Monday, December 25, 2006

Google update, Tenke mining chart, TNR gold development.

http://stockcharts.com/charts/gallery.html?GOOG

I can not post my usual format now so you have to make some work, few notes:
- after last post on Daily GOOG slipped under MA50which is now became resistance;
- on Weekly GOOG developed SELL with MACD crossover;
- stock is just above support of previous tops of shoulders in FIRST TOP in Jan 2006 and Second Top in Triangle at 450.72;
- Point-and-Figure chart is pointing to Reversal with TP of 416, which will be only temporary resistance on its way back in my opinion.
Tenke mining - spot the difference: consolidating on Daily with solid support in 15.0-15.3 CAD, break out on Weekly with testing the resistance level, P&F TP is 24CAD short term. Many new developments will be in the next 1Q 2007:
TNR Gold just in the beginning of Argentina exploration season we will be for an update and latest news from Minera Andes are encouraging: this is North Property which belongs to TNR.V optioned to Xtrata and then to MAI.V, Minera Andes is making new drilling on combined property and initialized scoping study to evaluate potential of the deposit:
New PP at CAD0.20 and Warrants at 0.25 is making nice floor for good news acceleration in stock Value Recognition.

Merry Christmas and Happy New Year to Everyone.

I am on vacation and will post only ocationally.

Thursday, December 14, 2006

Google is officially preparing to the Crash

We are talking about new incentive plan here, apart from usual "world spread" innovation I can find only one Real reason: stock is not going much higher and Insiders are the best people to know it and are not ready to work just for salary and worthless stock options. Apart from latest hype Google did not make much this year as stock, slowing growth and rising Capex will compress Free Cash Flow and stock will fall, technical picture is telling about it very loudly.
Needless to say I am in agreement with Scott Cleland:
"Analyst Scott Cleland weighs in with a list of negatives. I don't agree with any of them.
Cleland says the new plan will enable employees to "rush for the exits", creating a short-term culture in which employees don't care about the company's long-term value. He says a restricted stock plan would be much better, because it is long-term focused. What he may be missing is that the new options vest on the same schedule as the old ones and on the same type of schedule that "restricted stock" would vest. Employees will not be able to sell the new options sooner than the old options. They will just be able to collect some of the "time value" of the options that they would otherwise give up if they did not hold the options to term. This feature might encourage employees to sell earlier, but it should not trigger a rush for the exits any more than a cash salary would trigger one.
Cleland says the new program tells us that Google is having trouble hiring enough smart people because the stock price is so high (implication: they know it's overvalued). This may be true, but it doesn't undermine the idea of transferable options.
Cleland suggests that the program will lead to even more dilution for shareholders. This is only true if Google grants more options than they would have under the old program. They will probably do exactly the reverse: grant fewer options (because each option will be worth more). What Cleland may be missing is that by "transfering" their options to an investment bank, the employees will NOT be exercising the options. They will merely be selling them to another party (which may or may not exercise them at some future date). What matters is the number of options granted, not whether/when they are transferred.
Cleland says Google is arrogantly "innovating without permission" and should have checked with the SEC. According to Google, they DID check with the SEC. And, again, it's hard to see why the SEC would have a huge beef with an idea that's better for both shareholders and employees.
More alleged negatives? (I'm sure there are some--I just haven't heard any good ones yet)."

Monday, December 11, 2006

Tenke Mining made solid New High on Rising Volume

While Google is fighting with Common Sense, few guys are busy buying undervalued assets of Tenke mining (TNK.to CAD18.1), maybe they are the same guys which are advising you to buy...Google with Target Price of 600. I have been there...with strong Buy on Enron, Worldcom, Tyco...etc. We have got only one luxury in exchange for slipping away Time and our ability to Judge and make Decisions, it is Wisdom and life becoming History which can always teach something because nothing is really changing...

Google to Be afraid or Not to Be afraid?

Will or will not Big guys create competitor to YouTube will be dictated not by their ability to do so but by potential of the video market and their fight with mortal enemy to their copyrights: Google, which is violating any possible IP rights. Google is not more than very good index of Library, you can easely find any book, but you are coming for a book, and those who write them will prevail. Technical picture is predicting deteriorating fundamentals: monetising of YouTube will take much longer time and its "juicy business" at the first glance will turn out to be Capital Flash System which will become one more constrain on slowing growth of revenue and Free Cash Flow.

Sunday, December 10, 2006

Google: Mark Cuban: Online Video Ad Market Will Collapse

How much Deal with YouTube and "Explosive Growth of Video Ads" priced into Google stock valuation?

http://internet.seekingalpha.com/article/22023?response_message=Welcome%20sufiy2004@yahoo.com!%20%20You%20are%20now%20logged%20in.

Media Giants Plot to take on YouTube

http://www.thestreet.com/_yahoo/newsanalysis/mediaentertainment/10326941.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

"Baidu.com, China's huge search engine, may soon announce an agreement with Microsoft. So it begins. China and Microsoft: A scrappy duo that's the world's last hope against the evil they call "Google." "

http://www.thestreet.com/_yahoo/newsanalysis/funnymoney/10326942.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Investment Thesis: Google will bring markets down, USD will depreciate, Gold, Silver, Uranium, Energy and other Things will prevail. CS

"If you would like to discuss USA economy go to China this week" - USD is melting down, take a break read "Empire of debt". No solutions, it is needed: to inflate out Debts, but move Must be gradual otherwise Financial shock will be unsustainable. I do not believe and hope that it will not happen - "the end of the world". Chinese are sitting on the Bomb of bursting USD so they will cooperate to the extend of Common Sense, so the move will be "gradual" but it will be enough to Explode Tiny PGM markets and particularly Juniors. In order to hedge themselves and to sustain explosive growth of new SuperPower China and Bricks (Brazil, Russia, India, China) are securing with available dollars Real Assets all over the world. It is government policy and they are acting very aggressively. Look no further then Tenke mining (TNK.to) the project will rely on Chinese building railroads in Africa, be sure not for charity, but to be able to ship goods smoothly into the Dragon hungry mouth. The real War I hope will be prevented with changing Power in USA, but the WAR for Assets is just in its infancy. Changing of power in USA could coincide with Bear market important Low in General market. Study a lot, be the first to secure Mud in the Ground with Gold/Silver/Uranium/Copper Hope in it, management is crucial, discipline and common Sense. According to Jim Paplava reinflation will prevent markets from crash and reinflation means deteriation of USD and explosive growth in Gold and Silver. He used to be in the "Crash Camp" and from Spring changed his position to Reinflation. I still personally think that we should not take it for Granted and Mr Market will show its maniac depressive stance. So part of my positions are in Puts on Tech, Google - Indicator of Irrational Exuberance, Housing and Retail. If crash will not happen I will consider it as insurance and unrealized opportunity to increase my Core position. If something will Trigger Crash of any magnitude all markets could dip in the beginning and it will be good opportunity to increase Juniors positions with money made in Puts. All these are incredible risky and you should not trade your lunch on it. Just think for a while and decide for your Money the place to be: overinflated in Hopes of Saving the world ADVERTISEMENT Company which is advertising to overburden in Debts Consumers Things that they Are Not Needed or Things itself in the Raw State of Mud with Guys who knows how to find them and have proven record to turn this Mud into cash and this Mud itself is First Necessity for everyone who just flushed the toilet first time in their life with joy and wonder. (No offence here fox - you are the driving force of the New Economy in Real Things).

HUI place to be, particularly Juniors with most OZ in the ground

Google weekly Second Top in Reversal Double Top pattern

Google daily Reversal Head-and-Shoulders

Friday, December 08, 2006

Tenke mining Conference Call

This one is going to be Hard Currency, ultimate ATM machine to sell slowly at much higher levels to acquire juicy juniors:
Mention number of Analyst and Argentina properties outline...

Uranium Juniors

Couple of days ago Uranium gang looked weekly overbought to me, taken profit on few positions STM.v, EMC.to, half of JNN.v, ALS.v, some Australian will sell half. Down the road will be very good opportunity to reEnter the sector. Rotated money into silver gang which is at weekly buy at the moment.

