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Google: The Bear Case

No one else is writing this piece, so it will have to be me.  I should say upfront that I’m not predicting that this will happen (yet), and I’m certainly not making a recommendation.  I’m just laying out a scenario that could kneecap Google and take its stock back to, say, $100 a share.

Google’s major weakness is that it is almost entirely dependent on one, high-margin revenue stream.  The company has dozens of cool products, but with the exception of AdWords, none of them generate meaningful revenue.  From an intermediate-term financial perspective, therefore, they are irrelevant.

So, the question is, what could happen to AdWords, and what will happen to the company (and stock) if it does?

The first thing that could happen is that, for a variety of reasons, AdWords revenue growth could slow.  The reasons could include market saturation (one of these days, Google will have picked all the low-hanging search fruit) and/or a flattening of keyword price increases (recent anecdotal evidence such as FTD suggests that this is already happening in some categories).  Both market saturation and price pressure will occur naturally someday, as they do with every business. The only question is when.

If/when this slowdown occurs, what will happen?  The stock’s multiple will compress.  How much?  At $460, Google is valued at about $140 billion, or approximately 50X-70X a 2006 free cash flow estimate of $2-$3 billion.  If grows slows gradually, this multiple will probably shrink to 30X-40X.  If it slows precipitously, the multiple will probably shrink to 20X-30X.  Natural forces, in other words, should eventually compress Google’s FCF multiple by 20%-60%.  (I am comfortable predicting that this will happen.  Again, the only question is when.)

And then there are the disaster scenarios.  Chief among them: click fraud.  Yes, to some extent, click fraud is just a cost of doing business–already factored into ROIs.  And, yes, no one knows how big a problem it is, which means it could be a smaller problem than people think.  And, yes, Google presumably has airplane hangars (sorry, Googleplexes) filled with rocket scientists working the problem.  And, yes, they might get it licked.

But, let’s say click fraud continues to increase as a percent of total clicks (which seems perfectly plausible to me).  Eventually, all else being equal, ROIs will start to decrease, as the $1.00 keyword that delivers a profitable sale today will deliver an unprofitable one tomorrow.  Then, two things will happen: First, marketing dollars will begin to flow back offline (a la FTD) or at least flow online at a slower rate.  Second, keyword prices will start trending down.  The latter will happen as the growth of (real) clicks is also slowing, compounding the impact.  Search revenue the product of CLICKS X PRICE-PER-CLICK and, thus far in the industry’s history, both have enjoyed consistent, impressive growth.  If one of these two metrics starts to drop, overall revenue growth could stagnate, and then, ultimately, decline.

If this happens, Google’s multiple will compress to the 20X-30X range cited above.  Only this time, the multiple will be applied to a smaller free cash flow stream–at least until Google starts cutting pie-in-the-sky projects and firing people.  And as this is happening, of course, Google’s hiring–about 10 new geniuses a day–will get more challenging, because getting paid in Google stock options won’t seem like such a great deal anymore.  To combat this, Google will have to pay more cash, which will put more pressure on margins and cash flow.  And, of course, many of the pre-IPO billionaire managers and developers may decide that now is the time to start that start-up they’ve always dreamt about–(“Enough of the big-company thing.”  “It’s just not fun anymore.”)  And that’s if the impact is gradual.

If the click fraud impact (or the impact of some other unforeseen problem like a global recession) is sudden, then the above scenario will seem like a holiday.  The one drawback of super-high-margin revenue streams is that they create the illusion of endless and effortless profitability.  Google has so much money right now that one of its biggest challenges is finding ways to spend it ($200 million on Googleplexes, $600 million on server farms, $500 million worth of product development per year).  What this translates to is a high and rapidly increasing fixed cost base–one that, on the income statement alone, now amounts to a run-rate of about $2 billion a year (excluding traffic acquisition costs).

