Google Bears Burden of Net Setback

And, in that context, investors are sorting out the pros and cons of a Google investment -- limited by, among other factors, some major blanks remaining in the company's offering documents, starting with how many shares the company and selling shareholders will be offering to the public.

"In general, I like to own the big names, even if it's small portions," says Darren Chervitz, research director of the (JAMFX Quote)Jacob Internet fund. "I would be inclined to add a company like Google," he adds, "but I certainly have my concerns."

Among the chief concerns, according to an investor who spoke on condition of anonymity, is growth in the pay-per-click search business that is the core of Google's revenue.

Surprising investors earlier this month, Google rival Yahoo! indicated that its paid search business was sequentially flat in the second quarter, after enjoying quarters of impressive sequential growth.

That sent shares lower not only for Yahoo!, but also for smaller players in the search category, namely Ask Jeeves (ASKJ Quote), FindWhat.com (FWHT Quote) and LookSmart (LOOK Quote). In fact, all the smaller Net players have now lost a quarter of their value this month.

And, says the buy-sider, it has likely been a negative for potential investors in Google, which has yet to disclose results for the second quarter ended June 30.

"If Google was public already, there'd be some serious concerns being raised," says the investor. Given Yahoo!'s numbers, it's more likely that Google will show 5%-10% sequential growth in the second quarter, says the investor, not the 15%-20% growth people might have expected, following the 27% sequential revenue growth in the first quarter.

Saying that Google is likely to put second-quarter numbers in the next amendment it files for its S-1 offering document, the investor observes, "Clearly, those numbers would be much more important than they might have been two weeks ago" -- that is, before Yahoo! announced its second-quarter results.