5 Reasons Why I Do Not Own Google Stock

Recently a few people have asked me why I don't own Google stock. Their question goes something like this: "It's such a great company, you love their products, you spend thousands on AdWords for various projects, so why not own shares?"

Google is obviously a kick-ass company. They are, in many ways, the new Microsoft. They hire the best people, they produce some of the best apps, they have large user base and fast revenue growth. Although the shares are still over $500, the P/E/G ratio is reasonable, arguably. So what's up?

Below are the five reasons why I don't own Google stock.

1. Their core revenue base, AdWords, depends on people not switching search engines.
2. Google is locked in a continuous cat-and-mouse game with the search engine spammers. Every two-bit webmaster is trying to get to the top of the results, and it shows. Spammers are getting more aggressive all the time, and Google is struggling to stop them.
3. Other companies are working on better ways of searching, and will eventually leap-frog Google. For example, Facebook's social graph, if applied to search, would make search spamming much more difficult. Imagine if your search results were filtered through your friends-of-friends network. That would effectively kill spam, and you can bet Facebook is working to make this a reality. In fact, Facebook has recently hired some key Google employees.
4. When people finally decide to switch away from Google, it will be really easy. If I thought ask.com was a better engine, I could switch in 5 minutes. The moment people switch, Google's revenue could plummet!
   
5. It's a software company. I may be a programmer, but I avoid software companies as investments. The software business is too volatile. It's too easy for the next generation of geeks to create a revolutionary technology that makes the previous stuff obsolete. The next generation of apps is never more than 18 months away.

P.S. Although I don't buy shares in software companies, hardware is another matter entirely. Take Apple as an example. Apple has all kinds of lock-in that Google can't even hope to achieve. They've got the OS lock-in, the file format lock-in, the iTunes lock-in, etc. They've also got a lock on the hardware supply chain. For example, anyone who tries to make an iPod clone will inevitably pay more for the components (flash memory, touch screens, chips, etc.).