Lucky to Live in this Era of Indexation

Last week we were greeted with writings from two of the best investors and thought-leaders: Howard Marks of Oaktree and Murray Stahl of Horizon Kinetics. The decades of wisdom acquired by both Marks and Stahl now share with us youngens via these readings is a gift we must all take advantage of. I am about to grossly oversimplify the points from both of these greats in order to riff off of it into a point of my own. I give this warning both to preempt any complaints about my simplification, and as a suggestion to do yourself a favor and read what both of these gentlemen have to say before going one sentence further here. If you are kind and/or interest enough to return to this site, once done with those piece, please feel free to do so.

Since I received a link to Marks’ memo first, my evening reading started there and proceeded to Stahl’s piece. This was a fortunate coincidence. Marks lays out the case for the role luck plays in living life and attaining success in financial markets, tracing it to the idea markets are mostly efficient, but for those areas with a “lack of information…and competition.” Meanwhile, Stahl examines what he believes to be one of the single largest sources of market inefficiency today in what he calls “indexation.” After reading both pieces, I couldn’t help but think: “we are lucky to be investors in markets in this era of indexation.” This one thought struck me as the perfect conjunction between the two pieces.

Stahl has used the word “indexation” to explain the phenomenon whereby more assets and managers are investing in indices and ETFs which are designed to “provide portfolio exposure to very specific criteria, such as an asset class, an industry sub-sector, a growth metric, a stock market capitalization band, and so forth.” Over time, Stahl has discovered and invested in several of the inefficiencies resulting from such a phenomenon, including the “owner-operator” whose major stockholder manages the company, spin-offs designed to streamline business operations, etc. I recommend reading Stahl as to why these opportunities arise in today’s market.

Why do I say we are lucky to invest in this era of indexation? Because, as Stahl argues, indexation is an incredible source of market inefficiency. As more and more dollars seek out exposure in the broadest of ways, there is ample opportunity for those of us who seek to “turn over as many rocks as possible” to find the right opportunity. Two of my favorite setups fit this bill, although I never specifically delineated these ideas in writing as an outgrowth of indexation. This is so because both setups existed as long as there have been markets, and are in many respects traceable to behavioral traits of human beings. What has changed is that indexation provides a natural outlet through which these behavioral weaknesses are even more pronounced than in years past. I have named these setups “Guilty by Association” and “I’ve got a Label, but I don’t Subscribe.” While there are similarities between the two, they deserve to be thought about separately.

"Guilty by Association"

When a company is “Guilty by Association” they are treated in the same way as another, more identifiable peer group or index solely by some kind of perceived proximity. These tend to be situations that are more macro in nature, where a broader problem is reflected upon a specific company or sector. Some examples might be helpful.

During the crisis period in Europe, all European stocks were hit with equal force. The market “threw the good out with the bad” so-to-speak. One particular class of opportunities we spent considerable time on (and ultimately made significant investments in) was businesses listed in Europe, with a revenue base that was largely global. In other words, these were companies that traded in Europe, though they did the majority of their business outside of Europe itself. In these situations, there was selling, even from investors not situated in Europe, due to fears about the Eurozone’s viability. Yet, these companies themselves were in a position where if the Euro actually collapsed, they were unlikely to be significantly impacted in a negative way. In other words, they were “Guilty by Association” with the currency in which their shares were priced.

Another example would be the hatred of muni bonds in today’s environment. This entire asset class is hated due to concerns about Detroit’s bankruptcy and Puerto Rico’s solvency woes. Because Detroit and Puerto Rico are municipalities, conventional investment wisdom beholds that municipal bonds in the general sense must therefore be in trouble. This kind of extrapolation is abundant and wrong.

Indexation impacts these areas because people who invest in broad-based ETFs or indices sell their exposure entirely, in order to avoid the perceived fear. In doing so, the selling of the basket forces mechanical selling of all the subsidiary components without consideration for which specific constituents are and are not impacted on a fundamental level by the fear. Thus, the good that gets thrown out with the bad and is “guilty by association.”

"I've got a Label, but I don't Subscribe"

This is the micro twin of “guilty by association.” Since so much money is moving into ETFs, and ETFs are trading with all kinds of sector and niche labels, there is pressure to fit each and every company into some kind of cookie-cutter genre. These labels impact how analysts and investors alike think about specific companies. Stocks get assigned to analysts based on the “sector” they cover, and many investors invest in sectors or companies that are in accordance with a specific mandate. I had been planning a blog post for a while called “Beware of Labels,” but I think all of those points would better fit the context of this post. One of the biggest misnomers in today’s markets is the “technology” label.  Mr. Market today dumbs "technology" down to mean: a) any company that is on the Internet; and/or, b) any company that makes hardware.