Wednesday, December 06, 2006

Tenke Mining Receives Construction Approval From Phelps Dodge

This is what was discussed here "as fireworks" and Bull Market: Tenke Mining broke through previous MAY Top, new highs to come now...
"The initial project will focus on 103 million metric tons of oxide ore reserves. It is expected to be in full production in late 2008 or early 2009. During the first 10 years of mining, total annual production is projected to be approximately 250 million pounds of copper and 18 million pounds of cobalt. The life of the initial project is anticipated to be approximately 40 years." (!)
Few things to consider:
- PhD has approved construction meaning financing without further feasibility study release;
- if Freeport-McMoRan's Acquisition of Phelps Dodge will go as expected they are "told to be" even more aggressive;
-only half of the property explored, BHP was talking about ... 1.5 billion ton resource with Cu grade 3.0%, in all calculations for TNK.to TP and their presentation accounted "only" 500 million tons;
-no Argentinean projects' value in this current price, action to be taken by management to unlock that value...


http://biz.yahoo.com/ccn/061206/200612060362078001.html?.v=1&printer=1

Google Clickfraud Issue is not going away

"There is little about Google's business that is more closely guarded than the issue of click fraud. Company officials say they take the issue seriously and have zero tolerance for fraudsters who generate bogus clicks on ads in order to profit. The search giant says it detects most fraudulent clicks before advertisers are ever billed and that industry concerns are overblown. But Google won't discuss specifically how it detects bad clicks or what percent it deems fraudulent, only that it's "less than 10%," saying such information could be helpful to would-be scam artists."

"Marketers are already anxious about fraud. A study by the Search Engine Marketing Professional Organization (SEMPO) slated for release on Dec. 4 found that 71% of advertisers are "worried" about click fraud, or describe it as a "moderate" or "significant" problem. That's down slightly from a year ago, but still a sizable issue. "

http://www.businessweek.com/technology/content/dec2006/tc20061204_923336.htm

Monday, December 04, 2006

Disclosure and Strategy

The most important: you must stay solvent long enough for your Idea to be realized. (Google is perfect example)
Core positions hold throughout MAY sell off, increased with taken profit before blast and leverage: debt and/or options. Core Juniors GOLD/Silver/Uranium alternative energy, all bought much lower, portfolio back to May high (with Losses in Google Puts accounted) with Major Buy in HUI. Leverage is going down, profits from SNDK puts, SSRI calls rolled over into juniours. Short Google, SEMIS, Housing, Retail, General Markets. Watch out major development in WWAT.ob very risky but with new financing this baby is going sing.
Stop wasting your time here if:
1. You believe that Market is Efficient.
2. You feel very confident - Sell OUT right now and take a break for 1 month.
3. You think that USD is going up and Oil down.
4. You think that Chinese are stupid buying with USD all possible resources OIL/COAL/URANIUM/OIL Sands/Metals and not your beloved GOOGLE which will feed everybody on Mother Earth in Couple of years.
Until recent time from June Short strategy on Google is losing money and working as hedge to Major melt down in the Markets. Only Core positions and Counter trade in SSRI calls at bottom in May/June counterweight time mistakes in Google Trade. Could decisions be less emotional - for sure: then I would stop this excises, enjoy if it is up to your Vibe - a lot of money paid for this education.

Gold, Silver, Uranium, Tenke mining, Silverstone Resources only tiny amount of panicking GOOGlers' money will blow up "golden" Sector

GOOGLE: fighting Gravitation

Monday, November 27, 2006

Google: Barrons' Ends The Party in Bubble 2.0?

We always need someone to tell us: "it is time", problem here is that everybody suddenly become awaken to apparent stupidity of existing perception of value in the face of reality which always has been here just nobody pays attention to it. And the game "find another fool" is getting to its logical end...

http://internet.seekingalpha.com/article/21221

From Henry Blodget:

http://www.internetoutsider.com/2006/11/on_barrons_anal.html#comments

It was written here before about Multiple compression and Growth slowing.

Friday, November 24, 2006

GOOGLE sued by French Movie Producer

In Knowledge Economy one of the most important functions is to store, organize and search all relevant and available data - GOOGLE is the best here in this Commodity business. User can always switch to another Producer of this service, competitor is just click away and switch cost is zero. But the real value will be always with content producing agents in this economy, knowledge will be important and not the transportation of it, as soon as delivery will be abundant uniqueness of any particular participant in this sector will be diminished and their valuation will be on the normal "industrial" level. Content Producers meanwhile will be starting to fight for their Copyright right, because for them it is matter of survival:

http://money.cnn.com/2006/11/23/news/international/google_france.reut/index.htm?postversion=2006112311

Wednesday, November 22, 2006

Tenke Mining Presentation and Reports

http://www.tenke.com/s/CorporatePresentation.asp

Note: TNK's 24.75% equals 8 billion pounds of cooper and 700 million pounds of cobalt.
Rock Value at 3.1$/CUlb=24.8 billion plus 15$/Colb=10.5 billion Total: 35.3 billion $. All South American Properties as Bonus. When production will start Market Cap target will be 3.5 billion $. Now it is CAD14.69*0.88*58.7mil shares=758.8 million $.
96 million $ in Cash

Less than half of the concession area explored.
Mine construction 2006 end, production 2008.

November 10th Repots on 3rd Q and MD&A:
http://www.tenke.com/i/pdf/2006q3.pdf
http://sedar.com/FindCompanyDocuments.do

Note: 6 properties will be drilled in coming explorational season in Argentina and Chile.

Congo: feasibility study to be completed in 4Qth 2006.

Monday, November 20, 2006

Tenke mining Update on Tenke Fungurume Project

"Final feasibility study, environmental impact assessment work and implementation of local social programs have progressed significantly over the past quarter. In addition, significant pre-construction activities have advanced on site to maintain a target of first copper cathode production at Tenke Fungurume towards the end of 2008."

"The potential acquisition of Phelps Dodge by Freeport-McMoRan Copper & Gold, Inc. ("Freeport") announced today is expected to be very positive for the project. Freeport successfully pioneered the enormous Ertsberg/Grasberg mine in a remote region in Papua, Indonesia (formerly Irian Jaya), mastering the technical, political and geographic challenges at Grasberg to make it one of the largest, most successful copper/gold mines in the world."

Stock Price of Tenke Agrees with it.

http://biz.yahoo.com/ccn/061120/200611200358881001.html?.v=1&printer=1

Tenke Mining and its Congo assets at Tenke Fungurume at the spotlight in the Biggest Mining Acquisition.

Freeport-McMoRan's Acquisition of Phelps Dodge Creates Largest Publicly Traded Copper Company

http://biz.yahoo.com/ap/061120/freeport_phelps_dodge.html?.v=8

"Phelps Dodge has operations throughout the world, and is working on an $850 million expansion of its Cerro Verde mine in Peru. It also is building a $550 million copper mine near Safford, Ariz., and planning a $650 million copper mine at Tenke Fungurume in the Democratic Republic of the Congo."

I hope that bidding war for the TNK.to will start after CAD50.0.

With all majors struggling and fighting for additional reserve base Tenke with CU 3% sounds very good to me. For the best value to shareholders I would expect spin off all their NON Congo properties in Tenke Exploration Co as in-kind dividend like Capstone (CS.to) did this year, management should know it is not valued at all in the price of TNK.to.

Sunday, November 19, 2006

Monday, November 13, 2006

Sandisk downgraded

We can see this story developing as it was discussed here before: consumers are hurt by housing, mass market production is feeling the hit and cutting on inventories, SNDK is early bird in the cycle to cut down its amusement. Semis are indicator for health of the consumer economy: Election rally is coming to End reality is little bit different then media would like you to believe:

"LONDON (MarketWatch) -- UBS downgraded memory chip manufacturer SanDisk Corp. SNDK45.75, -0.38, -0.8%) to neutral from buy, citing a likely oversupply in flash memory chips in 2006 and 2007. The firm said capacity growth at SanDisk and its peers means oversupply could reach 10% to 15% in 2006 and 5% to 10% in 2007."

