The Google Credit Card

The Google (GOOG) credit card has arrived. No joke, this is the real deal people! So what’s the catch, right? The Google AdWords Credit Card has been designed for small-to-medium size businesses that already advertise on Google. The firm is now capitalizing on the fact that many of its advertising clients in one form or another are often cash flow constrained and lack a “formal” credit line. While we can’t say we were expecting to ever see a credit card from Google this just goes to show you how innovative and bold the firm remains after so long.
In these tough economic times credit only flows freely and or at reasonable rate to financial institutions more prestigious (AKA: lucrative) clients. With that being said it looks like Google has taken this rough reality and turned it into an amazing opportunity. The firm has now officially transformed itself from just being a tech giant to a large scale financial institutions of sorts as well. Anyone who had doubts on whether Google could truly break into non-tech industries won’t have much to say after this. This one move alone makes us rate Google a “buy” given that the firm has now launched a new revenue arm that leverages its immensely lucrative advertising client base and further increases its presence in the online transaction space.
Yes You Can Charge It!
A few years ago most would have seen this as a horrible idea for Google because credit flowed like water from a river. Today though credit is a precious commodity and Google intends to capitalize on this reality. Other big names such as Macy’s and Amazon.com have been doing this for years and reaped the benefits without question. For Google it makes complete sense as well given the amount of money it makes by charging advertisers through credit cards already. At the same time banks such as JP Morgan (JPM) and Wells Fargo (WFC) may get a little run for their money now in the small business lending world.
Currently, trying to attain or keep a credit line open that isn’t being used regularly is like trying to not catch fire while standing inside a burning building…not an easy task to say the least. Why? Banks have essentially gone on the defensive and continue to remain in this posture, as they prefer to only take “risk” with select (more lucrative) clients. With Google stepping in as the white knight for this segment of the business community it’s likely to do more than just pad its bottom and top line in untold ways.
The Logistics of it All
Based off initial statements from Google the first beta testers should be able to use the credit card for more than just AdWords. This could be a move to further promote Google checkout and Google Wallet as they look to increase their foothold against competitors in the online transactions space.
The Google card will be a MasterCard (MA) and be offer a competitive annual interest rate of 8.99%. This isn't an introductory rate either. Although earnings estimates will likely be raised on this news given Google’s history when the firm reports again it will likely destroy estimates in our view with its new X-factor.
The New Beauty of Exploiting of Cash on Hand
While most tech firms have recently been getting berated for holding onto cash Google hasn’t. Without question patient Google shareholders are finally being rewarded for remaining quiet about this topic as the firm opens up this new revenue arm with untold potential. With Google approaching almost $40B in cash and not paying any dividends we see this as an excellent way to start leveraging this giant asset in a new way beyond acquisitions or R&D.
Conclusion:
Google is just throwing out so many fastballs it’s hard to keep track. First it was Google+, then hot acquisitions, and now the Google AdWords Credit Card. What’s coming next? Who knows but don’t start making assumptions about Google because who knows what they’re cooking up next. Hate to say it but it must suck to be Yahoo (YHOO) right about now. Perhaps they should have just taken the buy out after all from Microsoft (MSFT). Finally, the AdWords Credit Card is just a perfect example why we remain confident in rating Google a “buy” as it reaches new all time highs.