Google's Grating Silence

There was a telling moment for Google when CEO Eric Schmidt spoke at the Bear Stearns Media Conference Wednesday. Analyst Alexia Quadrani lobbed a softball to get the discussion going: "Where do you see advertising dollars coming from?"

Without missing a beat, Schmidt responded, "We don't really know."

Really? Google is the information company, the house of genius engineers who have boldly vowed to bring order to the gray goo of information on the Internet -- and who have done an astonishingly good job of delivering on that promise so far. Yet Schmidt was asking investors to accept the notion that Google didn't even know how many of its ads were coming from longtime Internet advertisers vs. offline advertisers.

Schmidt, who along with founders Larry Page and Sergey Brin makes up Google's so-called triumvirate, then launched into a soft-shoe routine about how "people think of Google as an advertising company, but we're really about return on sales." It was at once meaningless -- which company isn't about return on sales? -- and emblematic of Google's insistence on greeting Wall Street with a shrug.

For now, Wall Street isn't objecting. After all, who is going to complain about a company whose revenue more than doubled and whose profit grew sevenfold in its most recent quarter?

Google has explicitly encouraged investors to take a long-term view. Yet its tendency to withhold information relevant to shareholders is a long-term concern. When a crisis hits Google -- as it has every other tech giant, from Microsoft to Intel, from Amazon.com to eBay, from AOL to WorldCom -- investors who have endured Google's silence in good times will find it hard to shake off the feeling they're not getting the full story.

"It's not an issue right now because they're blowing through their numbers. [But] Wall Street will clamor for transparency when there's a negative," says an institutional investor who asked not to be named and whose fund bought Google shares in the IPO. "If I had a company with similar financials that gave more transparency, would I pay a premium for it? Yes, I would."