Importantly, almost all of this $2 billion is fixed, not variable.  If revenue drops, these expenses will remain the same–unless Google takes painful steps to cut them.  Google’s net revenue run-rate in Q4 should be something on the order of $5.5 billion, so there is plenty of room to spare.  But having enjoyed a 55%-plus operating margin in the past, it’s hard to imagine that Google shareholders are going to accept, say, a 20% margin–so the golden Google management team will find itself under intense pressure to cut costs and re-organize.

Would the company survive?  Absolutely.  The franchise is now so strong that it would take Enron-like fraud to destroy it.  But when revenue and profits are plummeting, when global advertisers are running away from the distaste, expense, and frustration associated with search marketing as fast as they are currently running toward it (and as fast as they ran away from the last miracle vehicles–display an email–in 2000), and when Google has transformed from a symbol of the American dream to yet-another get-rich-quick hallucination, it will seem as though Google is in danger of collapsing.  Managers will leave en masse, in disgrace.  Newspapers the world over will revel in front-page analyses of shortsightedness, arrogance, and what went wrong.  And the cash flow multiple will compress to below 20X on a lower FCF stream.

Is such a scenario likely?  Probably not.  But it’s certainly within the realm of possibility.  (How do we know this?  Because the same thing just happened to Yahoo!, AOL, and every other advertising-driven dotcom on the planet–except that in those cases, the fallout was worse).

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34 thoughts on “Google: The Bear Case”

  1. Nicely done, Henry. Any of this is as plausible, if not moreso, than any of the other stuff flying around at this point. Certainly your comments around diminishing ROI, growing cost base, attracting and keeping talent and “I have sooo seen this movie” ring extremely true to me, as one who has lived something similar. Not to say that they can’t pull it off – their brand is strong, their service is important. But they are a one trick pony, and unless they are able to ride their core strength into additional markets – IMHO that means catching what I see as the coming wave of brand related advertising online – they may well run into problems. The “Pack” is super-dee-duper and all, but next years’ revenues associated with it will equal what, one hour of global PPC sales?

    – Stuart

  2. I’m not sure click fraud can cause revenues to implode in the long run. You’re a retailer, you pay per click, you get some conversion rate, and your increase in profit is clicks * conversion rate * profit per transaction.

    Now click fraud increases and your conversion rate goes down. You would expect the same real visitors to come to the site and buy. But logically, you reduce the amount you pay per click, and you still pay the same total amount.

    In the short run there’s a problem for the ad buyer due to the increased risk in bidding. Once there’s an equilibrium amount of fraud, Google still gets some fraction of the total value add. The fraction is driven by how good they are vs. other media, ie how much high-conversion-rate traffic they drive.

    One suspects that as the novelty wears off, the total value add might not grow so fast or even decline. The first time you run a campaign for your Beanie Babie 2k6, you might get a huge conversion rate because it’s the first time people have been able to find your site. And people might overbid based on those initial results, setting up for an eventual decline in rates.

    On the other hand it’s not inconceivable the continued growth in time people spend online, resulting in increasing online ad budgets, and new outlets like targeted Internet TV and radio ads might keep growth high for years.

  3. Some ‘scenarios’! Good!

    Sure, so far Google has gotten its fantastic revenues essentially just from advertising. Advertising has been a terrible business: In the past, had to pour really good money into the TV “great wasteland”. Wasteful bummer.

    So, downside point: For how long can the current Google advertising revenue stream really be such a big part of the future of advertising? In more detail, (A) is what Google doing really even close to the most efficient or effective way to do ads and (B) is advertising really going to last? I.e., for (A), couldn’t we really think of better ways to do advertising? For (B), in the past, a person with money in their pocket and a need in their gut could see an ad and, in effect, have only two options (i) not buy or (ii) buy the product in the ad, and often enough they took (ii). But, the situation of just two options really shows a terrible lack of information. So, now, even if the person does want the product, some Internet searching, including on Google, can let the person find other sellers. The seller who did NOT spend on ads but was found just from ordinary Google searching has a cost and price advantage. So, sellers, why advertise? Why spend that money? Irony: Did Google advertise?

