Sunday, October 14, 2007


If there is one thing that I find most interesting about the "talk" surrounding the digital revolution from media, business and financial people is the very very very small amount of people that actually really know anything about how these new companies work.

The amount of times I have sat through business meetings with people who tell me their two cents about Google. Facebook and MySpace and respond "no" when I ask them if they have an account with these companies amaze me. You cant "get in" to these companies without an account.

True story - I sat through an advertising meeting where the decision maker had included a sizeable sum of his online budget to MySpace. He didnt have an account. Wow.

So I am reading the New York Times article yesterday entitled As Its Stock Tops $600, Google Faces Growing Risks.

In the first 100 words of the article, this comes out: "Jim Cramer, the high-decibel CNBC talk-show host, told his audience on Wednesday night “never to take financial advice from anyone who doesn’t recommend Google.”

Based on what ? Paid search ? The company is currently valued at 50 times its earnings, so trust me, that means you are betting on what they are going to become - not what they are today. And if their strategy is based on owning advertiser relationships and matching them with the customers, they are in the firing line of Les Moonves, Rupert Murdoch and Jeff Bewkes (Parsons is going soon) - all smart guys who have put up with people trying to steal their clients in the past - and crushed them after they realized what was going on. Google say they are a "friend to media".

Dont get me wrong - Google have smart people in there. But you are betting on them being able to make monumental decisions, incredible acquisitons and to have the cunningness of a Murdoch to reach the potential of the value they have today. The $600+ value is betting on Google to move out of massive reliance on paid search and be able to own a big chunk of advertiser relationships to place their spend for them. Today, this is 5-10% of total advertiser budgets.

Can you see Google sales people wining and dining marketing directors at the Superbowl and on skiing trips saying "Chuck, we can run 50% fo your ad budget. Trust me." ? Or do you see them more as really smart tech guys ? If you see them as the latter only, their share price goes to about $280-$300 tomorrow - in line wit the approx 20 times earnings tech stocks get.

My point is that Google wasnt really around until 2000. Thats a little only 7 years ago. They didnt really switch on paid search until a few years after. Sure they have revenues in paid search in an era that has such an archaic, flimsy infrastructure that the only "web" we see is pages and text. But tell me, where else does Google get money from ? What else have they been reeeeally good at ? They have tried a lot of stuff - do you use Google Documents every day ?

True, companies have had a hard time translating their businesses online and Google have helped with that problem. But trust me, the web you see today and the what the web will be like in 5-10 years now and beyond is going to be so different that you, me and anyone inside Google dont have a chance at guessing what it will be. The same way none of these people who are in "awe" of Google now, didnt see Google coming.

My aim here is to not hate on Google. I use it/them everyday. i am just curious about what I say as an increasingly widened gap between what people think they know about digital media and what is really going on.

The reality to me is that Google came from nowehere in 2000 and are now "valued" over 3 times the value of Time Warner and Disney. The speed of their appearance and rise makes me wonder if it could happen again. We are in a time where disruption is the norm. It also tells me that most of the people who are pumping up the stock wouldnt really know how to set conversion goals in Google Analytics, set up a Google Adsense Account, know what Google Adwords is or know how what the split is for a Google Network Ad placed on a site would be. Those things are the lifeblood of Google right now. I feel sometimes a lot of the people talking about it think, "holy hell, everyone uses it, so imagine the potential of Google!" Well, people use parks everyday -- and I don't see them being valued in the hundreds of billions. What if parks starting offering home loans, travel, video on demand.

It's like when I was on a friends little fast boat thingy and he was going way too fast. I said slow down. He said its fine! I said "there have been boat crashes before - no one ever says "wow, we are going to have a massive crash in 5 minutes"... they always say "its fine!".

But then again, has worship ever really been about cold hard facts or more about blind faith ?


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