Taking stock of Google: risks and rewards

“Google is a great search engine but not a good stock,” so says Fred Kobrick, a veteran mutual fund manager, as reported by CNNMoney:

Google is kind of a metaphor for investing today. People want a short-term fix and they want something that has momentum…many Wall Street analysts and investors fall victim to…the "game over syndrome," declaring a victor in a market too prematurely….companies like workstation manufacturer Apollo Computer, word processor maker Wang and spreadsheet software firm Lotus as examples of tech firms that investors erroneously thought would be immune to competition…Winners often come from behind and original leaders wind up running into problems.

Google, in fact is staring down one big potential problem: significant liability exposure for charging advertisers for fraudulent clicks, or “click fraud.” On the heels of Google’s proposed $90 million settlement in the Lane’s Gifts v. Google click fraud lawsuit, Stephen Ellis, “The Motley Fool”, suggests click fraud will also undermine trust in Google’s ad network and depress ad spends on Google:

While the settlement limits Google's financial exposure, the issue still has not been resolved, and it has the potential to undermine trust in Google's ad network. This in turn could lower the amount that advertisers will be willing to pay for clicks. As advertisers demand better ways to measure ROI on the marketing funds they spend with Google, the effects of click fraud will be easier to measure, and the effect on Google possibly greater.

Mark Cuban, Dallas Mavericks owner also believes “click fraud FAR exceeds what is being published by search companies”:

The Bad Guys have figured out that they look a lot more legit getting checks from google than trying to wash 10k dollars in cash delivered in a bag.

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