In my opinion, there simply is no such thing as an Internet company. There are retail companies who operate on the Internet (and at this point is there a single retail company who doesn’t operate on the Internet?), there are B2B companies who use the Internet to offer their services, there are financial platforms who provide web-based platforms. To ascribe the label “Internet” to one company and not another is merely referential of the fact that some companies are old and some companies are new. And even that is an oversimplification, for there are older Internet companies that are still called as much, despite being more analogous to marketing companies. And yet somehow, all these various, wide-ranging businesses end up with the “Technology” label despite the fact that their differences are far more pronounced and abundant than their similarities.

In a perfect world, we would throw away the technology label and call these companies what they are, whether that be media, retail, etc., but this isn’t a perfect world and that creates opportunities for us investors seeking out inefficiencies. Heck the “Telecommunications” sector is somehow a sub-sector of “Technology” and includes a company as old as AT&T (though I am aware AT&T today was actually one of the Baby Bells who ended up swallowing Mama whole). The biggest impact labeling has is in how analysts model these companies and the types of investors who are drawn to (or pushed away from) different sectors. We all know how popular comparables analysis and that too gets incredibly misleading when similarities and differences are conflated with one another.

An example of this would be my investment experience with Google. Over the past few years, Mr. Market has called Google an “Internet stock” and a “one-trick-pony” at that. To that end, analysts and investors alike oversimplified in comparing Google only to other Internet stocks, and in a perceived battle against Apple, this same community viewed the company as out of its league (See GigaOM, CBS News and HBR on the "one-trick-pony"). I took a different perspective: Google is more akin to a media company whose advantage lies in the infrastructure and distribution side. Wikipedia describes media as “the storage and transmission channels or tools used to store and deliver information or data.” This certainly seems like an apropos description of Google, and it’s more clearly reflective of who pays Google money at the end of the day--advertisers, much like how we think about “traditional” media. If you think about Google this way, and realize one of the company’s crucial advantages is in how it stores, aggregates, categorizes and distributes information, it’s clear that Google does and can do far more things than “just” search. YouTube is a natural fit in this type of company, more so than just an Internet or search company, and as such, it leverages the advantages of Google’s platform while also leaving open the opportunity for Google to naturally segue into other areas altogether. Within that context, Google looks far less like a one-trick-pony, YouTube’s valuation becomes increasingly important (see my writeup on the importance of YouTube), and the company is in fact more diverse and capable beyond “just” search.

Labeling is a human endeavor; something we do in many disparate fields. One of the most well-known is the biological taxonomy (I think every adult still remembers “King Phillip came over for good spaghetti”), which is an organizational hierarchy. While labels have always been used in stock markets, only now are they actual forces behind the mechanical allocation of capital. This is so due to the proliferation of ETFs and “indexation.” Even in biology, there are blurred lines between different species, etc. This is but one reason why we have seen a great increase in spin-offs: when some companies who are thought of and thus modeled “that” way, have a subsidiary that doesn’t fit the bigger mold, that subsidiary tends to be “underappreciated” by Mr. Market.

Market Inefficiencies

A lot of people, myself included, like ripping on the Efficient Market Hypothesis. This is certainly not without merit; however, as Marks emphatically argues, there is much truth and wisdom in the idea that market participants are in fact really good at incorporating known information into the price of securities. When we look to make investments, we must then do what Marks’ implies in another of his spectacular memos, by asking ourselves “what is the mistake that makes this a mispriced investment opportunity?” With these two examples based on the problems associated with Stahl’s “indexation” we have two areas in the abstract within which we can identify mistakes. To that end, we are lucky to live in this era of indexation for how it exposes the market to repeatedly and mistakenly misvalue companies.

Disclosure: Long Google

Links for Thought -- March 30, 2012

A Template for Understanding: How the Economic Machine Works... (Bridgewater) -- This is a MUST READ, and I mean that to the fullest. Ray Dalio and Bridgewater lay out a more complete, robust and accurate assessment for how an economy works than anything we see in the financial presses.  Plus the write-up is concise and written in layman's terms so that anyone and everyone can extract real value.  Reading this report should be a prerequisite for ANY candidate who runs for office, maybe then our economic rhetoric would be a bit more complex, but way more rational? One can dream!

