BUSINESS

Sometimes, it’s not easy being Google

JASON KIRBY August 6 2007
BUSINESS

Sometimes, it’s not easy being Google

JASON KIRBY August 6 2007

Sometimes, it’s not easy being Google

BUSINESS

JASON KIRBY

It’s often said that Google’s search engine puts all the world’s knowledge at our fingertips. So it stands to reason enlightened people should be less likely to repeat mistakes of the past. Try telling that to the company’s overexcited investors, who seem doomed to follow in the footsteps of their tech investor forefathers.

On Friday, the company released quarterly results that analysts and investors widely panned as “disappointing.” How bad were they? Well, the tech giant’s revenues soared 58 per cent in the second quarter to US$3.87 billion, while profits jumped 28 per cent to US$1.1 billion. Ghastly, to say the least. Google shares fell seven per cent, wiping out US$10 billion in shareholder value and dragging down the wider market.

This is all very similar to the irrationally exuberant days of the late 1990s’ tech boom.

The Internet was going to change the world, we were told, which justified outlandish expectations on the part of investors. Companies that merely doubled in size each year were punished as laggards until reality rudely interrupted the party and the bottom fell out of the market. It’s no wonder Google’s CEO Eric Schmidt has consistently played down short-term investor expectations.

Not that Google doesn’t face some big hurdles. The company’s costs are out of control, forcing it to consider a hiring freeze. And Google still relies almost solely on online advertising for its business, even as reports raise alarm bells over the surge in click-fraud, where scammers game the world of online advertising for easy money.

One analyst, Jordan Rohan of RBC Capital Markets, wrote in a report that the latest quarter “served as a reminder that Google remains an unconventional company with chronic investor communications miscues and unorthodox decision processes.” But there’s nothing unique about the expectations of Google investors. History will tell you that. M