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February 1, 2006
The Google Guidance Myth
Ugh, the commentary this morning from never-worked-in-capital-markets entrepreneurs and VCs on Google's results is driving me nuts. Guys, it doesn't matter that Google was close on its results, and it doesn't matter that this won't chill the entrepreneurial or venture investing climate. What matters is that a volatile, young publicly-traded company with a nose-bleed valuation says it doesn't give guidance, but does. And on one major line where it does give guidance -- forward tax rates -- it got things badly wrong, and it didn't have enough earnings to make up the difference.
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Don't worry, internet business is a growing business, and it may take atleast 100 years from now to reach the saturation point. Keep investing in Google, you will make lots of money.
You're exactly right, of course, but the question is really where Google draws the line on manipulating its numbers in the quarterly earnings game.
Clearly they do play the numbers and they certainly care enough about the analyst's to give limited guidance.
Seems to me they're playing it by ear, making up the rules as they go. This isn't necessarily a bad thing.
Anyway, we better get used to it since Google's dual class structure ensures that things won't change.