    Upside point: Thank you Google advertisers. Thank you, thank you, many times. Your ad spending lets Google have an altruistic ‘mission’ of organizing all the world’s information, and I get to use that information for free! But, if the ad revenue fell, then what might happen to altruism? Don’t want to think about it! I mean, once, before the Internet, I needed to do a search, went to Dialog, and blew off $1500. One search, $1500. Ugly!

    So, beyond just ads, Google has some ‘assets’ that should be counted. Yes, accountants can’t count these ‘assets’, but the last time the accountants could count nearly all the really valuable assets was in the time of Henry Ford. No, advertising people, I’m not talking about the ‘brand equity’.

    Assets: (1) Billions and billions of Web pages ‘served’, on disk, nicely indexed! (2) Millions of Web site programmers busily inserting special tags — just for Google — in their HTML, tags that greatly ease Google’s processing and indexing. (3) Millions of Web sites that keep their Web pages relatively ‘static’ (uh, the Web pages don’t have to be static, not at all) so that the Web page a ‘Googlebot’ sees, copies, stores, and processes can be relevant to the URL link on a Google search that a Google search user follows. (4) Google has been watching; the big Google eye in the sky sees nearly all, or at least a lot; Santa Claus may not but Google actually does have a relatively good idea if you have been “good or bad”! More to the point, with some applied mathematics processing the clicks, Google stands to have the world’s all-time ultimate “file of the GOOD leads”!

    These assets constitute a severe barrier to entry. I mean, who wants to go to a search site that has only 10 million Web pages instead of, say, 10 billion? So, to compete with Google, just for ‘openers’, need to copy a large fraction of all the Web. Hope your investors have deep pockets and lots of patience, guys!

    For more on the upside, vague but not easy to dismiss, is the ‘mission’ — all the world’s ‘information’. You mean, Google could have and/or index nearly all the world’s information and NOT find a way to get revenue from it?

    Uh, we should notice: Since Google indexes nearly all the information, nearly all the people wanting information go to Google. Since Google has nearly all the people searching for information, nearly everyone with Web information they want people to find cooperates with Google to index that information. That is, more briefly, Google gets all the searchers because Google has all the information; Google has all the information because Google has all the searchers. Sounds close to a natural monopoly to me. Again, there might not be a way to make money from that?

    To say “No” would sound like a mainframe executive 20 years ago saying that they had all the heavy-duty mission-critical bet-your-business on-line transaction data processing, and microprocessors and end user desktop computing had no solid “business case”. I.e., they meant we already know that an operating system based on multiple virtual memory address spaces needs a staff of dozens just for care and feeding so that there’s no way a single end user could have such a system. How would an end user even thread the fan-folded printer paper or monitor the system console 24×7? Right. And, like the mainframe executive 20 years ago who looked at digital communications networks for e-mail and on-line fora and concluded no “business case”. Right. And the world needs in total a maximum of 50 computers. Right. Ah, such vision! Yup, a vision is the last thing a mainframe executive had!

    So, I see Google as having a license to print money via any of several techniques — the current AdWords being only one. If they keep up their public image of altruism and print only moderately obscene amounts of money, then they will be okay. But if they tarnish their image and print really obscene amounts of money, then Congress and the DoJ will get interested. Basically, moderately obscene amounts of money has a relatively solid basis. For now.

    For the future? Who says that have to hold the stock 100 years? As we drive forward in time and the future fog slowly clears just ahead of us, watch carefully and, once the “basis” no longer looks so “solid”, then sell, and be among the first to do so.

    Sure, the world could be destroyed just any second now by a big asteroid collision. But, the last big one was 65 million years ago. So, I’m not holding my breath waiting for another one. In particular, I don’t think the world is about to end, the economy collapse, or ‘information technology’ flop. Instead, I believe that ‘information technology’, and Google, will move on, really, will move forward about the fastest of any major effort in civilization. Besides, if a really big asteroid does destroy the world, then what’s the difference in investing in Google?