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7bA9F9A1B2-0A8F-4C25-BDDF-CF2A1C8E7CCF%7d&siteid=yhoo&dist=yhoo

Sunday, November 12, 2006

Google weekly chart multy year Double Top Reversal Bearish Pattern

Google: unrealistic expectations of growth are build into the price

All new areas of growth: diffusing into Old Media World with New Technology will mean that growth will not be as explosive as with "clicks" due to:

1. Competition of Old Media.
2. Failure to really innovate outside of search.
3. Copyright nightmare.
4. Becoming Media Company...with much lower multiples.
5. And last but not the least - big Budgets in Old Media World are won not with "clicks" but rather with "ticks".

http://blogs.zdnet.com/micro-markets/?p=654

Google: very expensive way of life with YouTube

http://money.cnn.com/2006/11/11/technology/bc.media.google.video.reut/index.htm?postversion=2006111100

http://www.accoona.com/search?col=mc&ws=10&ss=3&bs=10&ns=10&par=22704UU1163363734998&pg=1&order=1&qt=google+law+suit

Recession: to Paint Rosy Picture becomes more and more difficult

From Barron's:
"Recession: The preconditions are in place: (1) Housing drop of 10-20% (which usually signals a recession of unusual length). (2) Weak auto sales. (3) Inverted yield curve. "Where we had been looking for a slowdown, we now think there's a 40% to 50% probability of a recession. Next year could be a very difficult time in the U.S. economy."
Retail: Wal-Mart is his "favorite economist" due to its size, its market (low-middle income), and its monthly numbers. There has been a dramatic reduction in low-income spending. "I would suspect the retail-sales environment will be the next sector of the economy that we will start to hear less exciting news from."
Election: Lower capital-gains and dividend taxes have fuelled the current bull market. Although the current tax treatment, passed in 2003, is in place until 2010, even mentions of change are negative. The planned Democrat minimum-wage increase will raise unit labor costs and impact profit margins.
Inflation: Not a worry -- it will peak by year-end or early '07.
Oil/commodities: U.S. is the world's major consumer. If economic growth slows, so will consumption. "We think the price of oil could drop to a range of $45 to $50 by this time next year."
Interest rates: The Fed is finished raising short-term rates. He sees a 200-basis-point drop from early '07 to early '08. "I have never seen a slowdown or a recession where bond yields go up."
Dollar: "The dollar is about to resume a fairly extended decline." This makes foreign investments and precious metals attractive.
Stock market: It is highly correlated to GDP growth. He foresees flatlining or decline over the next 18 months. "
http://seekingalpha.com/article/20400

Google CheckOut has usual destiny of "Another Killer Product" Copycat

Google is still a company with outrages valuation, but all its strength is only in Seach Based Advertisement, all efforts to diversify from One Revenue Stream Business failed so far. After purchasing YouTube all investors has right to grill CEO about what all those PHD are doing, talking out minikitchens?

From Henry Blodget blog:

http://www.internetoutsider.com/google/index.html

Saturday, November 11, 2006

USD: another Leg Down

With Gold, Silver and mining stocks HUI at BUY, USD - stock of Corporation USA is ready to go down again: no more support from FED (Housing decline is killing Consumer) and the only way to deal with mounting Debts is to inflate them away:

http://www2.pimco.com/pdf/PER040_103006_Dollar%20Downdraft_Clarida_Final.pdf

Thursday, November 09, 2006

Google Inc.'s online video service has been sued for copyright infringement

YouTube was so interesting because it was free, spontaneous and nobody cared about copyright issues. You was able always find materials with copyright infringement, now its popularity will be coming down with approach to try to organize it and bring its content in order with legistlation. Google has became big fat sitting duck for all those guys who has been losing money all these years due to piracy. Will they just sit on their hands and watch Google's fortune using their IP growing? I do not think so:

http://biz.yahoo.com/ap/061108/google_video.html?.v=3

Sunday, November 05, 2006

HUI: Multy Year Buy Signal for New Leg Up

HUI: chart is strong ready to depart from General Martkets

Google: Indicator of Irrational Exuberance

SPY: All "Free" markets are Broke Down in Unison

DIA: Break Down from the Support Line

QQQQ is tired: Support Line is Broken Downside

SMH indicator of Tech and Consumer Economy Health is falling apart

TNR Gold: Junior Exploration company introduction.

Note: I own this stock at the moment of posting.

This is very risky, but pay off could be handsome: nobody likes it, nobody follows it. Do your DD, it is very small market cap, it is beaten to 0.2cad but has partners like TNK.to, NG.to, MAI.v.

Pure option on Gold with no time value. This one could go to zero or be above 1.0CAD only money which could be lost allowed for such high risk.

Upside potential:
1. TNK.to Operator on Argentinean properties, Lukas Lundin's Tenke Mining President Paul K. Conibear on the Board.
2. Optioned property from Nova Gold Shotgun: with Winchester prospects - latest drilling results in press release below. Vice President of NG.to in the board. They left Rock Creek property in order to work on Shotgun. NG.to is putting Rock Creek into production in 2007. (This could be allocated to stupid decision as well of that management).
3. Los Azules Property optioned to Xtrata and from Xtrata to Minera Andes MAI.v extensive drilling and Cu finding there. Former GG chairman bought 30% of MAI.v just because of that property MAI.v adjued to TNR's one. Biggest Cu grade is on TNR's property there.
4. Very small cap, unbelievable valuation with such properties and partners, illiquid, nobody knows: with real development will sky rocket over 1.0CAD.
5. Shares are very tightly held: main shareholders: TNK.to, RAB, NG.to, management.
Risks:
1. Nothing of the above has moved the stock so far.
2. Management was sleeping completely, but has waken up recently.
3. Information flow and PR management could be way better.
4. Very slow moving environment.

Things to watch: drilling results from all properties, TNK.to warrants excises at CAD0.25.
This one you have to really dig out, I will post some more info.

http://www.tnrgoldcorp.com/news/tnrnr110106.pdf

http://www.tnrgoldcorp.com/

Saturday, November 04, 2006

YouTube is not easy task to settle, a lot of money could pass down those Tubes.

I think the more Google guys will get into the copyright issue, the more price for buying YouTube will look unwise at least. It is not News settlement: it is bread and butter for powerful industry which is struggling with piracy and losing tons of money just because of "New Media" with Google and YouTube at the Edge.

http://www.hondoazul.com/YouTube_TarBaby.pdf

Monday, October 30, 2006

Walmart and Semiconductors are signaling that Party is over

If you talk WMT you talk American consumer, if it can not grow Sales any more even with artificially low oil prices for Election Rally it tells real trouble: yield curve is inverted for reason - it is practically recession already. Transportation with Double Top signaled contraction earlier in Mid Year. And now story about SNDK is making its way into PC market and bellwether of Tech semiconductors will take the hit soon. Party is coming to The END check your Water Supply.

Tenke Mining Fireworks Has Begun

From previous post on Tenke Mining: "I wrote it after Western Silver acquisition: "The new deal in my opinion will be catalysis for much higher price valuations of Juniors with real resources. From Hommel: WTZ has metal resources in zinc, Silver, copper and lead at current prices worth of USD10 bio in the ground with PRODUCTION. Glamis is buying it for USD 1 bio 1 to 10 price/resource rate.
From Paradigm research: DRC alone account for 71.5 bio Cu eq lb*2.27USD/lb*24.75%=40.3USD bio Tenke's share rock value in the ground. In WTZ - Silver, but here we have all Argentina properties and Jose Maria bulk tonnage discovery (not included in this rock value)
With start of production in 2008 even if prices stay the same level TNK potentially MC is 4.0USD bio (without new major Argentina discoveries and increased reserves in DRC). They will have to finance 24.75% part of mine in DRC, I am not sure about the cost but if even we take dilution of 10 mio at CAD15.0 average it will bring 150 mio CAD for all activities. With FD at 51.7 mio plus dilution of 10 mio we will have in 2008 FD 61.7 SHARE PRICE TARGET CAD75.0
Now everybody can do DD and add potential Argentina, price rise in Cobalt and Copper, less dilution due to debt use.
Minus of course that it is DRC, but ... with time for mining it could be valued more than USA.
To unlock all this value we need couple of smart decisions of Lundins: spin off Argentina comes to mind, buy out TNR and on this base consolidation of all gold projects of Lundin group RBI, CGH - the new GOLD Co will move into new league right away: PRODUCER with big exploration potential with much higher valuation of gold properties.
Best luck to shareHOLDERS,
Sufiy."
First part has already happen PP for CAD103 mil at CAD12.70 bought out by Lundin family."
Regards,
Sufiy.

Tuesday, October 24, 2006

How many loyal customers will be left in YouTube?

YouTube collected personal info on people who has been unloading videos on its site and has revealed ID to Paramount lawyers who sue the poor guy in the court:

http://www.boingboing.net/2006/10/23/youtube_gave_user_da.html

How much upside is left even to Google's craziest valuation?

When will the game "music chairs" begin? Who will be without the place? In order to Sell you need to have a buyer. If you are buying Google at 480.78, you are buying the company with following valuation from Hard Data on Google Bear Case:
FCF 2006 est 1.712 billion
GAAP EPS 9.44 USD
Revenue 10.4 billion
Market cap at 480.78 stands for 149,3 billion. After YouTube deal if stock will not move from 480.78 dilution will be +3.4 million shares wich will bring Market Cap to 151 billion.
So at 480.78 Google is "on sale" according to majority of analysts with:
2006 est MC/FCF=88.2, P/E=50.9, P/S=14.5 with growth in Revenue in single digits Q/Q and EPS growth +1.3% Q3/Q2 in slowing economy with online advertisement slowing growth reality.

