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Last October, when the stock market was a lot higher than it was now, and Google (NASDAQ:GOOG) was on the launching pad for its liftoff into outer space, I wrote a piece for MarketWatch and the Wall Street Journal that was headlined something like, “Not all tech stocks are really tech stocks.

Google, for example, I said was really a media company. To recap, including quotes from Fred Hickey, of the High-Tech Strategist newsletter and tech bon vivant Andy Kessler:

Google, regardless of how the company bills itself, is trickier and is really more like a hybrid between technology and media. It has fat margins and spends 12% of sales on research. But “it gets 99% of its revenue from advertisers,” Hickey says. And while Google has almost as many engineers as sales people, he adds, it really just “develops software to drive their advertising business.” Kessler adds that Google will become a full-fledged media company, based on his view of the world, as its price-earnings multiple contracts. “The contraction in Google’s P/E that has already happened is a sign that the Street is worried about something: A transition, a change or perhaps a fear that they are more of a media company growing share, versus being a tech company creating a market.”

Within weeks, Google’s stock, then about $622, zoomed to around $750 before gravity took hold. Its forward P/E, which popped up briefly, has now slipped to its lowest level ever.

But the point remains: Google, like many companies labeled as tech for the sake of headlines, isn’t really tech in the pure sense. That’s underscored with Google’s decline in response to data that shows a drop in the number of web surfers who are clicking on ads, which is Google’s bread-and-butter.

I was going over this with my data-junkie pal and Andy Kessler wannabe, Paul Kedrosky, (just kidding, Paul and Andy), and Paul referred me back to something he wrote a week ago that showed that spending online by Countrywide Financial — had tumbled 50% in January. Countrywide had been among the top 10 online advertisers. Other financial companies, as you might guess, have also sliced back. Less advertising, by its nature, Paul suggests, equals fewer clicks.

If mortgages and the housing industry were the tail wagging this economy, online or off, the rest is history. And the history of media companies is that as goes advertising spending, no matter the source, so goes their financial performance and stock. On that score, even Google is vulnerable.

Speaking of which: Best trade of the year, so far: Short Google, go long Take-Two (NASDAQ:TTWO). Tells you pretty much all you need to know about this market.

Onward…

Source: Google Feels the Credit Squeeze