    For the CAPM instead of picking stocks, e.g., Google, uh, the CAPM is one of those cases of, if we had some huge volume of data we do not have and likely never will have, if we could make a lot of really tricky assumptions nearly impossible to validate, and if everyone did some huge amount of really tricky calculations with this information, always right up to the latest second, then could just follow the CAPM and relax. Again, right!

  4. Google’s only option of long term (5-10 yrs) survival is to spend some of that cash on real companies. If I was them I would be buying utilities. Seriously, water and nat gas.

  5. One contributing scenario not mentioned is shrinking online
    ad revenues due to a consumer recession caused by
    millions of ARMs resetting this summer and next requiring
    households to cutback on spending

  6. Sounds like Henry has never used AdWords. That’s the problem with click-fraud. There’s too many people writing articles about it, who have no clue.

  7. Very informative and perceptive. Oh, and also don’t forget the giant comet or asteroid that could crash into the earth. It happened before, remember?

  8. The poster 3 posts up from me is correct.

    Henry’s article about the google doomsday scenario appears to be 100% cut-and-pasted from the fuckedgoogle.com site.

    (Which, as far as I’ve found, is the ONLY negative google site on the entire internet. everyone else, with no exceptions, are google cheerleaders. that should tell people something about how far this mania has progressed)

  9. Hello everyone,

    Well, it’s not that click fraud is going away, but Google can handle it pretty well from their own site. And did you know that 90% of AdWords revenue comes from serving ads at their site? They give away the lion’s share of revenue collected from ad serving other sites.


  10. awesome writeup! i’ve been wary of google ever since it was around $280, but im just shocked to see it go up every single day!

    im not sure when wall street will wake up and realize this, but im sure that the day will come.

    take care

  11. I don’t work for Google but I have many clients advertising on the engine.

    Google’s success was built on the algorithm it designed to provide users with the best search results. They will find a solution to click fraud and users will always use the best product out there.

    Google will most likely continue to serve the best organic results while working on the issue of click fraud.

    Keep in mind that in a level playing field, all other search engines will be affected by click fraud as well. Again, the best site will prevail.

    Most agencies that manage search campaigns use thrid party measurement tools to determine the end ROI – the proof of successful marketing is in the numbers. Click fraud aside, the medium is cost effective for most advertisers. If marketers continue to demand reliable reporting, they are protecting themselves against fraud. Google’s move to offer Urchin free of charge was a step in the right direction.

    I think Google will be just fine…


  12. Henry’s jumped on the “Click Fraud” bandwagon.. Doesn’t he realize that’s yesterday’s news?
    As a developer of ROAS (Return On Adspend) analytics technology, tracking the profitability of both Yahoo Search Marketing and Google Adwords advertisers with a combined spend of over 150MM annually, from experience I can say Hentry’s so far off course, that his ship will never come in…

    1. The 20% of advertisers that generate 80% of the ad revenues flowing through Google Adwords track (ROAS) at the keyword level, and can spot click fraud very quickly.
    2. Conversions mean little, It’s cost per conversion that tells everything. Competitors driving up bid prices, affect CPR or ROAS far more than click fraud.

    Henry, another investment analyst that thinks he understands technology, and how it affects the profitability of major search providers.. LOL (Don’t quit your dayjob)….

    Keith Pettersen
    RedZone Global

  13. While not commenting on your thesis (although a meteor crashing into the Google complex could take the stock to $100 too), I must comment on your declaration that “No one else is writing this piece, so it will have to be me”. Simply not true. Risk assessment is part of the equity analysis process. We’re RESEARCHING IT, writing about it, and talking about it. Our conclusion is for our clients.

  14. Almost 50% of searchers use two or more search engines, 46% would migrate to a better technology deliver more relevant results (comscore). The click fraud problem is not a hard problem to solve; my bet is some small company will solve it in 06 (this is a problem that Google is not that motivated to solve for the obvious reasons). The search market is white hot (thanks to Google), and no doubt will experience a rapidly changing landscape this year. Keyword is just a baby step in the direction of understanding a user’s sense of what is relevant when they search for something using any search engine. Given the mass popularity of search engines what do you think will happen when the next generation of search (which delivers better results) enters the market? Look for it in 06 – does anyone remember Netscape?

