Is the Bubble Bursting?

What happens when the numbers that make Google look so good are not there any more? This is the question being explored this morning by Silicon Alley Insider blogger Henry Blodget and his commenters. The numbers have to do with the click through rate, which is basically a measure of the revenue-bearing response to advertisements placed by Google on Web pages that they support (such as this one). Blodget's summary of the latest round of those numbers is, to say the least, hyperbolic:

Comscore reported shockingly bad US paid click performance for Google in January: flat growth year-over-year versus a 25% increase in Q4. Even if Comscore is only half right, this is a disaster.

As can be anticipated, both Blodget and his commenters are now rallying around a variety of explanatory hypotheses in an effort to assess the future of not only Google but the world the Internet has made through Google as a "primary instrument." So far David Brayton appears to be the one commenter to suggest that the whole idea of paid click performance as a value metric was specious in the first place and served only to obscure more old-fashioned metrics, such as ROI (return on investment). Seen through a more jaundiced eye, the value of paid click performance may be viewed as a confidence game, which worked while it was working, inflating an economic bubble at the same time. Questioning that value amounts to sticking a pin into that bubble, just as the bursting of the dot-com bubble emerged from questioning whether or not "new economy" thinking was securely grounded in a sense of value that you could "take to the bank," so to speak.

Regardless of how great or significant its magnitude may turn out to be, Google's apparent distress is sure to be greeted by considerable amount of Schadenfreude. As they used to say at Schlumberger (and probably just about every other large business), "Be nice to the people you meet on the way up; you will encounter them again on the way down!" The public voice of Google has always had the arrogant tone that, given enough smart people willing to cleave to the "Google vision," that enterprise could solve all the world's problems and anyone with alternative suggestions was too much of a mental midget to take seriously. Those mental midgets who are likely to be most problematic if Google goes into a descent will be those in government. They may not be "the age of people who are using all this stuff" (as Eric Schmidt put it so eloquently on one of his visits to Congress); but their careers will depend on how well (if at all) they can steer this country out of its current economic mess. With their sense of superiority (if not genuine economic value) seriously deflated, Google must now decide whether it wants to be part of the solution (rather than the know-it-all source of the entire solution) or part of the problem.