Google Cloud: Coming Soon to Robots Near You (Seeking Alpha) -- To date, the robotics story has primarily been hardware driven, based on innovation in mimicking human movements and/or actions based on necessity. Now the rapid advance in software is adding a whole new dimension and setting the stage for the dawn of widespread adoption of robotics. While on the topic, check out this awesome video of a robot that can jump over 30 feet if need be! 

World's Changed Man, World's Changed-China Edition (Financial Times) -- This is from earlier in March, but still just as relevant.  Throughout the month, each market downtick was more a reflection of concerns over China than Europe.  That's quite the change from this past summer.  What are the consequences?  Well one might be the end of the big commodity bull that's lasted over a decade.  Can the commodity bull persist if China slows?  Does this bode as a positive, or a negative for the US?  These have been the questions that I spent the majority of my attention on this past week.  I should have some charts and analysis within the next two weeks.

Insane in the Membrane (Outside Magazine via Readability) -- This is a fascinating long read on the history of Gore-Tex and the state of the waterproof, breathable fabric market.  There is an intense battle being waged for market dominance that includes some interesting twists and turns.

How the Natural Gas Craze Will Impact Clean Energy (GigaOM) -- This is an issue I have spent quite a bit of time contemplating myself.  Is natural gas a transitory or enduring shift in terms of efficiency, cost and environmental cleanliness?  If so, what are the consequences for clean energy on each of those variables as well?  We seem to be at a big inflection point in the adoption of both.  Is this an "either or" proposition, or can both succeed?  There are way more questions than answers right now, and in these answers lies considerable opportunity.

Why Minsky Matters (EconoMonitor) -- In my book, Minsky is the most important economist today.  Yet, there's a bit of a debate going no amongst the new age Keynesians as to how exactly Minsky is relevant.  Here is L. Wrandall Wray's analysis as to why Minsky is so damn important.  It's slightly wonky, but a must read for anyone interested in macroeconomics.

Praise is Fleeting, but Brickbats We Recall (NY Times) -- Really fascinating psychological analysis of how the mind processes negatives in contrast to positives.  We tend to recall negatives more frequently and with more clarity and this has to do with how the brain works.  Understanding psychology generally speaking is very important in improving as an investor.

I usually close with one of my nature pictures, but today I will leave you all with this awesome video presentation taking advantage of the power of the iPad:

YouTube: Bringing Disruption to a TV Near You

Want to invest in one of the best, most innovative startups in the world with taking none of the risk associated with a startup, and more potential upside than many of the most popularly watched private market web names like Facebook?  Look no further than the strongest brand hiding behind the Google name: YouTube.  YouTube is turning into a huge business, and were it a standalone start-up, the company would easily be one of the most valuable Internet companies and one of the most hyped.  Instead we hear little about YouTube’s business other than the obligatory question and non-answer answer on each Google quarterly conference call about when/if/how much money YouTube will make. 

Today, YouTube seems even more an afterthought in the narrative about Google the company than Android and Google + and I can’t help but find the irony and humor in it all.  While everyone is waiting for Google’s true “social” answer, and even Google itself is out there searching (pun intended), YouTube is in fact a social, technology and media behemoth in its own right.  After all, it is the place where “going viral” became the thing to do (speaking of which, here’s a cool video with Kevin Alloca, YouTube’s “trends manager” on what actually makes a video go viral).

Facebook is the startup darling of the world, Netflix at times has been the streaming superstar, and Apple is…well…the apple of everyone’s eye.  Meanwhile in between watching hours of YouTube videos a day, everyone forgets that a) YouTube has an amazing business model and b) Google is both cheap and sitting on a competitive Trojan Horse.  Let me explain.

The Cost of Content

I’m oversimplifying here, but in content, there are the producers, the distributors and the consumers.  When anyone talks about content distribution companies, and video in particular, the cost of content is important in determining the bottom-line profit.  The true advantage of streaming video is that on a relatively small fixed cost base, a distributor can reach every web-connected person on Earth.  In an ideal world, that sounds like a simple and great business, but the content producers have only been willing to engage the distributors with largely one-sided terms. 

