The two biggest challenges that Google is facing are that ads are tough to show on smartphones (because they are narrow) and more and more searches come from smartphones, and that Facebook is competing harder and harder in an ad based world that Google cannot enter.

The biggest opportunity I see for Google is to turn Motorola around and have an integrated/open ecosystem that catches up with the closed Apple ecosystem. I am not argue that Google makes Android a closed system like iOS and only sells its smartphones through what is now Motorola. What I am saying instead is that Google could be in the position that HTC or Samsung are today. It could make the best Androids and use a hardware OS combination to make money a la Apple.

Android is bigger than iOS and yet Apple is worth over twice as much as Google in market cap. iOS is 90% of the value of Apple. Android is considered to be less than 10% of the value of Google. This is where Google’s biggest upside resides in my view. In an successful implementation of the Motorola acquisition.

In any case I think that there are 3 companies that are a must have in anyone’s portfolio now and they are Google, Apple and Amazon, in proportions to their market caps. Facebook would also be a must have but not at 100 times earnings. I should also clarify that I have Google, Amazon and Apple in my portfolio and have for a while.

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