  15. Interesting stuff. I’d like to hear more about Googles numerous other initiatives before shooting them down.

    Yes, Google Base, Google Video, Gmail, etc etc etc don’t add much today, but that can’t last forever.

    And like people state that Yahoo and AOL suffered ad related slumps, they forget to mention that they have also been successful at finding other products and revenues as well as ad sales.

    So will Google, the question is when and what will they all add up to.

  16. Henry, youre a genius – coming to the conclusion that if growth slows there will be multiple contraction… pure, unmitigated brilliance!!
    And if that wasnt enough – the other earth shattering observation – google’s growth cannot continue forever. Thank god we have the wise keeper-o-multiples because I really thought they Google could grow into infinity and become the entire US economy. You are insightful – because true beauty lies in being able to predict that all companies slow due to product lifecycle and other natural economic phenomenon, not in calling when it will happen. The time element is irrelevant in making money in stocks. In the long run – you will be proven right, not only on Google, but also on Amazon. And that fellow Keynes knows nothing.

  17. Finally, someone said it! People thought I was crazy when I didn’t accept a Google job offer, but the whole business felt too volatile for me. What you say is certainly plausible, but what shocks me even more is just how easy it is for a new search technology to come out and wipe away their business. Yes, Google has the best search engine. But investors don’t seem to realize how volatile that is. We used to think AltaVista was it for search, then we thought Yahoo! was amazing. What happens when the next technology comes along? Every product Google has produced has been disappointing – from their GoogleTalk messenger to their sidebar to their recent desktop search to their more recent Google Video. They build up press releases, sparking speculation of grandeur; they are always disappointing announcements yet the stock always goes up afterwards. Google has a strong brand for search (google=search), but elsewhere they seem to be getting on people’s nerves because there isn’t a need or desire for their other services. People are not as loyal to the google brand as google wants you to think; they don’t have a strong brand – just a strong search engine.

  18. Henry,
    very interesting writeup. What happened to your gig with Slate? Are you still explore China ventures? Never heard back about your thoughts on China since…

  19. This stock is all about moving it around so that the institutions that are involved with option trading can keep the printing press going. These guys are minting millions of dollars a day playing the options. It is Ironic and so typical Wall Street. They all hated Google when it IPO’d and now they all love it 400% higher. You were in the business Henry, how many of these whores with these sky high upgrades don’t dare step on Googles cape in fear of never getting any banking business with them. The first sign of slowing growth and this stock loses 100 points over night.

  20. I think you’re onto something here regarding observing the patterns when comparing to Yahoo and AOL. Google is an innovative company that sees opportunity and is not afraid to take it –in fact they regurlaly encourage their employees to do this 20% of the time. Perhaps this same innovative spirit will figure out how to do this in another channel besides adwords

    I don’t know for sure, but can sure speculate that they’re seeking many other streams of opportunity.

  21. Great article. Thanks for playing devil’s advocate on Google. Its good to be reminded from time to time the peril of investing in the highly competitive high tech industry. Its unfortunate that “Blodger calls Google at $100” is now the top story/headline on Bloomberg system. The article completely takes your write up out of context. Even though you were one of the early few that touted Google. Now you’ll be remembered only as the guy who called the Amazon surge and the guy who called the Goog’s freefall. I feel your pain- people/media have selective memories.

    1) Look at page 7 of the 10Q on the Revenue Recognition portion of the ADSENSE program. “REVENUE” comes in and is totally paid out to their partners…. INCOME Contribution ….ZERO…. but what does GOOGLE do, they count it both as revenues and expense…. WHICH INFLATES THE REVENUE GROWTH RATE WITH NO MARGINAL CONTRIBUTION TO INCOME
    2) Then come our GENIUS analyst…. They point out that Revenue growth is astronomical (yeah right!!!)….. and then use a ridiculous multiple of REVENUES to justify a sky high valuation….

