Thursday, February 9, 2006
Google stockholders: Cruising for a bruising?
There are finally some sensible articles being written about Google in the business press rather than just the group love we were seeing. Until Google's latest quarterly earnings missed projections by a significant chunk of change and shaved off tens of billions off its market cap. As I'd written previously, Google has been cruising for a bruising (as my college roommate would have put it). According to this Washington Post story:
Since Google reported its earnings, analysts have finally started taking a harder look at the company's numbers. Google blamed the disappointing profit on income taxes, saying it wound up paying a higher tax rate than expected.
Devitt rejected that explanation immediately, saying that even without paying more taxes, Google would not have hit its profit target. By Friday, the Wall Street Journal was talking up the same theory, calculating that taxes accounted for only half the disappointment, and quoting Devitt.
Wall Street also is likely to start listening to some of Devitt's other concerns.
He thinks Google advertising is infected with "click fraud," a term that covers a variety of ways that advertisers, their competitors and others can game the system and manipulate the number of "hits" that online advertising attracts. He thinks Google's advertising rates are headed for a fall because advertisers aren't getting the results they want. And he thinks the simultaneous fallbacks of Google, Amazon and Yahoo could turn investors off to all Internet stocks.