Monday, October 23, 2006

S&P DOWNGRADES CLASS A SHARES OF GOOGLE TO HOLD FROM BUY ON VALUATION

"S&P DOWNGRADES CLASS A SHARES OF GOOGLE TO HOLD FROM BUY ON VALUATIONS&P Marketscope - October 23, 2006 2:47 PM ETShares are up 19% this month, and are approaching our recently increased 12-month target price of $500. We remain positive on GOOG's fundamentals specifically, and online advertising in general. However, risk-reward considerations contribute significantly to our downgrade. With GOOG today reaching an all-time intra-day high, we are growing increasingly wary of what we perceive to be potentially excessive enthusiasm regarding the company and stock. At current levels, we see the shares as only reasonably valued. "

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:newsml:reuters.com:20061023:MTFH41903_2006-10-23_19-55-46_N23390483&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage1

Some guys are still using their brains and calculators in Google case

As written here before Google's Revenue growth is slowing :

http://internet.seekingalpha.com/article/18996

Is Google an Organizer or just Polluter of the WEB?

Very big academic debate will be held in the nearest future: was Google phenomenon good for development of the WEB or was it time of Rubber barons in the New Economy. It looks like that on every Conner of the WEB only Rubbish with parked pages could be found and you really have to start filtering all information which is coming from search engines.

Great read:

http://blogs.zdnet.com/micro-markets/?p=576

Washington post "FBI, SEC and US Postal Inspection Service are investigating click fraud"

This is the real story behind all that industry denial:

"Big advertisers are pushing search engines behind the scenes to fight click fraud more aggressively, but many are afraid to criticize them publicly because they wield such clout. "Sixty percent of new customers come through Google. [Advertisers] can't afford to upset that channel, regardless of whether there's fraud," said Jason Clement, an associate director at Carat Fusion, a New York ad agency."

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/21/AR2006102100936.html

Very interesting discussion on

http://battellemedia.com/archives/003003.php

Sunday, October 22, 2006

Google's growth is slowing dramatically

Few more observations on recent trends in Revenue and Net Margin of google presented in CC slides
First of all I dare to say that they have monetised everything from the existing traffic with diminishing growth and they are desperate to buy new traffic in order to monetise it. The biggest problem here that YouTube traffic is not monetisable straight forward if meaningfully monetisable at all. But few figures: Growth in Google.com is in the slowing trend Q3/05 +20%; Q4/05 +24%; Q1/06 +18%; Q2/06 +10.4%; Q3/06 +13.5%. Share of Network Revenue is declining Q2/05 85%; Q3/05 76.3%; Q4/05 72.8%; Q1/06 71.5%; Q2/06 69.6%; Q3/06 63.8% and growth in Network revenue is slowing even more aggressively: Q3/05 +7%; Q4/05 +18%; Q1/06 +16%; Q2/06 +7.4%; Q3/06 +4% (!) What has happen? Partners has figured out how to monetise traffic without Google? Nobody is growing apart from Google (which is slowing down itself)? Click fraud with better audit available to advertisers is taking its cut from "partners" clicks? We can only speculate here, but trend is established and it must be very disturbing to Google management. Cost of this Network traffic is increasing, if you will proper apply TAC to share of Network Revenue you can see following picture: TAC/NetwRev Q2/05 78.4%; Q3/05 60%; Q4/05 78.7%; Q1/06 77.9%; Q2/06 78.7%; Q3/06 79.6%. So total picture is that growth of Revenue on Google.com is slowing to 12-15%; Growth of Network Revenue is slowing dramatically to single digit figures and its cost TAC pushing 80%. Net Network Revenue was Q1/06 205 mil 15.8% of Rev Google.com; Q2/06 212 mil 14.8%; Q3/06 212 mil (!) 13%. Somebody is playing math here? Do you remember how insurance companies like AIG smoothed their earning with "Partner Deals"? Traffic exchange even more easy to regulate or maybe some of the "Partners" in the "Network" in the Family. But no offence Boys - you are hardly pushing any Law here and clear in your intentions: Selling your shares smooth and fast. All written above went straight into the money: Net margin contracted in Q3 vs Q2 from 29.4% to 27.3%. Should I send it to Google? Or they already have these slides for internal use?

HUI New 1st wave up in the making, New Buying Opportunity could be presented.

Run for your Lives! Warning: before buying into this Market check your Water Supply.

Transpotation Non Conformation: Double Top signaled period of contraction started and it is still in Downtrend

Market is at crossroad: New DOW High is not Confirmed by Transportation

Saturday, October 21, 2006

Google just 460...Anyone?

It was not a lot of institutional buyers at 460 last Friday:

http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=goog

Coming week will be very interesting with all markets at crossroads, I will post few charts for Lazy weekend session.

Almost everybody thinks that Fed is Done but what if More Fed's hikes are coming:

http://money.cnn.com/2006/10/19/news/economy/inflation/index.htm?source=yahoo_quote

Good weekend educational read:

http://financialsense.com/

http://jsmineset.com/

http://gold-eagle.com/

http://prudentbear.com/

When you are tired:

http://www.valleywag.com/tech/google/

Google CC:

http://internet.seekingalpha.com/article/18858

Google weekly: Double Top Reversal in the making?

Hard Data on Google Bear Case

Lets keep all media hype away and quick short covering amusement following it and check out Google's development in recent Q in order to try to understand its valuation compare to its piers. Upside now is known and everybody is on Buy side with price target 600 (+30%). Shorts are killed and short ratio is less than one day trade, no easy money for upside after yestoday short covering left, somebody has to start to buy into this story at this 460 level. First Google came with Rev 2.69 billion which is less then 2.76 which I have projected from PWC predictions of 16-18 billion online ads market in 2006 with Google Share of 40.5% of this market in Q3 (seasonal trend applied) So, first Google did not manage to increase its market share in Q3. Second, lets look at earnings GAAP ($) Q1 1.95, Q2 2.33 (+19%), Q3 2.36 (+1.3%!?) Earnings growth dramatically slowed. Third, revenues: Q1 2.25, Q2 2.46 (+9.3%), Q3 2.69 (+9.3%!?) math's precision or can I smell some cooking oil here? 44% of revenue is coming from international business. All hitfarms are located in pure "international "destinations India, China, Malaysia, Russia etc. Revenue growth is slowing with increased risk of cutting back on advertisement due to economy slowdown and click fraud awareness buy the customers. Fourth, Net cash from operations Q1 0.825 (37% of Rev), Q2 0.841 (+2% 34% of Rev), Q3 1.0 (+19% 37% of Rev) Capex Q2 0.699 (0.319 Real eastate 0.380 "normalised"), Q3 0.492 (+29%!) So Google Capex increase is really much bigger then their Rev growth 29% vs 9.3% with constant Net cash from operations at 37% Rev, Free Cash Flow is under compression. Total Free Cash Flow for nine months is 1.112. If we will project Rev growth for Google at 12% for Q4 vs 9.3% for Q3 they will make Rev Q4 3.0 (less then based on PWC and 41% of market 3.2) Net cash from operations at 37% of Rev 3.0 will be 1.1, if we apply 20% growth for NCFO in Q4 (vs +19% Q3) we will get 1.2 so lets assume NCFO will be in the middle = 1.15. What about Capex? I think it will be increasing dramatically with moving into video: broadband, storage, new blades, electricity. But if we even aply same growth to capex as to Rev +12% (they said it will be bigger then Rev growth, Q3 was +29%) Capex Q4 will be 0.551. So, Free Cash Flow in Q4 will be NCFO-CAPEX=0.6 and total FCF 2006 will be 1.712 If stock will not move from 460 we have MC=142 billion MC/FCF=83! YHOO is projecting FCF 1.35 in 2006 (lowered recently) with MC at 32 their ratio is MC/FCF=24 If the Google will manage to make even 2.8 EPS in Q4 (+19%) (do not forget annual charge for all those "to be expenced option related expences which they did not account in past Qs) GAAP 2006 will be 9.44. So with GOOG at 460 we have company with 2006 est MC/FCF=83, P/E=48.7, P/S=14.2 with slowing growth in EPS and Revenue and most important with dramatic compression in FCF. YouTube will bring dilution, much more CAPEX in Video Game and No revenue so far. What is the more reasonable valuation of Google: if we give GOOG MC/FCF=40 (69% over YHOO for leadership and "strength") MC with 1.712 FCF must be 68.5 billion with 310 million shares outstanding before YouTube diluton it is...221 share price. When MR Market will figure it out I do not know, but I am testing the water with March 2007 460 puts.