    Here is an example…
    Say the revenue from AD Sense is $500mm, All that money is paid out to their partners so Expense is $500mm, Hence Net Income contributiono is ZERO.

    But our SUPER ANALYST would take that incremental $500mm, multiply it with a revenue multiple of $50 and say that should increase the market cap by $25 BILLION (yes that is Billion with a capital B)…….

    It is the same sham from the Dot Com boom… but we never learn do we…. Why do you thing that they are paying $1 billion for the AOL deal, They will do the same revenue recognition magic and boost market cap by $20 or more Billion… nice game …..

  23. “Newspapers the world over will revel in front-page analyses of shortsightedness, arrogance, and what went wrong.”

    Henry, i hate to say this but “… we’ve been fed this bullshit since the craddle.”(to quote J. Conner from a movie)

    The bankers and financiers(if any) would see this happen to the other portals of the world first before they’ll let this happen to this billion dollar baby of theirs.

    Don’t get me wrong, the market is sensitive to cos that have outrageous or to quote your article with a phrase ‘pie-in-the-sky’ valuations but the market is saying will still give you at least one if not a couple!!… but its’ got to be based on something concrete… hence forth Google.

    But Google isn’t the be all end all of internet cos or even an idea… there’ll be other ideas and cos.

    In this era it is all about Google. It is in control of its’ own destiny.

    Not many ideas going forward will be equal or bigger that this
    ;that’s what the investment bankers are telling themselves…

    “We can take this baby around the block a couple of times and make a fortune. Hey that’s what they call us right (creative) capitalists. We invented it for G**’s sake”- Investment bankers

    The fallacy of that thinking is they assume a 100% probability when it is actually more like 80%… that’s what happened to Enron that 20% error

    Common Henry, you should know better sell me a 10-15X compression and we’ll call it a correction.

  24. Given that Google’s Adsense network (the part vulnerable to click fraud) in Q3/05 represented 43% of their revenue or approx. $675M for the quarter are they likely to do anything that shuts down that revenue? I don’t think so. Click fraud is not a bandwagon, it’s a 5 mile freight train and it is not stopping for anyone.

    As long as affiliates are paid commission by way of the cost-per-click model, click fraud will continue to grow. Bloggers know all about click fraud, I’ve seen countless blogs with statements like “don’t forget to click on my Google ads, it helps pay the bills” should we call it ‘cultural click fraud’ ? Hmmm, who owns blogger.com? Someone should have a chat with them about that.

    I found this earlier today, is Google’s reputation sliding ?

    — Hot Keywords of the Day —

    “Google Arrogance”
    “Google Anti-Trust”

  25. Henry,

    You’re nothing but a slimy crook like many of your brethren on wall street. Out to make a quick buck in good times and bad.

    How come you’re not in jail for your trading misdeeds during the boom? What goes around comes around…your day has yet to arrive.

  26. As an advertiser that spends between $2000 and $6000/month on Google advertising for several years (almost from day 1 of AdWords), we’ve noticed that, even while keeping our bids constant, that our cost per conversion has jumped up 2x or 3x, depending on the keyword. For whatever reason, Google is sending us fewer qualified leads than they have before.

    However, they have also lowered their minimum bids from 5 cents a click to 1 cent per click. So we lowered all our bids, some right down to 1 cent. Instead of the $150/day that we were spending before, we now spend about $40-$50/day, and we actually get more conversions than we did at $150/day. I suspect that we’re an isolated case, since most advertisers bid far more than the minimum, but as click fraud increases cost per conversion, other advertisers will lower their bids to keep cost per conversion in line.

    A previous poster pointed out that the largest advertisers have ways of detecting click fraud. The problem, though, is convincing Google of this. Even if you can prove that certain clicks were fraudulent, just try getting someone over at Google to answer a phone call and listen to your case. They may be hiring lots of PhDs, but customer support is almost non-existent. If you can find a customer support phone number for Google, you’re a better detective than I am.

