Google's share price had a minor hit the other day when they "disappointed" on earnings. I can't make sense of their valuation, even though I do think they're a great company.
I can, however, point out that one of their flagship products, Gmail, has serious issues. For historical reasons I get to see how five different spam filtering systems work: Yahoo, Earthlink, Spamcop, the open source systems used by many smaller ISPs, and Gmail's system.
Gmail is not just slightly inferior. It is qualitatively inferior. It is so bad it's mindboggling. The other four all work quite well, making relatively few false positive or false negative errors. Gmail errs in both directions, misclassifying spam as mail and mail as spam.
This isn't new. They've had the same problem for over a year. The only reason I stick with them is their fantastic UI and amazing search capabilities, but if Yahoo ever updates me to their new UI I may switch (I can redirect my mail flows fairly easily since I control the routing domains).
Why doesn't Google invest in the open source systems that work for everyone else? The scale they work on is rather different from that of a small ISP, so they may face impossible scalability challenges. I wonder though, if arrogance plays a role -- the belief that their algorithms will devise a better solution. If it's really arrogance, then their share price may fall more than 10% over the next year.