Friday, October 20, 2006

Reflection...time to think it over. CS

Ok, GOOG at 460, it is time for reflection. First I must admit: ability of this company to create perception in the market that they have beat every possible estimation and move the share price higher is unmatchable, or here I am wrong – guys from YouTube maybe even better, and it is great for them if they will sell shares of GOOG in due time. But admission to be made: GOOG have broken to the upside on earnings from triangle on weekly bases. I was wrong here and predicted that it will be breaking down. So we must study the facts, check the strategy and move on. When I would be completely wrong: if I have put all my short position on this earnings without any limit of risk, so few rules to stay in this game until the end of education:
Allow at least twice as much time for your thesis to be developed in the market as you can anticipate in the beginning.
It is still very difficult: you have some help: Roll Over your position.
If you Trade then close position as soon as you have profit that you have anticipated in the beginning and take you capital out, let you profit run If thesis still in place.
How to stay in the game: Trade only with money which you could afford to lose: limit your risk by buying PUTs on stocks which you think are overvalued.

So what is my case: I am Investor in big long term trend: now it is commodities, PGM, Silver, Uranium, alternative energy. All my major positions are there: I am using TA to reduce my positions on the tops and to increase them in the bottoms. Here my horizon is years. I am buying value in undeveloped resources – mining companies: it is like option trade on the underlying commodity but without time value to lose. Not Risky? No way, but I had very expensive education and now is doing good job. Am I as good as I am writing now – this is the whole point of this Blog: I can be way better, particularly in Trade. So this is part of my education: I have allocated some capital on ongoing bases and trying to bring my skills to perfection, here where the Google comes: I really like technology and using it everywhere and Google as well and Blogger (maybe because I am PC illiterate). But when we talk about Google Company valuation it is another story.
Probably, according to research and massive comments I am the only reader of this Blog – better for me: Warren Buffet will not compete with my positions. And I do not like that Larry and Sergey after reading it will change their strategy and will buy all Junior mining companies with their shares: they are already wealthy, actually without knowing me are doing the same (only selling shares of GOOGLE, it is very strange that they are not buying it like crazy with guaranteed upside to 600) and my turn to make a lot of money on Irrational Exeburation in WEB BUUBLE 2.0 is still to come. Sorry I can not disclose my Junior mining trades apart from already posted information: their market caps are so small that it takes me months to establish proper positions. But leave me a comment and for the good devoted to thinking guys and girls there is nothing to be jealous about.
So talking about business I will post my take on earnings and why I am not buying calls but rather puts March 07 and further down the road. Why to bother? Another Rule:

Never marry your position, do not bring your trade or even investment to Personal level: if the thesis changed close the Trade and move on.

From personal experience: If you are healthy and have capital, another idea and opportunity will find you, in different case nobody will call.
What I did well this year in trading: Puts on GM, YHOO, INTC, QQQQ, KBH, LEN, TOL, DIA, AAPL all closed with profit. Now new are established PUT QQQQ, SMH, DIA, SNDK, NVDA, RIMM. Warrants on NNO, GG closed with profit. Now calls are established on SSRI, SLW, GG, RGLD. Google PUT closed with profit in May – June and Rolled Over into Jan 07 (bought new positions Long Put with longer term of Expiration). Am I perfect and satisfied, no - I could do better particularly with GOOG, RIMM and expect that more time will be needed until Irrational Exuberance will be apparent to the market and take into account that some Saudi friends can help someone with elections bringing oil down and effectively markets up. Thanks them for it: I had good Juniors Hunting recently. Few more streaming thoughts before Bear GOOGLE Hard Data thesis posted: today I have closed very nice Trade on SNDK: it was down 21% and my PUTs were flying: very perfect education case. I enter small position in the beginning of the year too early and too out of the money (after today drop even there I can break even), but let myself test the water, on recent spike I have established proper position and today thesis was developed by the market, valuation PERCEPTION was changed and stock was beaten HARD so I ended with nice profit. Why SNDK fall? They beat the Street 0.51 vs 0.49 and on revenue 2% above Street est. but they guided lower! And everybody sell them, GOOG keep silence about the outlook and the same guys who punish SNDK with $46 PT are putting on GOOG PT of $595. Look at their fundamentals in the same report: SNDK forward P/E 2006 is 30.1 est. and 2007 is 28.7 GOOG frwd P/E 2006 is 41.8 and 2007 is 30.4. One stock is down 21% and another is up 7.5%. Here comes another very important issue: PERCEPTION and it could cost you all your money you can be THOUSAND times right, but if perception of the MR Market has not agreed with you, you can lose everything and in options TIME which is against you when you are long options is most crucial factor: Google can go into oblivion in 5 years but if you had Oct 2006 400 puts you Capital will not make it. That is why (according to open sources) Warren Buffet is never playing options, he is …”just not clever enough” as he puts it. One thing is to find out right direction another is to figure out the timeframe when that direction will be realised. Am I trying to be clever than him? Nope, just “sharping the saw”. At the moment bad story about SNDK is known, with GOOGLE with WORSE fundamentals perception is that everything is growing fast and upside is unlimited. What is very important with SNDK: there is no pricing power, competition in COMMODITY business (search is UNIQUE and RESTRICTED to Google?), lower sales (I bet due to Consumer hurt by Housing Bubble bursting and cut back of all users of SNDK on Inventory levels due to Not Rosy outlook) will they cut on chips but spend on ADs even more – hardly and we can see it already in Google financials). Before Hard Data just take a look on Rev growth q on q this q3 it was 9.3% not 10% in conference call (are they pushing figures only here?) but in q2 on q1 Rev Growth was … the same 9.3% miracle, or can I smell some cooking oil? Then we can find out that international Rev contributed 44%, where from do you think click fraud originated: China, Malaysia, Russia and other “pure international destinations”. Why do they use Non GAAP figures together with GAAP ones just for confusion, they love Buffet but he never do it. Why is there is always mysterious:
“Stock-Based Compensation – In the third quarter, the total charge related to stock-based compensation was $100 million as compared to $109 million in the second quarter.
For the full year, we expect stock-based compensation charges for grants to employees prior to October 1, 2006 to be $377 million. This does not include expenses to be recognized over the remainder of the year related to employee stock awards that are granted after October 1, 2006 or non-employee stock awards that have been or may be granted. We currently anticipate that dilution related to all equity grants to employees will be approximately 1% to 1.5% per year.”
Why do not expense all related to the q costs of Labour in all categories of compensation? The only reason that you can play with it but at the year end you will have to charge it. But more to come in hard data posting.
Few final disclosures: because if you Think you will always ask Who? What? And Why? I am not so old; my background is in Finance with applications in telecom, transportation, banking, and internet. Mining and PGM lately, strategic controlling in fast developing Holding of companies in different industries in emerging markets was my last managerial application. Now I have a treasure to Think, Act and Enjoy accordingly. I do not believe in Efficient Market - otherwise I can not afford my lifestyle. Why? I am not sure, definitely for myself and my son and maybe few others…If I will stop posting it means that I have figured out more efficient way of keeping myself to the account. English is not my native, sorry. Sufiy…it is very special and I am not Muslim (nothing wrong with it anyway). Always remember there are a lot of PhDs in the world, but not everyone of them is a millionaire. You need something else, I would rather call it Art. (I am not PhD)

http://investor.google.com/releases/2006Q3.html

Wednesday, October 11, 2006

More news on slowing advertisement

"CNet also lowered its revenue outlook for the third quarter, citing weaker-than-expected advertising demand. The company now expects revenue of $92.8 million, below its previous forecast of $93 million to $96 million.
Also, CNet lowered its 2006 revenue project to $376 million to $386 million from the previously stated $386 million"

Tuesday, October 10, 2006

WEB 2.0 turns into BUBBLE 2.0 Google buys YouTube

On this deal WEB 2.0 has turned into bubble 2.0. Google has admitted that inside nothing substantial could be created, the main logic was "if we will not buy it MSFT or AHOO will! And then what...Google will vanish? Where is all that brand strength, dominant market share? The truth is it is one stream revenue business, competitors just ONE CLICK away, cost switch for customer Zero. Look at their CC about the deal: company is under hit of contracting revenue growth and most importantly FCF, which will bring valuation and stock price down. The most interesting for me is how they are going make this q, numbers are gonna be very thought to meet.

Please note that in my EPS estimation below I have used all current trends in spending but revenue growth is +12.5% Q3/Q2 and +17%(!) Q4/Q3 they manage to make only +9% on Q2/Q1.

Sunday, October 08, 2006

Google in the earnings season: trends are against it - no mistake will be excused.

Weekend lazy: food for thoughts on recent trends...

