Don’t forget that Waymo will always be a much lower margin business than search! Setting aside the decades of R&D expense, those cars require purchasing, maintenance, warehousing, etc.
All that may be true. Human drivers are not the point of comparison. The search business is. Waymo will still always be a lower margin business than search for the reasons I enumerated.
Waymo may end up being great business. But it is unlikely to exceed what search is/was. For that reason, press X to doubt GP's claim that Alphabet is undervalued. "IT'S PRICED IN" [1]
It's unlikely to exceed what search was, but transit is a much more reliable bet for continued revenue. I don't think anyone is betting on ad revenue being reliable at Google long term anymore.
But the market is so, so much bigger. And the margins will likely stay high for a long time while there are few competitors, and their main competition is human drivers.
Not having to pay drivers is an enormous source of profit.
As big as search!? Doubtful. The entire globe is unlikely to be the addressable market. China will never let Waymo in. India will undoubtedly field multiple worthy competitors. Europe is hostile to technological progress and even more-so to American tech cos. In most parts of the world, Waymo is unlikely to be able to deliver a positive gross margin business given the per-capita-income of most places.
It could be a big business. In fact, I hope it is. Lives will be saved. But there is still a lot to be worked out, and the margins will never be as sweet as those of search.
One of the main reasons to vertically integrate is to expand margins by squeezing cost out of the value chain. My point still stands: Waymo will never have margins as good as search.
