Google was once an idolized rock star of Wall Street, delivering astronomical profits as its stock soared in to the stratosphere. Back then rumors of Google’s operating system were all the buzz. Everyone believed Google’s “don’t be evil” slogan and the smartest graduates gravitated towards their job offerings. Their search engine was unparalleled and the future appeared bright and limitless.
The hunger for fresh ideas
Now the euphoria has worn off and reality is setting in. By all accounts Google is grasping for straws to find growth organically and has set its sights on other companies to fill the void. After a failed acquisition attempt of Yelp last year and more recently Groupon, it’s becoming clear that some key start-ups don’t want to be purchased by the company.
Google is instead rolling out its “Places” offering, which promises to compete with the likes of Yelp and Groupon, but entirely lacks the charm and community of either site.
There is a notable exception (to the recent hesitation of being bought out) that has raised quite a stir. Google’s planned acquisition of ITA, a leading intermediary bridging the gap between customers and airlines, has prompted enough concern that the US government has threatened an inquiry and a non-profit called Fair Search has emerged to raise awareness of what the acquisition could mean for consumers, claiming that higher prices and less choices for airfares will be the result.
Too big to succeed?
Inside the company diversifying away from search seems to be a key effort, even if the results are less than optimal. Google Checkout has been a lackluster performer, as companies are hesitant to adopt the payment mechanism when so many superior alternatives exist. In addition, Google TV doesn’t appear to be nearly as popular as the company had anticipated, disappointing users in the quality of its product and upsetting the content distributors they had partnered with from the poor adoption rate.
Will these products go the way of Google Wave, another failed offering that was poorly marketed and subsequently abandoned only shortly after its beta?
Big trouble in China
The search giant also had an embarrassing fiasco in China earlier in the year. Apparently their internal systems were hacked due to a combination of phishing and vulnerable Internet browsers, allowing sensitive internal data and e-mail accounts of political dissidents to be compromised.
Instead of standing by its word to not cooperate with the Chinese censorship system, Google succumbed to all of the demands of the Chinese government and cooperated by implementing a sophisticated system that blocks what are deemed questionable keywords and search results, such as “democracy”.
Adding to the mess there have been several reports floating around the Internet that the silicon valley company’s advertising systems are delivering malware to end users. The Santa Clara corporation claims they actively work to provide a safe search environment, monitoring their results for malware — but do they do the same for their ads? Evidently not.
Search engine backfiring?
Worst of all, though, is that Google has lost its core. Search engine results provided by the indexing behemoth are now rife with spam and irrelevant data, some links even lead to malware infected websites despite the aforementioned efforts to safeguard users. Other search engines such as Bing, Ask and Yahoo are ramping up their efforts and competing quite effectively in the quality of their results.
The customer’s always … alone?
Most people can’t speak to a live human being at the marketing monolith. Apparently only high paying advertisers are able to get anyone on the phone. Everyone else has to deal with electronic communications that can take weeks, if not months, and sometimes result in no response whatsoever. Customer service is not something the company seems to value.
A choppy chart
As a result of all these troubles the California company has had a hard time keeping investors confident over the past few years, as shareholders have been increasingly nervous about future growth prospects. While share prices managed to more than double since the depths of the sell off in late 2008 and early 2009, there is a significant level of resistance in the $630.00 area that has yet to be breached.
This all begs the question, has Google peaked? Are they now franticly searching for ways to generate more profit and expand margins at the expense of the quality of their most important product? Is the brain drain to Facebook and other emerging Internet companies derailing efforts to maintain dominance in an ever changing environment?
Only time will tell, but this investor believes that the best is behind Google, that better opportunities will be found elsewhere and this stock should be sold, if not shorted.
(Disclosure: No position, long or short, in GOOG.)