Mixed outlook for advertisement

http://www.ft.com/cms/s/f55f202e-4cbf-11db-b03c-0000779e2340.html

Online video is not a priority

http://www.adweek.com/aw/national/article_display.jsp?vnu_content_id=1003189673

Online advertising slows:

http://money.cnn.com/2000/10/05/redherring/herring_online/

Options is not good motivation at GOOGLE any more! Executives prefers hard cash, it is very strange I thought GOOG at 600 will be better:

http://www.redherring.com/Article.aspx?a=19015&hed=Have+Google+Options+Lost+Luster%3f

US Online Ad Spending:Peak or Plateau?

http://www.emarketer.com/Reports/All/Em_ad_spend_oct06.aspx

PWC report

http://www.iab.net/resources/adrevenue/pdf/IAB_PwC%202006Q2.pdf

How online gambling collapse will affect online advertisement

It will be very interesting to get estimation how Google, Yahoo and internet advertisers were affected generally by collapse of online gaming companies:

http://www.theherald.co.uk/business/71399.html

http://www.google.com/trends?q=online+gaming%2C+online+casino%2C+online+pocker&ctab=0&geo=US&date=all

Saturday, October 07, 2006

Am I old, bad and everything is going down...Nope, we just need to be in the right place

Technology Market is just about to get Flu

No rosy picture in the market with DOW at new high

Goog relative to DIA (DOW Trust) is in clear bear market trend is down, big money is leaving

Google is in symmetrical triangle break out to the upside? Hardly

It was not sobering: it is desperation - Google in talks to buy YouTube!

From Henry Blodget:

http://www.internetoutsider.com/google/index.html

Sorry Henry, If I can disagree here: I can see this move of Google to buy YouTube as act of desperation to diversify from one stream revenue business which is slowing down with click fraud and slowing economy on one side and finally sobering thoughts of founders on all crap products they announced which are not working and/or not wanted by anyone on another. I can imaging that after a big battle inside and clear understanding that all very expensive R&D are not bringing NEW PRODUCTS WHICH ARE ADDING to revenue and bottom line they were pushed to make a move which suppose to bring new dimension and advertisement space for monetisation efforts. Will it save GOOGLE from falling short of expectations – I doubt it. Apart from copyright issues fully described by Mark Cuban and others from business point of view this acquisition is wrong at the wrong point in time: YouTube is just a place where people are unloading their video content - it is real “LONG TAIL” staff, 99% of it will be seen just by creator and five other guys maximum. In order to monetise this audience media it will take ages and maybe never be profitable. If I would like to see news I will go to news portal, I will use good video search engine for lectures or similar CONTENT. Apart from hype this 1.6 billion investment will not bring any even middle term (1-3 years) google size meaningful revenues. So we have now very interesting point of Google business development cycle which will be reflected in earnings this and next quarter: no new working ideas from inside, all released products are not material in sense of revenue, strategy is to move into video space and buy out time but there is no clear business idea apart from proposal to advertisers: now we will put your add on every video download (99% is how I am cool dancing or baking or nice place in Zumbaramba). On the margin compression side we will have slowing growth of revenue due to click fraud recognition and slowing economy (not only YAHOO! disease), increasing Capex (now with not clear picture whether any of these investments are actually working) and expense related to options from 1st and 2nd q around 151 mil, so Free Cash Flow will be way below to reflect any sustainable multiple to the current stock price.

Friday, October 06, 2006

Looks like sobering thoughts for me

Finally from Google founders: this kind of unsustainable and irresponsible financially CAPEX investments into the products which do not work and do not wanted is very precise indicator of BUBBLE ready to burst.

What developments have turned unstoppable we-will-fix-everything guys to more sober state of minds? Slowing monetisation efforts, ADs cut back due to click fraud and economy slow down or just common sense? This earnings release will be very interesting!

"Google (GOOG) leaders told their engineers to stop focusing on launching a dizzying array of new services, and concentrate on making sure the existing ones work. "I was getting lost in the sheer volume of the products we were releasing," said co-founder Sergey Brin. The Internet search giant's Web sites offer more than 50 products in various stages of development, from digital maps to a search engine for mail-order catalogs. "They created a bunch of crap that they have no idea what to do with," said Rob Enderle, principal analyst of the Enderle Group. (Los Angeles Times, free registration required)"

http://finance.yahoo.com/columnist/article/business/10534

Monday, July 24, 2006

GOOG is trying to make positive spin on the click fraud report

http://googleblog.blogspot.com/pdf/Tuzhilin_Report.pdf

(We must add that this report was paid by lawyers anxious to make settlement with Google where they will receive up to 30 million dollars in fees)
Copyright The Financial Times Limited 2006
http://www.ft.com/cms/s/7037e12a-190b-11db-b02f-0000779e2340.html

Sunday, July 23, 2006

Big picture GOOG can not sustain this FCF multiple.

Henry Blodget in his analyses is right: the only way to understand real financial picture in all this creative accounting is FCF Free Cash Flow which is determined as Operating cash Flow minus Capex: capital investments into business. http://www.internetoutsider.com/google/index.html if we will follow his logic and give GOOG generous estimation of 2 billion FCF its multiple MC/FCF is 120.9/2=60.45 with single digit growth of 9% in revenue Q2 over Q1 http://www.awadallah.com/blog/ such valuation is completely unsustainable. Plus all usual suspects to consider: click fraud (no single word on GOOG CC http://internet.seekingalpha.com/article/13986, YHOO started CC with its very important issue http://internet.seekingalpha.com/article/13811), SBC stock based compensation is not expensed fully 375-109 (Q1)-115(Q2)=151 million to eat from earnings into the second half, " ...growth rate in capex in 2006 will be substantially greater than the revenue growth rate for the year.", declining Operating margin to 38% (YHOO is 41%)

What is reasonable multiple: YHOO at the moment has 36.47/1.4=26! (1.4 billion in FCF is middle of the range confirmed in guidance on CC) and it is multi revenue stream business with stable subscription base of loyal customers.

For GOOG to reach "reasonable" valuation of 30 with MC 2*30=60 billion in the economy going into recession when advertising will be cut first stock price will have to fall to 60000/310=193.5

I will be generous: at 200 I will not short this stock.

TA GOOG weekly: SELL

TA GOOG relative to Yhoo perfomance: YHOO leads GOOG

Wednesday, July 05, 2006

Real size of the click fraud problem.

Click fraud a huge problem Study finds practice widespread; many cut back online ads
Verne Kopytoff, Chronicle Staff Writer
Wednesday, July 5, 2006 now part of stylesheet -->

