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The economy continued to dominate the news this week. The US Federal Reserve took aggressive action to fend off a worsening economic crisis, while Google's disappointing year-end results may have put an end to the myth that everybody's favorite internet company is immune from reality.

Google results shock Wall St.

Google reported disappointing year-end results and saw its shares lose 6.5% in after-hours trading as investors contemplated whether the company's failure to meet analyst expectations indicated that the economic slowdown was starting to impact the internet's advertising behemoth.

In my first episode of The Week in Review here on E-consultancy.com, I asked if the confidence demonstrated by Google executives about the company's ability to withstand recession was a sign of arrogance.

While I'm still not yet prepared to say it is, one thing is clear - Google executives are learning a lot.

Apparently their degrees from top American universities like Stanford did not teach them that successful companies eventually see slower growth as they mature.

Google executives also learned something that I've suggested for quite a while -social networks may not be as big a boon for advertisers as predicted.

According to News.com:

"Under further questioning, co-founder Sergey Brin said the company was disappointed in experiments it had run on some of the approximately 20 social networks it works with, which include MySpace and its own Orkut."

Of course, Rupert Murdoch looks to have won another small victory, having locked in payment guarantees from Google for its MySpace advertising deal.

Aggressive activism

The US Federal Reserve and US policymakers are taking aggressive action to deal with the worsening economic crisis. On Wednesday, just over a week after it cut interest rates by three-quarters of a point, the Fed cut interest rates again by a half-point. And the US House of Representatives passed an economic stimulus package "worth just over 1% of GDP."

I'm sceptical about both moves. I personally feel that it's already too late and that the US economy is not only facing a liquidity crisis but a solvency crisis, which cannot be fixed by simply printing more money.

As the Economist points out:

"In trying to prevent financial-market calamity, the Fed may find itself pushed by Wall Street to leave interest rates too low for too long."

In other words - in the unlikely case that the Fed wards off economic doom, it will have only sown the seeds for yet another even bigger bubble.

Fox's reported Super Sunday Ad Take: $260m

Many internet ideologues like to promote claims that the internet is destroying "Old Media" industries like television.

So it's worthwhile to note that, according to AdAge's sources, Fox is expected to take in $260m in Super Bowl advertising this Sunday.

When one considers that Facebook was reportedly set to do $200 million in revenues in 2007, it's clear that Einstein's theory of relativity has application beyond the world of physics.

According to cutting-edge quantum math, the Super Bowl must be worth more than Facebook's $15b valuation.

MySpace to launch developer platform next week

Following in the footsteps of Facebook, MySpace is prepared to launch its own platform which will enable developers to create applications that integrate with the world's most popular social network.

Given that MySpace still has considerably more traffic than its better-hyped competitor Facebook, it seems likely that many developers will embrace the offering.

But just as in the case of investors pouring $50m into social network widget maker Slide, the question everybody should be asking is: what's the end strategy?

Drama 2.0

Published 1 February, 2008 by Drama 2.0

237 more posts from this author

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