Monday, January 23, 2006

GOOG 2006 = YHOO 1999 ?

I think Google is a great company but I simply don't get the stock price. Not sure if I'm in good or bad company pretty much agreeing with Henry Blodget on this. He's the Wall Street insider who can't give stock advice anymore, but gives some REALLY interesting comments in his new blog.

Interesting to me is the fact the ultimate Google insiders felt that $85 was about the "right number" for the IPO and the fact nothing really fundamental has changed since that time unless I missed something online. Of course they have great earnings from ads as the online ad market swells, but Google knew this would happen even if Wall Street was slow on the uptake of the implication of massively superior ROI from online advertising.

This sure reminds me of the Yahoo bubble of 1999.

Also interesting is the degree to which Yahoo can affect Google's revenue by manipulating the revenue YAHOO shares from it's Publisher Network which is in beta now.

What if Yahoo decided to pay out a 100% rev share for 6 months as an incentive for Adsense people to jump the Google ship? Google would see a HUGE drop in revenues. Simply HUGE - Adsense was 43% of total Google revenues for 3rd Quarter of 2005!

If this happened Google profit would not be nearly as strongly affected as revenues because most of this revenue goes back to publishers. 78.5 pecent of the total to be exact, thought the rev share varies among publishers. However I suspect even the savvy street folks don't really understand where all this money has been coming from, and would be alarmed to see it dry up as suddenly as it appeared.

Yahoo could keep up this pressure for some time since they don't get nearly as much from their publisher network.

Would it be legal for Yahoo to short Google and then announce this move? I assume the SEC would say "NOT LEGAL" and this would wind up as a complex case of stock price manipulation, but in any case what's Yahoo going to do with revenue share?

Indications at the conferences and from my read of the company are ...... they'll keep them about the same as Google so both Yahoo and Google can turn a good buck, but seems to me if so Google's buck is not going to grow fast enough to justify current pricing.

JoeDuck's Blog

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