Google and the market have it wrong. Wrong what? Google and the market fail to understand what business Google is in.
Google is not in the advertising business, Google is in the listing business. This is a distinction that Salli Rasberry and I made in our 1984 Marketing Without Advertising 1st edition, and ever since then. The book is based on a hands-on-business course I taught from 1978 to 1984, of the same name. (The book will soon be out in the 6th edition.)
Advertising is (as Salli says) dog shit on the sidewalk. It is put where you don't want to see it and you have to go out of your way to step over it. Ibid: most people don't like advertising except for the occasional humorous ad. Shit with a little warning flag stuck in it.
Listing is putting relevant information where the prospective
customer is looking for it. The best example is the Yellow Pages. The
listing can be any size, shape or quality...the relevant part of the
description is that a listing is in the location where a prospective
customer is looking for it.
With the correct understanding of the business Google is in,
listing, the market will understand that Google, last month at $500 per
share will have a share value in a few years of close to ten times the
current price. (Notice, I believe my own public statements and I own
many shares of Google.)
How do I get my future share price estimate? The current price is 60 times earnings; it should remain at that level. Earnings are based on revenue of $9 billion last year, more than half, $5 billion from the U.S. The total national ad market in the U.S. is $160 billion the local ad market is $90 billion. My conservative guess is that because Google is so much more accurate as a listing service than any ad medium, Google will get 20% of the national ad market and 40% of the local ad market for a revenue of $68 billion plus growth over five years to about $80 billion.
Disregarding any foreign revenue growth, which I know nothing about, that will create revenue nearly ten times the current revenue with a comparable share price regardless of what stupidity Google can create in massive personnel hiring or share dilution.