Internet advertisers paid $800 million for bogus clicks on their marketing messages last year, shaking confidence in the industry and prompting many to reduce spending with Google, Yahoo and other Web sites, according to a study to be released today.
The survey, by Outsell Inc., a market researcher in Burlingame, is one of the most detailed looks at the nagging, high-profile problem known as click fraud. Advertisers have long complained that major Internet sites don't do enough to combat the practice or, at least, disclose the extent of it.
Internet advertisers pay companies like Google and Yahoo every time someone clicks on their ads. The advertisers also share revenue with Internet companies based on how many advertising clicks their Web sites generate. Click fraud occurs when scammers repeatedly click on ads to cause a rival company to be overcharged. In another incarnation, fraudsters place the ads on their own Web sites and then click on the links to get a piece of the shared revenue they've agreed to with Google or Yahoo.
In today's report, advertisers say that 14.6 percent of all clicks are bogus. Moreover, three-quarters of advertisers said they had been victims at least once.
The perception of pervasive fraud has prompted many advertisers to change their spending. Many are asking why they should fork over money - significant amounts, in some cases -- for phantom shoppers.
The study found that 27 percent of advertisers reduced or stopped spending on click-based advertising. An additional 10 percent said they intend to curtail spending.
"In our opinion, it is not acceptable that advertisers fund the illicit profits of the scammers," Chuck Richard, vice president of Outsell, said in the report. He added that the fraud is easy to get away with and that Web sites have done little to stop it.
Gaude Paez, a spokeswoman for Yahoo in Sunnyvale, denied that her company is lax about click fraud. Rather, she said, Yahoo rigorously polices the problem with a range of automated filters so that customers aren't excessively charged.
Through the years, Yahoo has detected and declined to bill for billions of dollars in suspect clicks, Paez said. Users can always request refunds if they believe that they were erroneously billed, she added.
Outsell found that 7 percent of advertisers request a refund, netting an average of $9,507. Unsolicited refunds were paid to 4.2 percent of advertisers, with an average of $9,444 coming from Google and $4,068 from Yahoo.
Some advertisers who say they have been defrauded may be mistaken, Paez said. What looks like an unusual spike in clicks, for example, may actually be the consequence of a particular search term suddenly rising in popularity because of a news event or a holiday.
A spokesman for Mountain View's Google didn't respond to a telephone call seeking comment.
Advertisers have sued Google and Yahoo, claiming that the companies fail to filter enough of the fraud. Both recently reached settlements in separate class-action lawsuits over click fraud.
Outsell's survey was based on the responses of 407 online advertisers representing a cross-section of U.S. business. Their spending ranged from several thousand dollars online annually to more than $10 million.
That some of the advertisers cut some of their spending had a big effect on the finances of Google, Yahoo and other Web sites, according to Outsell. Combined, they missed out on $500 million in revenue in the United States, according to the report.
Still, the U.S. Internet advertising industry grew in 2005, as did Google and Yahoo. Such marketing, called pay-per-click, was a $5.5 billion business overall.
"Regardless of how impressed anyone is with the growth of pay-per-click advertising, it's dragging an anchor behind it," Outsells's Richard said in an interview. "It could be much larger."
Paez said that her company's business is still healthy. "We continue to see a lot of advertisers joining the network and increasing their spending," she said.
Ads priced by the click appear most frequently on search engines, in the margins next to results. On average, the advertisers paid $1.39 for each click on their ads during the first three months of the year, according to Fathom Online, a search engine advertising company in San Francisco.
The ads, which appear as mostly text and a link, are usually specifically tailored to the search terms. For example, a user who enters the query "beach vacation" will typically see ads from travel companies.
Richard said that major Internet companies could help improve their perception by advertisers by being more transparent. Google and Yahoo decline to make public any internal data about click fraud for competitive reasons and for fear that fraudsters could use the information to get around the defenses.
The stance has frustrated many advertisers through the years, who say they should know up front what level of fraud to expect and how many illicit clicks they get and when. Previous estimates have calculated the amount of fraud at between 10 and 30 percent of all clicks.
Richard said that dissatisfaction with click-based advertising is fueling the drive to a different type of online marketing that he insists is better for merchants. The idea, sometimes called cost per action, would require advertisers to pay only when a consumer clicks on an ad and then buys a product or asks for a brochure.
Such advertising is gaining popularity, with San Jose online marketplace eBay recently disclosing plans for an advertising network that would farm ads out to other Web sites. The site operators would be paid if visitors click on one of the ads and then buy a related item on eBay within a few days.
"Pay per click is a really rudimentary advertising -- a baby step -- and it's destined to decline and be replaced by other advertising methods," Richard said.
Click fraud
A survey about fraudulent clicks on online advertisements offers a window into a problem faced by many advertisers. Here's some of the findings:
Clicks believed by advertisers to be fraudulent: 14.6 percent
Money paid by advertisers for bogus clicks: $800 million (2005)
Advertisers who said they were victims of click fraud: 75 percent
Advertisers who said they reduced click-based advertising or plan to: 37 percent
Revenue lost by Google, Yahoo and other Web sites, as a result: $500 million
Advertisers who request refunds because of fraud: 7 percent
Average refund: $9,507
Source: Outsell Inc.
E-mail Verne Kopytoff at vkopytoff@sfchronicle.com.
Page C - 1

Friday, June 30, 2006

Click Fraud approach YAHOO! vs GOOGLE.

How long will google be able to exploit dumb money from advertisers paying for nothing? Can business model be sustained on fraud? - just a few questions to consider about GOOG valuation.

P.S> Apple is in the heat of stock option scandal, will Google join the club? Reestablished put war positions on AAPL today in Europe market.


"Yahoo trumps Google: Yahoo takes the lead in attacking the click fraud problem
Posted by Donna Bogatin @ 5:51 amDigg This!
Yahoo made a public commitment Wednesday to “provide more clarity about our click protection efforts and significantly more transparency to advertisers in the future.” Yahoo’s commitment to publicly fight against click fraud was announced as part of a settlement of a class action lawsuit filed in the U.S. District Court in Los Angeles by Checkmate Strategic Group, Inc.
The suit alleged that Yahoo failed to do enough to track or prevent click fraud. As part of its settlement Yahoo has agreed to:
• One-Time Extended Claims Period: Yahoo! will offer advertisers a one-time extended claims period during which advertisers can submit click fraud claims for clicks dating back through January 2004. If our investigation determines that a credit is due that was not given previously, we will issue a 100% credit, which can be used however the advertiser wishes to use it.
• Dedicated Traffic Quality Advocate: Yahoo! will appoint a Traffic Quality Advocate who will be dedicated entirely to addressing advertiser concerns about click fraud and traffic quality issues. This advocate will serve as the internal voice of the advertiser within Yahoo! on these matters.
• Annual Access to CTP System and Team: To ensure that the advertising community has ongoing visibility into our Clickthrough Protection system, Yahoo! will host a panel of individual advertisers at our CTP headquarters once a year. During these visits, we will allow the advertisers to review our systems, meet with the CTP team and provide feedback on how we can continue to enhance our approach to fighting click fraud.
• Industry-Wide Click Protection Efforts: Yahoo will work with a reputable third party toward building industry-wide efforts to combat click fraud, including development of industry-wide definitions of click fraud and a comprehensive lists of identified bots.
• Traffic Quality Resource Center: Yahoo! will commit technical and human resources to build a Traffic Quality Resource Center, which will provide advertisers with more detailed information about traffic quality issues (including click fraud) and solutions via FAQs, advice columns, best practices guides and additional access to analytics tools.
Additionally, Yahoo commits to:
• Traffic Quality Inquiry Response Times: Yahoo! will provide advertisers who submit click fraud- or traffic quality-related inquiries with a time by which they will receive the results of Yahoo!'s investigation or, if the investigation is particularly complex, a status update.
• Additional Traffic Quality Refund Detail: To provide advertisers with more clarity around refunds for click fraud and other traffic quality issues, Yahoo! will include additional detail in advertiser refund notices.
If Yahoo’s public commitment to prevent, identify and redress click fraud problems is followed by real, meaningful action, it will provide Yahoo with a valuable, differentiating advantage over Google in their ongoing competitive battle.
Google’s response to a class action click fraud lawsuit filed by Lane’s Gifts in Arkansas:
You may remember that last February, Google was sued in Arkansas over what is commonly called click fraud… We’ve been discussing the case with the plaintiffs for some time and have recently come to an agreement with them which we believe is a good outcome for everyone involved… For all eligible invalid clicks, we will offer credits which can be used to purchase new advertising with Google. We do not know how many will apply and receive credits, but under the agreement, the total amount of credits, plus attorneys fees, will not exceed $90 million…
We have said for some time that we believe we manage the problem of invalid clicks very well. We have a large team of expert engineers and analysts devoted to it. By far, most invalid clicks are caught by our automatic filters and discarded *before* they reach an advertiser’s bill. And for the clicks that are not caught in advance, advertisers can notify Google and ask for reimbursement. We investigate those clicks, and if we determine they were invalid, we reimburse advertisers for them. We will continue to do that, and believe that this settlement is further proof of our willingness to work together with advertisers to reimburse invalid clicks.
Contrast the settlement agreement of Yahoo versus the settlement agreement of Google:
Reimbursement of advertisers
• YAHOO "we will issue a 100% credit, which can be used however the advertiser wishes to use it."
• GOOGLE "we will offer credits which can be used to purchase new advertising with Google."
Acknowledgement of click fraud problem
• YAHOO Detailed six-prong, plan (outlined above) to “move forward to work more closely with our advertisers and others across the industry to fight click fraud.”
• GOOGLE “We have said for some time that we believe we manage the problem of invalid clicks very well…for the clicks that are not caught in advance, advertisers can notify Google and ask for reimbursement… believe that this settlement is further proof of our willingness to work together with advertisers to reimburse invalid clicks.”"

http://blogs.zdnet.com/micro-markets/?p=183

Thursday, June 29, 2006

Google is pure arrogance compare to Yahoo click fraud approach.

