10 Things I Hate About Google By
Alyce Lomax (TMF Lomax)
J Why do I hate Google (Nasdaq: GOOG)? Let me count the ways.
1. Evil is as evil does. Google had some visionary inspiration when it made "Don't be evil" its battle cry. Sure, people revile corporate greed and evil deeds, especially in the wake of recent scandals like the one at Enron. However, there's risk in Google's statement, given that many issues are hardly black and white. For proof, look no further than Google's business in China. Once you make a blanket statement like that, you'd better think long and hard about the things you do. Because any missteps, or even any moral muddiness, can come across as hypocritical. And that's not an image any corporation wants.
2. Jack of all trades, master of none. Remember Tom Gardner's commentary on operational focus? I find Google sadly lacking in the "focus" department, and I fear that one day we might look back and say that's what went wrong with a promising company. Granted, Google Labs is cool, as is Google's determination to give employees some free time with which to innovate. On the other hand, should innovation be unbridled, with a constant flow of beta products? Does Google really need to get into Wi-Fi? Does it really need to come up with an online bill-paying service like eBay's (Nasdaq: EBAY) PayPal? Does it really need to do anything that might get it the slightest bit of attention? I understand that Google needs to derive revenues from sources other than advertising, but many of its endeavors seem to lack a cohesive strategic direction and monetization -- which brings us to point No. 3.
3. Show me the money. Sure, for some of us, Google's goal to smack down rival Microsoft (Nasdaq: MSFT) is exciting to contemplate. Take Google's recent Writely acquisition as well as its Google Spreadsheet beta. However, the more I thought about Google Spreadsheet, the more I realized it's going to be really hard for Google to monetize the free feature. How do you insert ads related to numbers? Will people -- much less businesses -- tolerate that sort of thing for sensitive and serious data? What about the reports that Google Spreadsheet is less functional than Microsoft's Excel? The elements that don't make sense outweigh the ones that do. Many of Google's projects strike me as similarly uninspired when it comes to money-making potential.
4. Grab your tinfoil hat. In the words of Kurt Cobain, "Just because you're paranoid don't mean they're not after you." When the U.S. government demanded Google's search results, many of us had probably been conveniently ignoring the fact that Google stores up our data in the first place. Of course, Google says that only machines, not humans, scan your data, and that's only so Google can serve up targeted ads. But still, the idea that Google's got a repository of what you search for -- not to mention what you say and do by way of Gmail, Google Calendar, and the like -- makes me wonder whether people might start worrying about what could happen if all of that data fell into the wrong hands.
5. Don't bother rolling up your pant legs. For a sustainable competitive advantage, a company needs a deep moat to ward off encroaching competitors. But Google's moat is only ankle-deep. Anybody could get into the game, and its competitors are established names with plenty of cash and resources to do battle. They're doing just that.
6. What goes up must come down. Google's market cap is an absolutely astonishing $118 billion. It trades at a price-to-earnings ratio of 68 and a price-to-sales ratio of 17. Although its revenue and profit growth have been pretty astronomical, the expectations are unrealistic that Google can continue on this kind of tear for years to come. Google has an enormous challenge ahead and has even admitted that it needs to devise different ways to monetize its products as revenue growth slows -- and that has been predictable from the simple recognition of the law of large numbers, not to mention that the risk is clearly outlined in the company's 10-K filing. From a rational point of view, Google's high share price should suggest that things are going to get easier for the search giant. Yet we all know that's not the case.
7. One-trick pony. Let's get back to Google's reliance on advertising revenue. This company derives 99% of its revenues from advertising. It's a serious risk to invest in any company with such a high concentration of revenues from one source that could dry up for a variety of reasons. Anybody remember the Internet bubble and bust in the '90s? That was when only eyeballs mattered, and we all know how that panned out when advertising went into a deep slide. Now Internet advertising is an area that some companies have described as having reached bubble proportions. Lessons from the past are too quickly forgotten. And it's clear that the advertising landscape is changing.
8. Eight, eight ... I forget what eight was for. OK, let's just say it's the growing risk inherent in click fraud, which Seth Jayson explored in his similarly rantish piece about Google, " How Google Is Killing the Internet."
9. Monkey see, monkey do: Many of Google's services are simply clever emulations of existing programs, many of which are already well entrenched. Google Chat? Well, Google's taking on giants such as Time Warner's (NYSE: TWX) AOL, MSN Messenger, and Yahoo! Messenger. Google Finance? Oh, please -- Yahoo! Finance has had that niche nailed down for ages. Maybe Google's doing us a favor by jumping in and shaking things up to drive cheaper and more innovative products -- but by "us," I mean users and consumers. Google's not doing itself a favor, nor its shareholders, by trying to do too many things that have already been done, and done perfectly well.
10. Amateur hour. So it was refreshing when Google's IPO filing included some tough talk about focusing on the long term instead of on short-term Wall Street expectations. I get that, and it's definitely good. However, there's a fine line between thinking out of the box and acting downright wet behind the ears. For example, there was nothing revolutionary about some of the faux pas it committed at IPO time. Flash back to the regulatory fiasco that unfolded, as well as the controversy that broke out when an interview appeared in Playboy, of all publications, right in the middle of the pre-IPO quiet period. And then there was the particularly low moment when Google said it was blacklisting CNET reporters for one year after the site published information about CEO Eric Schmidt that had actually been procured by Googling Schmidt. Although I'm often a fan of unconventional attitude, I also need to believe that managements are not only smart but also mature and competent.
Although Google does have many attributes that make it part of the Motley Fool Rule Breakers universe, I can't help entertaining the notion that it may end up being the type of company that David Gardner calls a Faker Breaker. Sure, some might not agree with me. And I'll admit that I find some things appealing about Google the company. But that's not what my countdown is about.
I hate the thought of investing in Google stock right now.
10 Things I Hate About Google [Fool.com: Commentary] June 21, 2006
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