'Irrational Exuberance' For Google? (GOOG)

| About: Alphabet Inc. (GOOG)

He's certainly not the first to suggest Google's overpriced, but in the wake of the AOL deal (which he calls a 'ransom' payment), Wall St. Journal columnist Alan Murray pulls out the retiring Fed chief's phrase to question the action in GOOG (sub. req.):

Back in August, I wrote a column saying the Google boys knew their stock was riding a bubble, which was why they had decided to sell $4 billion more of it. I still believe that to be true. Still, now I know how Alan Greenspan felt in 1996, when he first talked about "irrational exuberance" in the stock market...

Perhaps this can go on indefinitely, as the market seems to assume. But it's hard to understand why it would. Google's magic is tied up in a bunch of algorithms for doing computer searches and placing advertisements that are impenetrable to me, but not to a lot of very smart people at places like Microsoft, Ask Jeeves, Yahoo, and other Silicon Valley companies who think they can do just as well. The barriers to entry here aren't overwhelming. There do seem to be significant advantages to being the biggest player on the field... But Google's competitors... have some heft of their own, and are ready to fight...

Isn't [the AOL deal] a clear warning sign that Google's costs of acquiring business are going to rise, and its triple-digit profit increases are bound to slow?

Quite possibly. The skeptic in us says this is mere salve for those of us who don't hold GOOG stock, but Murray's insight about Google turning defensive is an important observation regardless.