Google Has Jumped the Shark

Google seems to be under a lot of fire lately for some really dumb mistakes, and for acting like a spoiled brat with its investors, customers, and users of its services. As such, I really think that Google is about 6 months away from seeing its stock prices seriously slip, unless it mends its ways and quickly.

There is a great article on Google’s attitude here at Business Week.

Google (GOOG) boasts some of the Internet’s hottest technology and biggest brains. But while Google may be tops in managing the world’s information, it appears to be struggling with how to handle its own.

Recent missteps that have whipsawed or irked investors include the inadvertent release of sales projections and an agreement to censor its own search results in China. Then on Mar. 8, Google used a vaguely worded blog on its site to disclose a settlement of as much as $90 million in a case concerning click fraud. That came days after the company said the case was without merit and told investors the impact of click fraud on advertisers is immaterial.

Be sure to see my take on click fraud and how vulnerable Google is to it at the end of this article.

Investors say Google shares too little financial information and can be overly flip about company announcements, often posting statements on a corporate blog instead of through a press release.

GROW UP. Analysts and marketing gurus say that when it comes to communicating with the public and shaping its image, Google has some growing up to do. “It’s inevitable that at some point [Google’s technological edge] is going to be neutralized, and online search is going to become a Pepsi-and-Coke market — that’s when marketing becomes much more important,” says Peter Sealey, a consultant and professor of marketing at the University of California Berkeley’s Haas School of Business who was a chief marketing executive at Coca-Cola (KO) and Columbia Pictures. “When people start warming to other brands, Google won’t know how to stop it because they won’t know enough to understand why it’s happening.”

Take the issue of click fraud, where a scam artist or prankster clicks repeatedly on an online ad with no interest in buying a product. By jacking up advertisers’ online bills without creating any sales, the practice could undermine Google’s business model.

Google says it does an effective job of stopping the practice, but won’t share with advertisers or investors exactly how it does it, or how much money it is spending on the problem.

ANALYSTS ANNOYED. So when the company announced the settlement without giving much detail, some analysts were left scratching their heads. Nor did the settlement quell advertiser concerns, since Google still won’t share how it deals with the problem, and the settlement doesn’t address future instances of click fraud.

“BUSH LEAGUE.” Another recent case of miscommunication: On Mar. 7, Google filed a statement with the SEC saying that it inadvertently had released on its Web site a slide that included financial projections and said its ad business was “healthy and growing and… on a strong trajectory.”

“Come on, this is bush league,” says Sealey. “It’s inconceivable to me that a company like [General Electric (GE)] or Anheuser Busch (BUD) would do something [like release figures by accident].”

CLEAR IT UP. Google spokesman Steve Langdon says, “Our aim is to be transparent in our communications about Google’s finances and as part of that to add clarification when necessary. That, we believe, is the responsible thing to do.”

Still, Google may need to do a better job of sending consistent and clear information to the outside world, experts say.

Google would be better served to be a bit humbler in their treatment of the public. They need to stop fighting lawsuits based on idealistic, leftist and elitist principles, and they need to follow corporate rules for operation. I expect that the SEC will punish Google for leaking its projections on the Internet, because, as this article points out, big boy companies do not make such junior league mistakes.

Google is VERY vulnerable to click fraud. I say vulnerable, because it could ruin Google as a company because this vulnerability exposes a weakness in Google’s ability to generate and collect revenue.

Let me explain how click fraud against Google works. Google allows companies to sponsor google keyword searches, even if the keyword is NOT THE CUSTOMER’S OWN keyword. For instance, it would be like Burger King sponsoring the google keyword of “McDonald’s French Fries.” If someone types “McDonald’s French Fries” into the search box, only Burger King links would appear at the top of the search results.

Burger King pays Google to reorder its search results. Burger King also must pay Google for every click on one of its re-ordered links. So say that someone searching for McDonald’s french Fries gets a result pointing to Burger King, and the searcher decides, “okay, that’s close enough to what I wanted, let me see what Burger King’s french Fries are about,” and the searcher clicks on the Burger King link. Google gets several cents for that single click.

Here is where the vulnerability lies and how click fraud works: Burger King essentially left its till drawer open. If you hate Burger King, and you wanted to punish them for falsely taking McDonald’s search results, you could build a java applet and distribute it to willing participants to randomly google search for McDonald’s Fries and then also click the Burger King Link. Or, you could trick people into downloading a trojan applet that clicks on Google Sponsored Links. This could quickly drain the Burger King account, even though real people did not view the search results.

Thus, you could create a denial of service against Burger King’s own search results by quickly sapping its advertising budget by falsely clicking internet links. If Burger King can prove that click fraud is happening, Google may not get its money for the false clicks.

Now imagine an internet worm that defaces websites with a java script that is designed to attack Google by creating massive fraud against its primary source of revenue. Think it can’t happen? Websites are already being defaced with java scripts designed to attack visitors’ personal PC’s to install keyloggers and botnets. Suppose that the server-side java gets changed one day to take down the largest Internet Search Company? Or perhaps botnets that attack Google Sponsored links?

Google needs to secure this vulnerability to their revenue stream and be more forth-coming about how they combat click fraud.