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To: Elroy who wrote (26622)	12/14/2005 1:15:46 AM
From: Lizzie Tudor	Respond to of 57684

Answer me this, do you think 2007 EPS growth over 2006 will be more or less than 2006 EPS growth over 2005? THAT is the key question for whether GOOG (at 54x forward EPS) is over or under valued. I'm going to have to see 2006 GOOG eps before I answer that. The situation is this: the worldwide ad market is 600 billion yearly. Online ads, which currently are cheaper and more effective account for between 11-13 billion total today, with virtually all advertisers looking to up online spending on the future. The current online ad market of 13 billion actually doesn't come from the 600 billion figure imho, because pay per click ads originally took off for small business who is underserved in the advertising arena. The point being, I think the eventual online ad marketplace might top out at say, 60 billion yearly? That would be 10% of worldwide total today. This is not to say that 600 billion non-online total would need to decline to $540- its just that a reasonable assumption is that ad buyers might spend 10% online. If GOOG is doing less than 10 billion yearly in sales in 2006, then I would say 2007 will continue with accelerating growth. Between 10-15 billion in revenues, its a wildcard. OVer that, and 2007 will decline. jmo.