The content producers know full well the value in distributing via the Internet, so they even created their own distribution service—Hulu.com.  Netflix has used its DVD business, the company’s cash flow machine, in order to fund content acquisition for its streaming service.  As streaming has gotten easier and more popular amongst the masses, many have fled DVDs for streaming, thus forcing Netflix to improve its content mix online.   As their early contracts expired, the company found itself having to negotiate in a position of need with the studios, and since then has paid a hefty price.

Meanwhile, YouTube just keeps doing its thing.  Worldwide, people view 3 billion YouTube videos per day, which for perspective is “the equivalent of nearly half the world’s population watching a YouTube video each day, or every U.S. resident watching at least nine videos a day.”  While Netflix and Amazon are out paying (more like begging for the right to pay) for content, YouTube users are willingly uploading 48 hours of content per minute for FREE.  Granted not all YouTube content is as desirable as the content others are paying for, but considering how many people watch videos on the site every day, it’s safe to conclude that at every minute YouTube is gaining more valuable content at no expense.   

With this recipe, YouTube has become the most watched online video site by a mile (h/t to TechCrunch for the chart):

In the process, YouTube has already become a heavily entrench business with a strong brand name and strong brand loyalty.  When people talk about the competition for online video success, particularly in financial circles, the competition pits Netflix against Amazon, with Apple sometimes entering the fray and Google a total afterthought.  That needs to stop. 

As of today, YouTube has already reached deals with CBS, BBC, Universal Music Group, Sony Music Group, Warner Music Group, the NBA and the Sundance channel, amongst others (contract list from the CrunchBase).  Some of these deals were reactionary to growing pressure from content producers at the copyright infringing uploads done by YouTube users, but at the end of the day, these content deals have done a whole lot to enhance the quality of the videos available on YouTube and entrench the site as THE go to platform for video. 

Notice a theme with these content deals?  Many of the early deals are music-centric.  There is no better place on the Web to watch high quality concert video than YouTube, nor is there a better place for an artist to debut their new song via a video (even VEVO uses YouTube), with MTV now a soap-opera-type channel lacking any coherent connection to music.  Witness Cee-lo Green’s catchy release of F*ck You with the words literally dancing across a blue projection screen.  This was both a powerful and catchy way for Cee-lo to get his song out to the masses, and was a catalyst behind the song’s ascent on the pop charts.

YouTube the Platform

The Cee-lo release provides the perfect segue to YouTube as a platform.  YouTube is a disruptive medium in itself, but more interestingly it has become a platform upon which other disruptions are launched.  At the same time, YouTube has also become a video platform that is ubiquitous across all viewing platforms.  Although a web-page in itself, YouTube is a “channel” (rather app, but what’s the difference these days?) on any web-enabled TV device from designated viewing devices like the Roku or AppleTV to gaming systems like the Xbox.  The point is that YouTube has both incredible reach to its audience, and is an innovative vehicle for some of the world’s foremost innovators.  Even Apple can’t deny this reality.

In addition to debuting singles on YouTube, there are successful artists who owe their entire careers to the medium.  Look no farther than Justin Bieber (geez I promised myself that name would never be typed into this blog…), someone who would never have been “found” had it not been for the site.  Bieber isn’t alone.  Daniel Tosh has built an incredibly popular show on Comedy Central based entirely off of YouTube videos, and the Young Turks have become serious news pundits from their YouTube show. 

Louis CK, a comedian with a strong cult following, used YouTube in an entirely new way by releasing his “Live at the Beacon” directly through the platform.  “Lucky” Louis went on to sell this show for $5, with customers able to pay and watch instantly.  This is far cheaper than a DVD retails for, and a much easier way to directly connect with an audience.  The move was both highly profitable for Louis, and rewarding for his fan base. 

When you have a business that works better for all the parties directly involved than the existing business model, you have a powerful force.  It’s cheaper for fans, more profitable for the artist, reaches a far wider audience than anything else, and has fewer intermediaries taking a cut.  Stuck in the middle is YouTube/Google easily (and happily) collecting its margin.  It’s only a matter of time before more artists follow Louis down this path. 

And YouTube’s appeal isn’t limited to music, comedy and entertainment.  The Khan Academy is using YouTube as platform to disrupt education.  While it is a non-profit that produces free, high quality educational content for view via the YouTube platform, let’s not dismiss the fact that the Khan Academy is proving the power of the platform as a way to not only reach those interested in learning, but to fundamentally change the way eager students learn.  TED Talks has also used YouTube in a similar manner as a platform to bring informative, educational videos to the masses.  We’re only just beginning.

