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."
Kevin Kelleher
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