  27. I want to quickly add that Google is still the most cost-effective form of advertising out there. That’s really the bottom line. I also have an account over at Yahoo/Overture, and their cost per conversion is nowhere near as low as Google’s. So as long as the ROI remains competitive and click fraud doesn’t get out of hand, Google may continue to siphon ad money from other sources (TV, print, radio, etc). When you look at Google relatively small market share in comparison to the overall advertising pie, it’s possible that they could continue to grow for a lot longer before leveling off.

  28. For the person who stated that you can use the IP address to detect traffic coming from click-fraud warehouses, it’s not that easy. A professional organization like this would likely be using some sort of IP spoofing to make it harder to detect the clicks (each click will look like it’s coming from a different IP address). IP spoofing is mentioned in the Wired article on click fraud.

    Another form of click fraud that’s extremely difficult to detect is when an amateur webmaster who runs a low traffic site clicks on each ad on his site once a day. If this person has a dial-up account (and hosts it with an external hosting company like 1and1.com) then the IPs will appear completely unrelated from day to day, since dial-up accounts have no consistent IP address history. Since there are untold numbers of these little sites showing Google ads, I suspect the reduction in conversion rates is due to the proliferation of ads on these small sites (what Google calls its “Content Network”). On the other hand, at some point the ratio of small site to big site will stabilize, so perhaps the conversion rate will stabilize at some point.

    We’re keeping a close eye on the numbers here on our end.

  29. The real problem with GOOG is this: A new and better search engine will likely emerge in the not too distant future. This new search engine will more than likely be launched by a GOOG competitor. With this much money sloshing around it is just a matter of time before some Wiz at MIT or some other melting pot for the super smart comes up with a better idea. Just 11 years ago everyone was told that Netscape would own the web. We were told the “web browser” was what equaled domination of the internet. This turned out not to be the case. Remeber the first bath the portals took? Remember InfoSeek (seek) and Yahoo at 6 bucks a share after an itnital pop in the early 90’s? They dropped like dog food because they were viewed as unimportant. The only one that ever thrived was YHOO becasue of its search and better layout. With all the talk about click fraud and the merits or demerits of AdWords, AdSense, ad this, ad that, the bottom line is this GOOG search may not look all that great in 2 or 3 years. Better technology will come. Also, believe it or not, a lot is in a name. Typing Google.com is cool. Typing MSN.com and then finding their skinny rectangular data entry point for your search words is not. Someone needs to get a a cool name, some good technology, and a better deal against click fraud for the real customers. When this happens, and it will as the engines of capitalism mandate these things, GOOG will go the way of WANG, BORL, and the Edsel. My prediction: GooG goes to 300 soon and if the earnings get real bad we will be looking at a 50 stock in 2008…

  30. It’s not very difficult to create anti-fraud system for Google. They have to charge not more than one click coming from the same IP in one period (1 month for example) for single advertiser’s domain. It will kill 99% of fraud activity. Manual clicking will be unuseful and software hitboting will be 30X times more expensive. On the other hand it wil decrease Google’s profits. Gooogle do not do this because of loss profit side effect. It is not profitable for google today. We are receiving loses ang Google receives profits…

  31. The likeliehood of click fraud “leveling off” is slim to none. As long as anyone can become a “publisher” the candy store is open.

    Everyone blows smoke about the technology involved with detecting click fraud talking IPs, patterns, etc but its really so simple, you lock the back door. My guess is if you took a look at where all those adsense checks were going a half witted fraud investigator could probably nail 90% of it, but as long as bouncy ball google keeps pointing at technologists and offering rhetoric as solutions no one will ever see the trucks backed up at the dock.

  32. Since Google has lowered their minimum bit from 5 cent to 1 cent my renevue dropped sharply (90%).

    For sure this will affect Googles balance sheets, but this company has still a lot of air to breath. They just buy up companies after companies and therefore have a large potential for creating and promoting new products.

    Look out for a correction but not for Googles sell out. This wont happen.

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