YouTube and the Innovator’s Dilemma

YouTube is following the path of the Innovator’s Dilemma, and all of the dominant market leaders in the sectors impacted by the company are already on high alert (if you haven’t already done so, go read the book now, or for a short-cut read my blog post on it).  YouTube has firmly entrenched itself on the low-end of the video-watching marketplace, and I mean this both in terms of Internet video, and video in the broadest possible terms.  Further, YouTube has significantly deflated the cost of distribution and consumption, making both effectively free in many contexts for the content producer and the viewer respectively.  In doing so, YouTube generates a fairly high margin on its advertising dollars on.   

As YouTube has earned more and more money on the “low hanging fruit” (aka the free stuff) they have been able to step up their acquisition of premium, higher quality content.  Some of the aforementioned deals are evidence of this.  In other words, the company is using its entry level product, which has helped it gain market share, in order to fund its climb higher up the distribution tree.  As a result, the company is in the midst of a further pivot up its S-curve (H/T to Your Brand is Showing for the graph). 

The current technology is the combination of TV/Cable/Internet that we presently view video on, while the emerging technology is YouTube.  In my imprecise opinion, right now YouTube is somewhere around the big red dot that I drew on top of the chart.  The company is on its parabolic ascent, but has yet to reach and cross the current technology in its prowess, largely due to the defensive posturing of the existing infrastructure.  But that can’t last forever.  As the chart indicates, and as is typical with disruptive innovation, YouTube’s day is coming rather quickly.  Keep in mind we’re talking about a company and technology barely more than six years old.  It was within the past two years that we were introduced to high definition video for streaming, that we were able to watch YouTube video’s on our television, and even more recently, that content was divided into organized channels. 

Not long ago, YouTube had a major success in acquiring streaming rights to a premier Indian cricket tournament for live games.  Viewership surged far quicker than anticipated, and was more profitable than anyone expected. Soon many of the major sports leagues will have their television contracts expiring, and one can imagine that YouTube will be a player for the rights, especially considering their already strong relationship with leagues like the NBA and NHL.  If YouTube were in fact the first to bring mass-streaming of live sporting events to the American masses, they would be the first to truly liberate video viewing from the existing infrastructure and into the digital age.  After all, live sports viewership is probably the single largest impediment to would-be chord cutters today (myself included). 

YouTube gets this, as is evidenced by what CEO Salar Kamangar recently had to say: (h/t to New Markets Advisors, I strongly recommend reading their write-up on the disruptive power of YouTube as well):

"When you think about the impact cable had, we think we're in a position to have a similar impact for video delivery, like what cable has done with broadcast. In the early '80s, you had three or four networks. Now those three or four networks are responsible for 25 percent of viewership, and the cable networks are responsible for all the rest. Right now, the fraction of traffic that is Web video is small relative to broadcast and cable, but it's growing at a fast rate. What's amazing is that the Web enables you to build a kind of channel that wouldn't have made sense for cable, in the same way cable enabled you to build content that wouldn't have made sense for broadcast. You couldn't have done CNN with the broadcast networks; you couldn't have done MTV with the broadcast networks." 

And here’s a great TED talk with Chris Anderson, Editor in Chief of Wired Magazine, on “How YouTube is Driving Innovation”: (obviously an embedded YouTube video)

Putting the Story in Context with the Numbers

Now that I have established a benchmark for how awesome and disruptive YouTube is, the next step is to take a look at the number.  If you’ll remember, my initial premise was that one can buy one of the most disruptive, innovative companies today without taking any of the venture capital risk, for free.  This requires that I establish two premises: 1) that Google without YouTube is at most, fairly priced, if not downright cheap, and 2) that YouTube as a stand-alone entity would be worth a sum exceeding $10 billion in market cap, and in a range that reaches northward of $20 billion.  For that I will have to follow-up with a second post, but I will not leave just yet before beginning the next step of the argument.

Using consensus analyst estimates on revenue for 2012 (courtesy of Business Week), a 10% WACC and 4% perpetual growth, Google has an earnings power value plus growth of $680, that is a 7% premium to this price.  YouTube itself accounts for a mere 4% of Google’s in this estimate, and if you removed YouTube’s revenue contribution entirely from Google, the price drops to $653, a 3% premium to today’s price.  From this, we can deduce that YouTube represents about $27 per each share of Google, or a total intrinsic value of $8.7 billion. 

