Not exactly. There are profits this time around and consumers have embranced the Internet. But consider this:
Google has a market cap of just over US$81 billion. In 2004, the company had revenues of just over US$3 billion. By contrast, Time Warner had revenues of US$42 billion in 2004 and has a market cap of about US$80 billion.
Internet firms such as Google and Yahoo! (and AOL) are strong companies that have enormous long-term potential for earnings, but the competitive oneupsmanship of financial analysts setting higher and higher price targets for Google's stock isn't helpful to Google in particular or the online advertising industry in general.
There are some real problems (e.g., inventory shortages) that have to be solved or online advertising won't continue its rapid growth indefinitely.
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There's bound to be a disappointing quarter somewhere along the way. Given the inflated expectations, people will overreact when that ultimately happens.
Googleâ€™s present apparent â€œMidas touchâ€ seems to be in part due to Googleâ€™s unorthodox non-transparency in itsâ€™ dealings with many of its constituencies. As Google does not allow analysts or media at itsâ€™ annual shareholder meeting, does not provide earnings forecasts and does not disclose its ad prices or its revenue shares with content affiliates (not even to the affiliates themselves), Google itself may serve as a convenient scapegoat for financial analysts if their unscrutinized earnings estimates do not materialize.
It seems to be 1999 all over again. There is no way, even given Google's impressive performance, that a market cap of 27X revenues (forget profits) can be justified. Irrationale exuberance has reappeared and there can be no doubt that history will indeed repeat itself.