The market bloodbath: Some perspective

I don’t write about the stock market much any more — mostly because I wrote about it every day for about 15 years and kind of got sick of it, to tell you the honest truth — but today was one of those days where it’s hard to pay attention to anything else. Like many people, I spent much of the day hitting the refresh button on my browser to see how low the Dow and the Toronto stock indexes were going to go. I never imagined that some day I would watch the TSX come within a hair of a 1,000-point drop in a single day, or the Dow plummet more than 750 points.

On days like today, it’s tempting to use terms like “bloodbath” and “catastrophe,” and all those muscular-sounding adjectives that headline writers use to really pump up the hype, and plenty of media outlets were doing just that. Others were trumpeting the fact that this was the biggest-ever drop on the Dow and other indexes — but of course, that only applies if you’re looking at the number of points that they fell. If you look at it in terms of the market’s percentage decline, then it was definitely a bad day, but a long way from the worst ever. In 1987, the Dow fell by more than 23 per cent, while yesterday it fell by less than 7 per cent.

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Online ads — nature abhors a vacuum

Lots of chatter today about the stats on online advertising. In a nutshell, they grew to $4.2-billion (U.S.) in the third quarter, up 33 per cent over the same period last year. That had some — including Netscape supremo Jason Calacanis — crowing about a new Golden Age of online ads, while others urged caution, since the ad figure is a measly 2-per-cent increase over the immediately preceding quarter.

You see this kind of thing in stock-market coverage all the time: Google’s profit rose 892 per cent over the prior-year quarter, so that means BUY! But Google’s profit only rose 38 per cent over the preceding quarter, so that means… er, BUY! Well, you get the idea. The point, of course, is that advertising is moving inexorably online. As Froosh points out, whether that shift continues in the kind of straight-line way or with some bumps and valleys, it will increase.

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It has to increase, because nature abhors a vacuum — and at the moment, the gap between the proportion of ad spending that is devoted to online and the proportion that goes to offline markets is huge. That gap is effectively a vacuum, and so Aristotle’s dictum holds true. Either people will stop spending so much time online, or advertisers will increase their spending.

I would bet on the latter. And as my friend Paul Kedrosky suggests in his post on the subject, I wouldn’t want to be placing my bets on any of the existing media sources that will be the losers in that particular equation.

Google investors get another gut check

Those Google guys — they’re a nice bunch, and smart as all get out, but when it comes to dealing with investors they could probably use a few tips. For example, when your stock is selling for more than 80 times earnings, and you have a market value of over $110-billion (U.S.), don’t use the words “growth is slowing.” Ever. Why? Because then your share price will get creamed, as Google’s did on Tuesday, when chief financial officer George Reyes did exactly that at a Merrill Lynch conference on Internet advertising (which accounts for about 90 per cent of Google’s revenue).

Specifically, the Google executive was quoted by CNBC as saying: “Growth is slowing and now largely organic… the search monetization gains have now been largely realized.” Did he say that the company was going down the tubes? No. But when you’re growing as quickly as Google has been — and your stock is predicated on that growth continuing — admitting that growth is slowing down even a little is tantamount to yelling “Sell!” Which is what investors did: Google was down by more than $50 or about 13 per cent in early trading, which wiped about $14.5-billion off the company’s market capitalization in a matter of hours (former analyst and tech-stock lightning rod Henry Blodget has more here and also here).

By mid-afternoon, the stock had rebounded to trade at $373, which meant it was only down by about 4.5 per cent from Monday’s close — but clearly some investors were rattled. It’s been a tough couple of months for the search kingpin: although Google’s stock price has come back from its lows of a couple of weeks ago, it is still down by more than 20 per cent from its peak of $475 earlier this year. And Mr. Reyes’ comments didn’t help the rest of the Internet sector either — shares of Amazon, Yahoo and eBay were all down as well on Tuesday.

While the Google exec’s comments may not have been news (at least not to anyone who looked at the company’s financial results from the most recent quarter) they seem to have come as a surprise to some investors. And they could make them increasingly nervous about the stock going forward. As my friend Paul Kedrosky notes, it’s not so much that Google doesn’t give guidance, it’s that they suck at it.

Please, Firefox – don’t drop the ball

Richard MacManus of Read/Write Web, who also blogs for ZDNet, put into words something that I’ve been thinking about for awhile now, which is that Firefox might be losing its lead in the browser game. Obviously, I’m not talking about a market-share lead, since Internet Exploder Explorer still has about 90 per cent of the browser market. I mean the cool, cutting-edge kind of lead that has helped make Firefox the browser of choice for geeks and opinion leaders in the geek-o-sphere.

Don’t get me wrong, Firefox is still cool. And even though Internet Explorer 7 has a built-in RSS reader and tabs, two of the things that many people love about the ‘fox, it still isn’t as cool. But it’s getting there. For one thing, it’s fast. And for another thing, it doesn’t suffer from what I (and others such as Nik Cubrilovic of Omnidrive) think is one of the big weaknesses of Firefox – one that has been around since at least 1.2 or earlier – and that is the gigantic memory leak that sucks up RAM every time you open a tab, until pretty soon your browser either crashes or your entire system slows down like your processor just got swapped for a 486.

Before anyone suggests that I try the various fixes that are out there, I have. I’ve tried the one where you open the “about:config” page and edit the minimize function, and I’ve tried editing the memory usage settings. And I know that extensions can cause problems with leaks as well – but then extensions are also one of the main things that makes Firefox so special, since you can add all kinds of functionality. But I feel a whole lot less special about it when my system crashes and I have to restart it.

One of the things that makes what Richard writes so compelling is that we’ve seen this movie before. Netscape was also a kick-ass browser with all kinds of features, but it lost its way and became a bug-riddled pile of bloatware. And yes, I know that a certain software company used anti-competitive tactics to help defeat it – but Netscape also made it easier for Microsoft to win by shooting itself in the foot (and many other more crucial body parts) and I would hate to see Firefox do the same.

Update: I tried disabling the tab-caching feature in Firefox, based on this recent post by Firefox developer Ben Goodger, and it seems to have done the trick. After a day of opening up tabs – I think I have 23 open at the moment, which is about average – my system would normally be so sluggish I would have to quit and restart Firefox, which by this point would have chewed up as much as 350 megabytes of RAM. And now? Total RAM usage is about 90 megabytes and the system (an older Windows 2000 Dell desktop I have at work) is running fine.