Monday, April 23, 2007

Google's Blind Spot

Google (NasdaqGS:GOOG)reported numbers which are hard to complain about. Their market prescence still causes many to worry despite an improbably small revenue base when compared to many other businesses. Google needed to report excellent numbers as they race to fill in the valuation gap between market share price and the reality of their earnings per share. As they execute many conclude that they have a pact with the devil and need to be reigned in.

Following the DoubleClick announcement there is a growing chorus from consumer groups and technology companies to investigate. As Google grows stronger outside of the US, particularly in the UK and Europe, other regulators and politicians will start their own investigations. A curse of a thousand flies may yet descend onto Google.

Google's blind spot will be the political regulatory environment. They have not had to deal inside the Washington Beltway or the political equivalents in other countries. They do not understand the lobby system and public pressure. They probably are not significant players in political fund raising in the US or other countries for that matter. The undisputed kings of search neglected to search the problem. They have stayed too long within the spin bubble of their own success. Clinical evaluation indicates self absorption with narcissistic tendencies.

Sitting on top of huge piles of cash will attract political attention. The Board needs to focus on the regulatory and hire the right politically savvy staff in a really big hurry. (Problem in the upcoming election season). Current senior officers have no perspective on managing this problem.

Google will almost certainly have substantial restrictions placed on them as a result of their recent acquisitions. This will slow them down. Perhaps it may cause a confusion as Googlers grapple with an externally imposed reality. This will allow the previously vanquished such as Yahoo (NasdaqGS:YHOO) and Microsoft (NasdaqGS:MSFT)several windows of opportunity to retrench and plan their come backs.