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The New Google Dance

Many developers, webmasters and SEO’s are quite familiar with the term “Google Dance” which generally refers to the search engine giant shuffling it’s results usually in combination with it’s pagerank algorithm being updated. While there hasn’t been a visible toolbar pagerank update in over four months and many experts are wondering if Google has planned to remove the popular rating system, a second “Google Dance” of a different nature has had another group of experts shuffling their feet to the backbeat of Google’s drums. The music that’s driving the new “Google Dance” is the throbbing sound of Google’s soaring stock prices. Some of those dancing in the streets put the stock north of the $800 mark. This implies an upturn of more than 20% for a stock that has already surged by 50% in the past 12 months. Realistic or not, Wall Street will take it’s profits any it can muster them and in terms of a bear or bull market following Google’s every move, there is no bear, there’s a lot of bull and an ocean full of sharks waiting to take a bite out of the already over inflated values.

The Song Remains the Same - Adsense

After seeing its stock rise above $600 per share less than two short two weeks ago, Google has exceeded forecasts by earning a profit of $1.07 billion in the third quarter of 2007, a 46% increase over the $733.3 million it earned during the same period in 2006. Google Inc. reported stronger than expected profits, with sales rising 57% to $4.23 billion. The news from Google was greeted with a number of analyst upgrades and has seen the single share price of Google stock rising to a record $650. Cheered by the earnings results, at least 16 analysts raised their price targets on Google. The changes moved Street median target price from $657.50 to $722.50 with the highest of brokers expectations coming in at $850 per share. While all this commotion and speculation by the analysts is great for those who can afford to purchase significant amounts of Google, the average long term “bear” investors are finding the stock a little to risky for their tastes. Among chief concerns is the fact 99% of Google’s earnings are derived from their Adsense advertising product. Those closely watching the webmaster community are less likely to jump on the bandwagon because word in those circles is that Google stands to lose ground in the contextual advertising business to new upstarts that offer greater compensation for webmasters. While Google has managed to hold onto their title as internet advertising kings, webmasters and publishers everywhere are looking for alternatives due to Google’s lack of support, agressive policies and general tactics used to capture the market that are definitely crossing the “do no evil” line.

Shake it Up - Where’s the Split?

While the recent earnings report from Google has encouraged many analysts to steadily bump targets higher, the meteoric stock surge has also spurred many investors to call for a split, and at least one notable analyst, Mark May of Needham & Co. has released a note to clients Tuesday advising that Google Inc. undertake a stock split in order to make its shares more accessible to small investors. May also wrote, roughly 84% of Google’s outstanding shares are owned by institutions, whereas comparable companies have an average institutional ownership of only 67%.

While the price of Google shares are keeping it out of the hands of small investors, the big money crowd is delighted to have Google stay right where it is as far as a split is concerned. It doesn’t take a math genius to figure out that any institutions and large investors who picked up Google shares at $500 each less than a month ago have earned a cool $150 per share over that period of time. Anybody with the power to have grabbed 1000 shares for a half a million dollars has walked away with $150k profit in under a month’s time, that’s if they’ve bothered to sell their shares as of yet. I’d suspect many who have jumped on the dancefloor are still dancing to the beat.