Before next week’s post on how to value YouTube, I just want to finish off by stating my belief that $8.7 billion is way too cheap for such a valuable web property, especially when companies with lower revenues like LinkedIn and Zynga are trading for near $10 billion, and Facebook is pricing at over $100 billion.  In a recent social brand value analysis by BV4, a brand value ratings agency, Facebook checked in with the highest brand value of any social web property at $29.1 billion, with YouTube in second place at $18.1 billion.  Assuming a $100 billion market cap for Facebook, and applying Facebook’s brand value to market cap ratio, that pegs YouTube at a $62.2 billion value.

UPDATE: The last paragraph has been edited to input the correct brand value and market cap numbers thanks to Matt in the comments below.  Again, more detailed numbers analysis to follow sometime next week.

Author Disclosure: Long GOOG

The Information: A Book Review Meets the Facebook vs. Google Debate

In The Information: A History, A Theory, a Flood, James Gleick traces the history of information from Claude Shannon working in Bell Labs through the modern day proliferation of information on the World Wide Web.  Not long ago, former Google CEO Eric Schmidt controversially proclaimed something along the lines of: “every two days we create as much information as we did in the history of the world up until 2003.”  While not necessarily controversial on its face, many perceived this as a slight on the accumulated knowledge of mankind up until that point. 

What Schmidt meant by was not to diminish the accomplishments of his ancestors, but to laude the proliferation and compounding power on which information works.  Information over time itself becomes a facilitator of faster and swifter growth in new information.  Gleick’s book provides us all with the framework through which to understand what Eric Schmidt meant and why it is consequential and important. 

Few would deny that today is the Information Age, and as such, any author who titles his book “The Information” is undertaking a self-acknowledged daunting and maybe impossible task.  As humans, it is perhaps our ability to create and manipulate information (and not our opposable thumbs) that distinguishes us from the rest of the Animal Kingdom, and that certainly factors into the intrigue and import of this book. 

By and large, despite its length and depth, the book reads like a novel with robust character development and seamlessly interwoven and entertaining narratives.  In reading The Information we learn about how the telegraph, telephone and Internet each came to vastly accelerate both academic and economic growth in due to the efficiencies gained from packaging information in novel ways.  We learn about the history of “coding” from African mountain-top drum beats, to World War II era code-breakers to web page development and the quantities and depth of information required to transmit each message across their respective medium.  And we learn about how today, as the Information Age just may more aptly be labeled the age of Information-overload.

The book is a multi-disciplinary take covering information from fields including physics, engineering, statistics, biology, English, and history, all at different points.  Through this vast lens, people from any background can extract significant value from reading this book.  In order to understand modern times, and how and why things work as they do, we need to take a step back and attempt to understand yesterday first.  Why this would be important to a computer programmer or entrepreneur is self-evident.  Its import to investors should be equally so.  We need to have a framework through which to understand the evolution of information-based services in order to understand what may be a value-trap and what may be the next big thing.

As I was reading the book, I couldn’t help but decipher in my head how it relates to today’s debate about whether Facebook is the next Google.  While reading The Information, I came to thinking that many miss what I perceive to be a key point: one of the most essential elements of Google is that it is THE catalogue of information for the Internet.  Google’s dominant position as the search engine of choice and its first-mover advantage in building out its own information storage infrastructure has helped cement that status.  Facebook may (and does) have an advantage as it pertains to social connections, yet Google’s advantage is far more robust and deeper. 

Google’s advantage is “information” in the most general and abstract sense.  The company figured out not only how best to store said information, but also learned how to catalogue and index the information in the most accessible manner.  Social is but one facet of information and it will never be more than that.  While just about anyone with an interest in information can extract value from Google, that’s distinctly not the case with Facebook.  Quite simply Google holds the keys to the information that the Internet facilitates.  Information is ubiquitous, and Google is your catalyst.

This is far from my complete analysis of the Facebook vs. Google debate (which I really think is an illusory debate founded solely on the premise that everyone likes an either/or proposition these days), but I think it is particularly relevant given the history outlined by Gleick in The Information.  I would recommend this book to just about anyone interested in learning about how the Internet came to be, for without information theory there is no Internet, but in particular, I would recommend it to anyone involved in either the development of new information-based services or any investors in media or technology companies. 

Author Disclosure: Long GOOG