Google's rollercoaster equity price

Given prospects of competition from other search engines, such as Microsoft's MSN Search, that would deplete its advertising revenues Google seemed hopelessly overvalued at $300. But its price defied the skeptics and rose strongly to over $450. Now it has plunged as concerns develop about the very same competition issues. The price has now fallen to below $345 or by 28% off its peak value as investors took fright at an article forecasting the internet firm's share price could fall by half over the next year if revenue, under pressure from competition in online advertising, falls short of expectations. And it is advertising revenue that is critical - the social value of Goggle vastly exceeds its commercial value because of the public good aspects of the product provided - the best statement on this issue I have come across is by John Quiggin here.

As Business Week pointed out earlier this year, the priority for Google, given the prospect of its share price vaporising, is to make a large asset-rich acquisition. But it may now have left major moves of this type too late. Potential targets are unlikely to want to share valuable real assets with depreciating, perhaps ephemeral, paper claims on cyberspace.