Pending Larry: Google CEO Goes From Silent to Meme
This wall street journal blog talks about the “Pending Larry Quote” twitter page put together within a half hour of the company’s quarterly earnings blunder–not only were earnings down, however due to an IT glitch the reported earnings were available 3 hours ahead of schedule. Stock Shares had already plummeted close to 10% as a result of the leaked information and the Google was forced to stop trading for a certain period of the day. This mockery of Larry Page, a Forbes staple year in and year out, leads me to think about the potential financial negative impact Google will face as a result of the ever-so-fast world of social media. This is the type of PR that will shake investor confidence and although humorous to some, it is certainly not profitable. It is understood that any CEO is vulnerable to mockery of sorts; however, you cannot undermine the CEO as the face of a company and when your company is worth billions of dollars, it might be best to be extra careful especially with an issue as sensitive as earnings. My question for discussion is two-fold: a) Does the immediate Social Media response leave a bad taste with a potential investor for a company like Google? b) Imagine, this was not Google and rather it was a more sensitive industry such as Banking and one of our biggest banks invoked a social media domino effect- could the repercussions be grander or is this whole story negligible to the big picture?
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While this was a very embarrassing moment for Google as a company, I believe they have much larger issues to worry about than the negative PR from a fake twitter account in this situation. For investors or potential investors, the damage was already done as soon as their SEC draft filings were submitted and released too early. You must then consider the poor quality of their earnings, which disappointed many, and then you can see how and why the stock tumbled. Information pertinent to investing is perhaps one of the few things that spreads faster than social media. Before retail investors even realize that google has made a misstep, the professional investment community has already made a move based on their news and how their views about potential investments will change.
I think in the bigger picture, the effect of a Meme twitter account based on an already bad story for a company is negligible. The bulk of the damage, especially in this situation, has already be done and all it will do is entertain those who probably aren’t invested in the company. If Google were to react negatively towards that fake twitter account, then it could start causing some more damage by putting the management decision of the company in the spotlight. Now Google needs to focus on improving the company to make sure that a) a mistake like this never happens again and b)start to improve the areas in which it fell short of expectations for this quarter.
The fact that the earnings were released early is of little consequence. As always, the devil is in the details, and the disappointment in quarterly revenue speaks to a larger point. Although its earnings were up over this time last year, it also showed that its core Internet ad business was slowing — it was only 17 percent year-over-year, the first time it has been under 20 percent since 2009. If anything will leave a bad taste in investors mouths, it will be the prospect of slowed growth.
The day after the earnings were released we saw the tech sector get weighed down by Google’s disappointing results. The results would have been the same for the banking sector if a banking leader such as Morgan Stanley or Goldman Sachs had been in a similar situation. Google is to tech as Goldman is the banking and I imagine the social media effect will be very limited with industry leaders such as these.
It would be difficult to predict the impact on a more-sensitive industry, such as banking. But, if history is an indicator, “runs on the bank” were usually based on a psychological mob mentality, rather than on sound financial evidence. Even the recent downturn in the financial services industry was triggered in part to such thinking.
Perhaps a tangential question should be ‘What anticipatory steps should be taken to prevent potentially damaging reactions in a fast-moving environment?’, especially when social media information can sometimes be misinformation.