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The Sky Is Falling: Google Shares Below $300

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[qi:114] So much for the Obama bump. The markets have resumed their downward spiral, making clear that our economic conditions aren’t going to improve anytime soon. The impact of this sustained selling is even being felt by companies that were, until recently, deemed bulletproof — among them, Google (s GOOG). Shares of the Mountain View, Calif.-based company have dropped below $300 for the first time since 2005, indicating that the company might not be immune to the downturn in consumer spending (and thus advertising) after all. Nick Denton, publisher of Gawker Media, makes a very compelling case as to why online advertising is in for some stormy weather.

Citibank Internet analyst Mark Mahaney earlier today cut his fourth-quarter profit and net revenue estimates on Google, saying he’s picking up all sorts of negative data points. “We have conducted two dozen+ checks with SEMs (Search Engine Marketers), Online Ad Agencies, large brand retailers, high ASP retailers, travel companies, etc…Conclusions aren’t uniform, but Search marketers almost universally expect Q4 to be the weakest they have ever experienced,” he writes in his morning note. While these might be transitory issues for Google — the company continues to increase market share in search and has a monopolistic control of online advertising — as Mahaney points out, even it has nowhere to hide as the planet gets hit by this economic comet.

This downturn poses another challenge for Google as well: To date, it has been able to spending liberally on attracting talented folks to its team. But many of those options are now under water, leaving those employees to resent some of their predecessors. Maintaining its talent — and attracting new blood — is going to be that much harder going forward. And that will leave the company even less time to play with its new toys, such as its newly acquired fighter jet.

18 Responses to “The Sky Is Falling: Google Shares Below $300”

  1. Hi Om —

    Who are these folks who are dumping stocks, driving the market down? I for one am certainly not among them….the basis I have in Apple, Cisco, Intel, etc. is considerably higher than what they are going for now, and to sell (capitulate) would surely lead to huge losses that would take years to recover. Are people thinking this will lead to something like the 2001-2002 bubble where tech never fully recovered? I am hoping that this is not the case, and that we’ll soon see some kind of stabilization when people realize there is intrinsic value in many of these companies, below which share prices should not fall. Where it makes sense, let’s start buying folks!

  2. Joe the Programmer

    I never understood all the nerds who through their loyalty behind Google as if they were not just another for-profit company. Google has had there stock price inflated to ridiculous levels simply because they are the trendy uber-cool brand. In reality the stock should fall much further based on how low their actual earnings are. Quite frankly a much better investment would be HP. It will be interesting watching google fall to a more realistic stock value.

  3. Well Om, it would be an interesting excercise for you to review your own post from one year ago. At that time you joint creating a huge bubble around Google by expecting the Google share rising to 1.500USD. So what have you personally learnt from this?

  4. You’re missing the larger point. Google’s been falling for years now. They are back to 2005 levels which means that they are FAILING as a public company over the past few years.

  5. reinharden

    I hear from various GOOG friends that most groups have a hiring freeze in place anyway. So they don’t have to worry so much about attracting talent at the moment.


  6. I bet a lot of people are dumping their stocks not to re-invest elsewhere, but to pay off staggering debts.

    Rough, rough times for the stock market. Just read on TechCrunch about Yahoo! tanking bigtime, now at just over $10.00 a share.

    Google will probably come back up in the next year or two, but we’re really in a deep trough at the moment.

    Thanks for the update, Om.

  7. @NirajJ

    Essentially with this decline the market is saying that Google’s advertising model is not as safe as it seemed to be. that is why the stock constantly is retreating. It is a leading indicator of what market perceives is the “problem.”

  8. Jason Voorhees

    Dammit, if I can’t buy that third BMW I am going to break something!!!! America, WAKE UP and start bidding up this stock again. Sigh. Back to working on that search thingy.

  9. Google was considered as one of the most reliable stocks – especially when we think of the 700+ rate, less than a year ago.

    It will be interesting to see how many people jump in at this time to grab stocks of Google, Citi (trading at less than 10) and Goldman (trading at less than 70). It might be worth an investment for the long run, but please do your own judgement before buying. Please dont blame Om later :-)

    On a related note, a more interesting thing to notice might be where Yahoo ends. With its stock trading at around 10 bucks, it might help to bail out Mr.Yang in the fighter plane away from the silicon valley.

  10. On – dropped below $300 for the first time since 2005, indicating that the company might not be immune to the downturn in consumer spending (and thus advertising) after all.”

    If you are going to use the stock price to gauge the downturn in add spending then best of luck.