Google (GOOG) today announced that it would purchase mungawumba bank . "We have taken a look at the banking systems, and today they are mostly I.T. systems, much like all the other applications such as gmail".
The benefits from the merger include:
- banks are really I.T. business these days. Google, coming from a software platform world, has a high level of capability in developing I.T. platforms.
- Google has cash - $15b in cash which could be used to (partially) capitalise a bank - if Buffet is to be believed a good use of Google capital.
- Google could combine a banking business with a e-commerce payments platform - think PayPal. Google already has Google checkout a competitor to PayPal.
- Google could use banking platforms to augment marketing platforms. Think credit card rewards. They *could* combine banking platforms with 'tailored advertising' - providing advertising to people who could do something with it. I think that would be a long way off, they would have to be very careful that people didn't think their financial data was getting away. Microsoft is providing rewards for people using its Live site.
Against:
- Both banking and marketing are cyclical businesses and correlated against economic performance. The current environment demonstrates the cyclical nature of the banking industry and it's relation to economic performance. Economic performance is highly correlated to marketing spend although at this stage in the growth of on-line advertising, the effect on on-line advertising and Google itself is unknown. Financial Times says higher. PWC via Guardian says lower - up 20% not %38%.
- Google has in recent times had trouble maintaining enterprise levels of service.
- conflicts between banking privacy and selling advertising.
- Banking compliance, regulation. Knowledge of banking (other than Google Checkout)
- Risk management
I was going to take a punt on potential investments. Google is similar in size (market cap $US130b) to a large bank (JPMorgan, Chase & Co - $US157b) (Goldman Sachs market cap $US50.41b)
Financial services of a type is possible. PayPal as a competitor in this market (and maybe Yahoo)- Google seems to be a weak competitor based on market share and features. Opt-out is required for information not to be shared between Google affiliates.
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2 comments:
some basis - not much for marketing as a trailing indicator of performance - has to be 'true' - but where are facts
battellemedia
Rats I wanted mungawumba bank :-)
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