Quote:
Originally Posted by KC911
Do you really think Google is facing an eminent collapse?
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Yes, which explains why I've lost tens of thousands of dollars on the permanent PUT position I've been keeping on the company since last year. (Of course, since I've been losing money, it means I've been
wrong so far.)
There are a lot of different angles where I can see problems -- like the receivables number I mention above (it is inconsistent with their billing system -- or means they've been extending credit very freely to some advertisers to grow revenue; the question is if those advertisers are good credit risks or not?).
One of the quickest ways to get an idea about the questionable things going on behind the scenes at Google, would be to read here (read all the links -- the experiences of Google's customers -- the advertisers buying the ads -- can say a lot):
http://www.apogee-web-consulting.com/blogger/2007/01/not-search-engine-spam.html
I've also spent time reading some of the legal briefs Google's lawyers have filed in different court cases. I can only describe some of their lawyers' argument as being an "out right attempt to deceive." (I had no interest in any of the legal disputes; I was just reading the briefs to try to understand the company better. I believe that the lawyers business people choose to handle their legal issues and the arguments they make can say a lot about their ethics.)
Right now, read the arguments Google makes when defending the copyright infringement rampant on YouTube. They try to hide behind the "Digital Millenium Copyright Act" saying that they comply with the law and take down infringing material when notified by the copyright holder of the infringement, but it is pretty clear that the Act wasn't intended to protect the sort of "willful blindness" about infringement YouTube/Google needs to engage in to operate a site like YouTube. (Cases are pending on this.)
There is no doubt that Google is "raking in large amounts of money," I think though, that they are not as "fantastically profitable" as they appear to be.
Advertising has a certain "slushiness" to it; advertisers are used to spending money and getting a gradual return for their spending. I think Google has been exploiting their advertisers -- or at least profiting by turning a "blind eye" to the exploitation occurring on their network. As the advertisers "get wise" to the activity, they will be pulling, or significantly reducing, their advertising with Google (we saw this with Ebay just a few weeks ago). The extent of "trust" that is lost will determine if (or how severely) Google crashes.
Remember that Enron, wasn't "all" fraud -- they were doing a lot of legitimate business, but when the elements of fraud were exposed, all the legitimate business was taken elsewhere and the company collapsed.
I see the same potential situation with Google; if advertisers lose their confidence in Google because of fraud Google is engaged in (or profiting from while they ignore their partners committing the fraud), and the company is not as profitable as it has been made to look, the stock will collapse severely. Shareholder and advertiser lawsuits, and possibly SEC or Justice Department action, could then force the company into bankruptcy.
Most people will probably think "I'm nuts" to mention "Google" and "bankruptcy" in the same paragraph, but I keep digging as I continually re-evaluate my market positions and I keep concluding that Google is a "house of cards" at risk of collapse.