Tuesday, February 14, 2006

Google completely over-valued

This is purely my opinion, but I can't understand why Google's stock is priced so high. In light of their recent behavior towards both the US and China regarding privacy and human rights, it's obvious that the main motivating emotion driving the company is greed. I think a lot of us had hoped that the "Don't be evil" tag line would finally be true for a large company. Unfortunately, it's just not true, and I think it may not even be possible for a large, publicly traded company. Had Google remained a private company, then the personality of the owners would be the driving force behind the businesses activities. Now it must be the never-ending quest for the quarterly earnings figure.

As far as the technologies go that Google is releasing, Adobe Flex/Flash is WAY ahead of the AJAX toolkit that Google has built. All you have to do is look at Breeze vs. GMail to get a good sense of the relative maturity of the two technologies. The Google/Sun announcement has turned out to be vapor to date. What was the point?

The real question for the long haul, is can Google deliver more advanced software and still survive on the unobtrusive advertising model? It's an interesting question. It would be interesting to see if they could deliver an enterprise class software solution for free based on advertising revenues generated by the product inside the enterprise. Could they move into the Salesforce.com space with an offering, or maybe a twist on a small business accounting application. It's hard to imagine such an application being successful when technically, clicking one of the ads means you are no longer working.

Another problem that has cropped up for Google that is probably much more important than most people are admitting and that is the problem of click fraud. Click fraud with Google is where a system is set up to simulate clicking on Google's delivered ads. It results in essentially stealing from Google's advertising customers by Google's affiliates. In a small way, if you click on a few ads on a blog or website you like solely for the purpose of delivering a few pennies to the site's owner, you are committing click fraud. Imagine the trouble you could cause if you set up a couple of cfhttp bots and hammer away a constant stream of your own spurious websites. The big problem here is that Google has enabled the entire system of fraud from end to end. I'm not sure they could ever completely stop it.

So with a known (severe?) flaw in their core business model, can somebody tell me why this stock is valued so high? Are we so desperate to find an honorable company that we ascribe that characteristic to the first company that gives us a marketing campaign claiming to be "not evil" when its actions belie that image?

2 comments:

  1. I'm inclined to agree you about the AdSense click fraud. I've not found AdSense traffic to be valuable. However, I predict you'll see Google ruthlessly protect the privacy of it's users. The whole farm depends on it.

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  2. The only value in Google is its brand. They are like Apple. Apple could put crap in a box--call it Apple iCrap and people would camp out overnight to buy it. I am in no way saying that Apple makes bad products--it’s just that their brand does the heavy lifting.

    Where Google differs is that what they are offering (lately) is nothing new or revolutionary and this is what makes them way over-valued.

    As far as "Do No Evil"...I think any company or person that says this should be suspect. It not only stands in the way of corporate self interest, it goes against basic human nature. To me this sounds like something the devil would say.

    If Google was private would it change the way they do business? Probably. At least until they went out of business. Would the founders remain altruistic and faithful to their beliefs? Doubtful. Money and power changes people and almost no one is exempt. After a while the ultra-rich-powerful-intelligent-(insert virtue here) lose touch with the average Joe and tend to think they are (a) better and (b) should make decisions for everyone else. This is what happens to the mega-rich, politicians, celebrities and intellectual elites.

    What amazes me about Google is the trust that everyone puts in the company. On one hand you have people complaining to the government about the evils of big business. On the other hand, everyone loves Google which is a HUGE company dead set on spreading the one thing that everyone seems to hate: ADVERTISING.

    One last rant about Google. I think they've been doing "evil" for quite a while. In November of 2004 they made a huge change to their algorithm which basically shook up the listings. The timing of this was suspect in that it forced many highly relevant, highly ranked sites to use AdWords for Christmas advertising (i.e. make tons of money for Google). They have now also created a system that virtually guarantees inconsistent rankings because data is constantly being churned throughout their network. Of course this forces companies to rely on AdWords for consistency.

    Is what Google is doing wrong? No. Should people put all their eggs in one basket? Not on your life. Don't blame Google for failure. The only thing that I see that is wrong is the fact that Google continues to use "Do No Evil" as their motto.

    --Brad

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