""I can only conclude from Yahoo's actions that Yahoo both cares a great deal more than Google about its own customers and that Yahoo! has a lot more confidence in its prior click fraud detection efforts than does Google," Kaplan said.
Google spokesman Steve Langdon said the company continues to believe the Arkansas settlement is fair."

http://biz.yahoo.com/ap/060628/yahoo_click_fraud.html?.v=5

"Yahoo Settles 'Click Fraud' LawsuitWednesday June 28, 9:23 pm ET By Michael Liedtke, AP Business Writer
Yahoo Settles Class-Action Lawsuit Alleging Internet Powerhouse Profited From 'Click Fraud'
SAN FRANCISCO (AP) -- Yahoo Inc. will consider refunding money to thousands of advertisers dating back to January 2004 and pay $4.95 million in attorney fees to settle a class-action lawsuit alleging the Internet powerhouse has been profiting from bogus sales referrals generated through a sham known as "click fraud."
The agreement, given preliminary approval Wednesday by U.S. District Judge Christina Snyder in Los Angeles, doesn't limit Yahoo's liability -- one of several contrasts to a settlement reached in March by online search engine leader Google Inc. to resolve a class-action lawsuit over the same issue.
Google's financial commitment in its case, overseen by an Arkansas state court, is capped at $90 million. That's a sliver of the $13.3 billion in ad revenue that the Mountain View, Calif.-based company has collected since 2001.
As much as $30 million of the Google settlement could be paid to the attorneys who filed the case.
Although Yahoo doesn't know how much money it will end up refunding, company officials seem confident it will be a relatively small amount. Yahoo's ad revenue totaled $9.1 billion from January 2004 through March of this year.
"We want to keep our advertisers happy," said Yahoo lawyer Reggie Davis. "Whatever credits are owed will be 100 percent forthcoming."
In its settlement, Google is offering to give back less than 1 percent of the money spent on undetected click fraud and plans to make the payments in the form of credits that can used to buy more ads on its networks. Yahoo is giving advertisers the option of receiving cash refunds instead of credits.
All advertising claims submitted to Yahoo will be subject to the review of a retired federal judge who will oversee the refund process. Google's review of click-fraud claims won't be subject to any oversight.
The settlement also will give Yahoo an opportunity to provide more clarity about one of the most confusing -- and potentially disruptive -- issues hanging over the rapidly growing Internet advertising market.
As part of the agreement, Yahoo has committed to working with others in the industry to define what constitutes click fraud.
The ruse takes different shapes, but the end result is usually the same: Merchants are billed for fruitless traffic generated by scam artists and mischief makers who repeatedly click on an advertiser's Web link with no intention of buying anything.
Those clicks generate revenue for Yahoo, the owner of the Internet's second-largest advertising network behind online search engine leader Google, as well other Web sites.
The estimates on the prevalence on click fraud vary widely, partly because there are so many different interpretations of the practice.
A recently established index compiling information from more than 1,000 advertisers has estimated that about 12 percent of the clicks on ads running in the Google and Yahoo networks are fraudulent. Other studies have estimated the click fraud rate as high as 30 percent -- numbers that both Google and Yahoo have vehemently disputed.
Yahoo already has given advertisers billions of free clicks because it would rather err on the side of its customers when anything questionable occurs on its network, said John Slade, senior director of product development.
Darren Kaplan, an Atlanta attorney representing advertisers in the class action, praised Yahoo's approach.
"I can only conclude from Yahoo's actions that Yahoo both cares a great deal more than Google about its own customers and that Yahoo! has a lot more confidence in its prior click fraud detection efforts than does Google," Kaplan said.
Google spokesman Steve Langdon said the company continues to believe the Arkansas settlement is fair.
Kaplan and a group of other lawyers had filed a click fraud suit against Google in San Francisco federal court. That complaint was derailed when Google settled the Arkansas class action. Kaplan and Los Angeles attorney Brian Kabateck hope to prevent the Arkansas settlement from getting final approval in a two-day hearing beginning July 24. "

Tuesday, June 27, 2006

Google will become a history: cash back instead of click fraud

"At Jellyfish.com, we want to change your relationship with advertising; making it something that always works directly for your benefit instead of wasting money interrupting and annoying you.
Why Current Advertising Stinks
To most people advertising is a dirty word. Look at the traditional world. We have been bombarded and interrupted by unwanted advertisements from the time we could walk and most of us have developed a healthy animosity towards ads. In fact, we hate them so much we actually spend money to avoid them; buying things like Tivo DVR’s and Satellite Radio. Yet, advertisements fly around our heads like pesky insects on everything from city buses to products placed in our favorite movies. Occasionally, we find one entertaining or relevant, but mostly we simply endure them as a necessary evil.
When you ask most people to describe advertising you will likely hear things like “annoying,” “interruptive,” “biased,” and “wasteful.” Does it have to be this way? We don’t think so.
The State of Online Advertising
The next question becomes, “has the Internet made advertising better for consumers?” It has certainly made advertising more of a scientific certainty for advertisers. Instead of placing an ad in a magazine or on television and hoping that people actually pay attention to the message, online advertising allows companies to pay only when you actually view a page with an online ad it, or click on a link to an advertiser’s web site. For the first time in history, it is now possible to accurately measure and track how people are actually interacting with each individual advertising unit on a global scale and in almost real time. Huge amounts of money are now pouring online because advertising can deliver laser beam certainty.
But has this amazing shift also changed how people feel about advertising? Not really, in our opinion. We avoid banners, and hate things like pop-ups and interstitials that continue to interrupt us. We have to sit through a full page ad on our screen before we can enjoy the New York Times, CBS Sportsline, or a host of other sites. And we try to avoid these ads as much as we can. Online advertising is still a necessary evil.
This is true even of the paid search advertising at search engines such as Google, Yahoo! and MSN. These sponsored links are certainly more targeted and can be helpful, but most people we know still try to avoid these ads. They are happy that the sponsored results are pushed off to the margins of the screen and conspicuously labeled “Sponsored” to keep them away from pure organic search results. Why is this? We think it is because the existing “Pay Per Click” search advertising model—in which advertisers pay each time someone clicks on a search link—fails to align incentives properly between the consumer, the advertiser and the search engine intermediary connecting them. This existing model is mostly there to benefit the search engine.
Search Engines Auction you off to the Highest Bidder
Most people don’t know this, but there is a huge advertising auction that takes place every day at the major search engines. And what are they auctioning? The auction is for your attention. Companies bid for your attention by paying to be listed in the sponsored search results when you type in certain terms. And the more they agree to pay the search engine for each click, the better chance they have of getting listed higher up in the search rankings. Every engine is a bit different, but the paid results are organized with one primary goal in mind; to maximize the amount of advertising revenue the search engines make. Thus, the more an advertiser pays the search engine for your click, the more likely that advertiser will be listed high in the rankings and get your attention. That is why the advertising is called Pay Per Click (PPC).
This auction system works really well for the search engines because is allows market forces to drive up what an advertiser is willing to pay for your attention. And these rates go up all of the time. If I sell coffee makers, I want you to see my ad first when you search on the term “coffee maker,” and I don’t want my competitor to get to you first, so I’m willing to bid higher and higher click rates to be listed high up in the rankings for that search. And the more the search engine knows about you (where you live, what sites you visit, etc.), the more targeted you are as a sales lead and the more they can charge advertisers in this auction system to reach you. But here is where the mistrust of advertising comes in; the sites that are listed first in the sponsored results for my search aren’t necessarily offering the best coffee maker for you; they are the sites that make the search engine the most money. And the consumer has no idea what the advertising amount is. It reminds us of a commissioned sales person that shows you a product at a store that gives them the best commission. Do you trust them? Probably not. Isn’t this why the search engines have to label these results as advertisements?
A Major Shift in Online Search Advertising: From Pay Per Click to Value Per Action
The Pay Per Click auction has been great for search engines, but the problem is that most of the value created by this auction is flowing to the search engine in the form of advertising fees that primarily benefit the engine at the expense of buyers and sellers. Don’t get us wrong; we aren’t saying you shouldn’t use search engines (we think they are fantastic tools for finding information). Our mission is to show you that when you are buying stuff online, there is a way that we can bring you directly into the value created by this advertising auction for your attention.
At Jellyfish, we want to pioneer a new form of search advertising we call Value Per Action. Instead of charging fees when you click, we charge our advertisers only when you actually buy, and we share at least half of this fee back to you as cash back. In other words, we connect you directly to the value of the advertising. Instead of measuring how much money WE make when you click, we measure how much value the advertiser is willing to pay YOU for your sale. With VPA, the advertising value of your attention becomes transparent (you can see it in the form of cash back) and changes from annoying advertising into something that actually lowers your end price.
And to help you get the maximum amount of savings when you buy, we are using the same kind of advertising auction that the major search engines do. But instead of ranking our results by the amount companies pay us in the form of hidden advertising fees, we rank results by the end price for a product, after our cash back. We think this will create a perfect retail marketplace because retailers will increase their VPA advertising rates to get to the top of our rankings and the value of that advertising competition will flow directly to you to lower your price (you can see a picture of this system here). The more stores compete for your attention, the more you save. And you don’t have to do anything more than search for things you want to buy.
Consumers Take Control of Advertising
We think Value Per Action is a big idea. It is a way that advertising can adapt and survive in a new world where consumers have ultimate control to tune out interruptive, biased advertising. We think you will see many companies that begin to use forms of VPA to make advertising something that you control, receive independent value from, trust, and most importantly, invite into your lives. Our hope is that Jellyfish.com will lead this charge, and help people turn the tables on traditional advertising. Do you want to help us? Then please start shopping at Jellyfish.com. Our service is free and who can’t use more money in their account?"

http://www.jellyfish.com/ourVision