Google: Internet bubble 2.0?

In the immortal words of presidential candidate Ronald Reagan to President Jimmy Carter, “There you go again.” 

Henry Blodget and Mary Meeker are “going again” with exuberant cheerleading for an Internet darling. Which is the “lucky” public company getting the Blodget-Meeker props this Web 2.0 go around? 

The number one Internet company, of course: Google.

Last Monday, Meeker hosted Google CEO Eric Schmidt at the Morgan Stanley Technology Conference, held, fittingly at “The Palace,” in San Francisco. 

I heard Meeker lead a collegial chat with the chief executive of $150 billion market cap Google. Here is one of the Meeker driven exchanges:

Meeker to Schmidt:

Google gets a rap for being arrogant, in the media with some of the partner companies that are out there. The irony is that you take 30% of your gross revenue and hand it back to partners. You are making a very large number of people very happy, are you able to use that effectively as ammo with the negotiations with some of the people?

The reality is you are one of the best partner companies the world has ever seen.

Schmidt to Meeker:

A few years ago, we started focusing on partnerships. As you have pointed out, we share an enormous amount of our gross revenue in the food chain throughout the organization, and it has worked well. (Mary: Yep).

Blodget is touting the Google YouTube horn at Seeking Alpha in a story entitled “When will the media stop raining on Google’s parade”?

(Seeking Alpha editors apparently “cleaned-up” Blodget’s “real” headline for his Google props; the story was originally published at Blodget’s own blog headlined “When will the media stop peeing on YouTube?”)

What are Google YouTube shareholder “facts,” according to Blodget, who is “precluded from working in the securities industry”? 

• It is irrelevant what "revenue multiple" Google paid for YouTube. YouTube was so young it hadn't even gotten around to generating revenue yet.
• A $1.7 billion acquisition was a tuck-in. The company traded a mere 1% of its market cap to become the instant global leader in a business growing at hyper-speed.  It could do ten of these acquisitions before its shareholders even noticed.

Are GOOG shareholders really blinded by Google love so as not to “notice” the impact of YouTube on GOOG?

Blodget may be, as his “accentuate the positive” technique once again suggests. Blodget’s concluding endorsement of the YouTube acquisition:

If it never contributes a single penny to Google's bottom line will it have been a devastating, regrettable failure?  Absolutely not.  This was a tiny tuck-in acquisition for a massive global behemoth.  It was a minor risk with a potentially huge payoff that the company was smart to take.

YouTube may very well “never contribute a single penny to Google’s bottom line.” But that is not where the YouTube acquisition MAJOR risk lies, contrary to Blodget’s “informal” analysis.

Blodget apparently did not read the SEC mandated Google 2006 Annual Report published earlier this month, but I did, as I reported at this Digital Markets Blog in “Google: Copyright infringement lawsuit risks ‘could be substantial’”:

Once a year, Google is legally mandated to provide shareholders an accurate assessment of the real financial risks it faces. Google to shareholders on the “substantial” risks it faces regarding potential copyright infringement claims;

We have had copyright claims filed against us alleging that features of certain of our products and services, including Google Web Search, Google News, Google Video, Google Image Search, Google Book Search and YouTube, infringe their rights.

Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements or orders preventing us from offering certain functionalities, and may also result in a change in our business practices, which could result in a loss of revenue for us or otherwise harm our business. 

Tracy Pride Stoneman, securities lawyer, on Blodget, Meeker and Internet bubbles:

With Henry Blodget and Mary Meeker pushing tech and Jack Grubman pumping telecom to their brokers and the investing public, it is not happenstance that millions of investors ended up concentrated in volatile, speculative securities. The sad reality is that millions of investors not only paid for this advice in the form of commissions and fees, but they also paid for it with their life savings.

IS GOOGLE DUE FOR A FALL? READ MY FAST COMPANY MAGAZINE DEBATE!

ALSO: Why Google will never pay for content and YouTube: What Google CEO Eric Schmidt really thinks and Google warns of Microsoft, Yahoo competition and Google arrogant? Google CEO Eric Schmidt responds