Google Crafting a Disjointed Web


The Motley Fool published an article about Google's SpamSense empire, noting that now that Google has now rubbed the lamp they will never be able to put the genie back in the bottle:

There's not much Google can do to stop the way information will be structured on the Net in the future (except perhaps to intercept it all via Wi-Fi?). But you'd think it could do more about the link farms, splogs, and click fraud. So why doesn't Google do more to put the brakes on this problem? Interesting question, because it makes a couple of assumptions that I find faulty.

The first is that Google can stop it. I don't buy that. I think when you pit a few hundred Google Smarty Pantses -- who are getting fat on stock options and gourmet meals at the Big Goo campus -- against many thousand enterprising schemers on the Internet, the battle will go to those hungry schemers every time.

Next, what makes you think Google wants to stop it? With AdSense providing so much of Google's revenue, I don't think Big Goo is in any hurry to flip over the rock and show everyone out there what's underneath. And that's where those stock sales come back in. Why do insiders continue to drop all those billions if the sky's the limit? Diversification? Ha! Go ahead, pull the other one.

If this story spreads expect a few knee jerk reactions from Google.



As one who routinely shorts GOOG and has lost several thousand due to very dot-Boomish mass-investinsanity, I have to say Just *wait* til scientific studies are released in the near future *proving* the GOOG is infested when it comes to click fraud.

If you own GOOG sell now, for the love of God[dess]! It hasn't been this high since they had to be bailed out by the strategic S&P 500 intro. A stock that hemorrhages billions a day and has insiders selling several times more its *yearly income every month* isn't exactly the safest place to be in, especially when its closest competitors' incomes are so much more diversified and have several far more successful platforms.

Invest a mere $15 (3% the cost of a GOOG stock) in a 100 $0.15 put options that GOOG will become less valuable than $320 by 7/17. Hell, what about $190 in puts that GOOG will decrease to $370? But! What if you want to get call options that GOOG will be worth $390? O, my friend, that will be $530.

When the market conspires so dramatically against a company's prospects so that it is far cheaper to short than call, you generally know it's screwed in the long-term. When it costs far more money to buy calls than stock, you know you're screwed, especially when the stock is so expensive. It means that the investors in the know are so nervous that they are both calling and putting it at the same time, hedging their bets.

Lose $190 in shorts, get 100 shares of GOOG from your $590 call... Yet, the same numeric value if you were calling on YHOO would cost you merely $64 in calls vs GOOG's $590. Why? Because there are SO FEW people shorting YHOO comparably that the most its most sure call options are going for is $0.05 (the bare minimum) vs GOOG's $5.90. That means that there are more than 100 times more puts being made on GOOG than YHOO allowing so many call options to be filled. It also means that while no one is apparently willing to bet very much that YHOO will drop precipitiously in the near future, a lot of people are willing to do so when it comes to GOOG.

PS The GOOG bomb of March when it went from $380 to $330 in a matter of days (b4 being bailed out by the S&P 500) gave me a lot of room to play with these options some more (those were one of those $0.05 (minimum 100) option trades :-)


Take a hard look at this problem, and a hard look at those insider sales, and then ask yourself why on Earth Google is spending time on doodads that no one needs, like an online spreadsheet. I think the answer is "because it needs news that looks like the future."

Prayer needed

I think we need to pray for all the GOOG employees...I'm thinking of 20ish year-olds like myself who possibly have leveraged a loan on their new mansion on their 1000 GSUs they imagine will be worth, what? $600, $800, if they're like some brokers, $2000 by the time their GSUs mature 4 years from now. What would happen to their family dynamics when the woman comes home from the plex having to explain to the husband that all her raises, bonuses, etc. just depreciated in value, overnight, to 1/8th of its current value and that it looks like the GOOG is the next Enron? It's one thing to lose a pension, it's probably something else to lose your future bonuses and basically-assured collateral too.

And let's not forget that roughly 1/4th the entire U.S. GDP ($12T) flows through GOOG's coffers yearly. Don't believe me? According to (o the irony!), GOOG's Avg. Vol is 7.95M shares bought + sold daily.

Now for a *rough* Reimann sum: (267.43 (52-week low) + 475.11 (52-week high) + 386.57 (6/9/2006) * 7.95M) / 3 =

2.992 Trillion Dollars

That's inbetween the economies of Japan (3.3T) and Germany (2.5T) [1]. Compare that to YHOO's 712.5 Billion or Wal-Mart's 642 Billion.

So let's say a quiet prayer that click fraud isn't out of control, that there aren't raving clickbotnets out there right now, that it's impossible to get 100% of your AdSense investment back just by clicking on adwords on another account you own just by clicking a low percentage of the page refreshes you make, regardless of how many refreshes/clicks you make per hour. Finally, let's pray that it's impossible to use GSUs as leverage for large-scale loans and that no one risks losing their house or worse.

If PPC didn't work in the Dot-Bust, why do people think it works now?

If I were a GOOG employee, i'd be sure to invest at least 1% of my monthly income on the low-end of GOOG puts; get puts out there for $300, $250, whatever. It'll cost you $5 per 100 and it's better to lose a few thousand a month if it means that you'll get significantly more GOOG stocks at the same instant that your GSUs go toward the toilet. $1000 of $100 GOOG puts (hypothetical) would net you 20,000 GOOGs giving you roughly $200,000 liquidity (if you sold immediately), comparable to the mere 1,000 GSUs * $100 = $100,000 you'd make. You could make this bet every month for 10 months before you'd start to lose potential money. But $100 is a hell of a risky bet, why not stick to $300? Those are $0.10 :-)

Don't Sell GOOG yet...

Google can always shift the burden of lost advertising dollars onto the Adsense Publishers to recoup their losses.

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