Thursday, August 30, 2007

Google (GOOG) can't get any traction - it this why?

TweetThis
I have read this in multiple places but am on the lookout for 'contagion' plays from the mortgage fallout. This is an interesting one titled "Will Mortgage Collapse Hurt Web Ads?"

Some interesting points:
  • financial advertisers account for more than a third of all web advertising, and as the plunging share prices of investment banks clearly demonstrate, the mortgage crisis is affecting a lot more than the mortgage sector.
  • half of the top 10 were mortgage or credit-related marketers
  • But the mortgage collapse could still be the start of a big cyclical downturn. Bulls like Rick note that Bankrate is doing fine, that TheStreet.com's ad sales were up last quarter, and that Google continues to chug along. But as the Bubble 1.0 collapse also showed, this logic is irrelevant: The Internet leaders did fabulously for five years through June of 2000. It's what happens next that matters.
  • But the mortgage collapse could still be the start of a big cyclical downturn. Bulls like Rick note that Bankrate is doing fine, that TheStreet.com's ad sales were up last quarter, and that Google continues to chug along. But as the Bubble 1.0 collapse also showed, this logic is irrelevant: The Internet leaders did fabulously for five years through June of 2000. It's what happens next that matters.
  • And online revenue doesn't have to collapse the way it did in 2000 for online companies to get hurt and Internet stocks to get crushed. It just has to experience a normal advertising recession.
Very interesting points and they have some serious merit in my book. You don't notice all the ads because at some point you just begin ignoring them as white noise but based on how many refinance offers I get in the mail each week, plus all this advertising on the web that is EVERYWHERE for getting a mortgage or refinancing.... this has to be pulled back. What does that mean for Google (GOOG) ? Is this why the stock cannot get any traction even on big up days in the market? The stock is really having a hard time breaking out of its 50 day area band on the chart.

Hmmm... just trying to think of a scenario in October where the teflon stock of our time reports dissapointing earnings. On top of all the other bad news that will be hitting at that time... hmmm... I hope a perfect storm is not brewing. September and October have traditionally had some of the worst single months in the history of the market. A bad report by Google? Could it happen?

I'm going to cut back my Google exposure a bit here, about 1/2. The stocks lack of movement in any of these serious rallies has been a bit troubling, especially with the strength in tech. Again, when in doubt, move to the sideline and see how things pan out. A full blown recession in 2008 cannot be good for advertising either. We are no longer in a growth at all costs era of online advertising - it will at some point turn a bit cyclical.

Long GOOG in fund; no personal position

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012 FundMyMutualFund.com