fairly confident in the resulting valuation. Not so for Google. Their business model and strategy don't make a ton of sense to many people, and in an industry scarred by the dot-com meltdown, there's always some degree of fear that the bottom's just going to drop out again. And there's also the argument that Google doesn't have a clear competitive advantage, when Yahoo!'s free and just a click away. Never mind that Google's culture and atmosphere would be difficult or impossible to clone, there are more concrete examples of their competitive advantage to be found (another great one here, and one more here).

I may have missed the boat on the Google IPO (a mistake I fortunately was not over-eager to repeat with Vonage, though I came close -- until I read their financial statements), but I did eventually get on board with Google, and plan to be there for a while longer.

Then again, it is almost time for a new couch ...