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Google Growth Now Just “Organic”

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Google Chief Financial Officer George Reyes told the Merrill Lynch Internet Advertising Information & Education Conference today that his company’s “growth is slowing and [is] now largely organic.”

Now “organic” in Google’s case may appear as unfettered pullulation to most other companies, but having largely maxed out paid search advertising, Reyes said that the company would have to find new ways to grow revenues.

[ADBLOCKHERE]On the news, Google shares dropped from $390 down to $340 this morning in under 15 minutes before rallying to close at $363.

Google once again appeared almost human: similar to the blow its shares took in January over “disappointing” fourth quarter profits, which merely grew 82% over the year before to $372.2 million, failing to meet Wall Street forecasts.

“Google is taking a shaky market down. It’s the other shoe to drop,” Larry Peruzzi, senior equity trader at The Boston Company Asset Management, told the BBC. “It’s been a stellar performer and a leader,” he added. “This is kind of new territory for them being this cautious.”

Is it tulip time? Many analysts think so, believing the search monster’s extraordinarily high valuation cannot be sustained. See Daniel Harrison’s thoughts on Google’s situation here.

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About Eric Olsen

  • http://sportolysis.blogsome.com Pratyush

    True evaluation of stock does come about in time. Will be interesting if the stock can show strength in these shaky times.

  • http://danielmarkharrison.blogs.com Daniel M. Harrison

    When I saw the Head of Google Norway speak recently, and asked him what he thought of his own company’s valuation of a P/E of c. 90 aside Microsoft’s meagre 20, his reply was: “What was MSFT’s P/E 20 years ago?”

    It’s a fair argument, but I think to be convincing Google needs to develop its business model further than just advertising via search optimisation: for one, hindging profits on ‘pure pay’ like this leaves the company massively open to industry/exterior risk, for two there’s a ceiling they’ll find themselves hitting before the market has a chance to appreciate future profits and revenues.

    On its own, a fair value for industry standards would be around $150 right now – my guess, as you know, is that they capitalise on this good fortune of over-valuation and acquire someone like SUN. It’s the only way they can sustain the high valuation, at least medium/long term.

  • http://spaces.msn.com/safaricast/ Gary Mortimer

    Believe it or not there are still places in the world that need to switch onto Google.

    Down here in my part of South Africa where conection speed is nothing short of prehistoric. People are not going on line and searching as a matter of course.

    As we get connected many thousands if not millions of people in Africa will be popping by to look and shore up the fortunes of Google.

    I don’t think the market is yet saturated.

    Maybe growth has slowed but its still fairly stellar and I would like my business to grow at that rate ;-)

    Gary

  • General Public

    Googles move to provide corporate e-mail and web page creator are bad idea’s. Many of the webmasters who support google earn their livelihood from these area’s. Remember what happened when yahoo started domain reg and web hosting? their share price dropped like a stone…

    Also recently lot of porn site seems to be re-directing the google search does anyone know the reason???

    If Micro$oft vista comes out with a search box right in the center of the desktop 90% of the inexperienced net users who are the major clickers on the google ads will be clicking on msn ads!!!

  • Agret

    “Also recently lot of porn site seems to be re-directing the google search does anyone know the reason???”

    Cause you have spy ware

  • http://www.wirah.com Billy James

    Interesting stuff.

    Google is such an enormous internet entity. It will be fascinating to see if they sustain their top spot.

    I don’t think any *new* companies dare to compete, but it would be nice to see a new mainstream search engine.

  • Eric Olsen

    it shows you how immature the Internet still is as an industry that Google can have appeared literally from nowhere and 6 years later it’s already being seen as fading

  • http://ruvysroost.blogspot.com Ruvy in Jerusalem

    And you talk about live internet gaming? What the heck do you think the stock market is? Folks have played “Google” and are now looking for another place to get the gambler’s high.

    Google’s stock value ought to be no higher than $140. That it is so inflated says that there is a lot of money being gambled with. That phenomenal growth rates are just not enough to satisfy the gamblers in the market says more about the market than about Google.

  • Eric Olsen

    I agree Ruvy

  • Eric Olsen

    interesting point INfo Bank, but what if it keeps dropping?

  • http://www.comagz.com/webmagazine/ Nir Ben-Dor

    Google strategy for the long term is a winner

    My estimate is that Google is now setting up some features that are meant to get business from eBay and Amazon.

    First let’s have a look at their new announcements (Payment system, Google pages) and their existing assets ( Adwords, Adsense, Blogger, Froogle). What happens if you put these together into one product.

    Anyone can make their own store and sell anything without being attached to eBay or Amazon.

    Adwords and Adsense provide advertising. Froogle provides pricing, cataloging and product discovery. Blogger provides communication channel with customers. The new payment system provides well.. payments.

    What remains for Google, is to provide the glue for all these modules to work together. This is where Google pages comes along. In future version, it could easily allow dragging and dropping of the above components, and creation of instant shops.

    Google took advertising and made it available to the ‘long tail’ customers. Now it will make anyone a merchant.
    Even their book scanning initiative supports this theory as it will position them to rival Amazon on their own game.

    Nir Ben-Dor
    I write for CoMagz Linkadelic Magazine. You can too.

  • Eric Olsen

    very interesting thoughts Nir, thanks!

  • http://ruvysroost.blogspot.com Ruvy in Jerusalem

    InfoBank, your approach made my father-in-law rich. But he bought low and sold high and was willing to sit it out for the long haul with firms that had a 1/10 or 1/15 P/E.

    An appropriate P/E for Google is no higher than 30/1. They are at 90/1. That means there is gambler’s money in the stock. That spells instability, because gamblers work on hunches and highs. So even if Nir ben-Dor’s observations are right in terms of what Google can do for folks, the stock may tumble considerably and create a cash crunch within the firm – just when it needs the extra cash.

    That’s what happens when gawmblers play with stock values.

  • http://ruvysroost.blogspot.com Ruvy in Jerusalem

    That shoulda been 10/1 or 15/1 P/E – sorry.

  • Eric Olsen

    the stock market seems to be gambling, but with fewer rules