• by Joe Mandese  @mp_joemandese, March 7, 2008

“Not very good, really,” Bear Stearns’ Alexia Quadrani confided this morning, getting the final day of the AAAA media conference off on a somewhat depressing note. Well, depressing if you’re an agency stockholder, anyway.

Quadrani said, Wall Street is “very worried” about the agency business, and that the big agency holding company stock performance reflected that, dropping 16% in market value during 2007, vs. an overall growth in the stock market of 4%.

“Why are investors concerned,” she posed? Well, all the obvious reasons, such as the fear of a potential recession, and the fact that agencies might be especially vulnerable should that occur. Another big concern, she said, is Google.

When the search giant bid to acquire DoubleClick last year, Quadrani said, investors took that as a sign that Google would “take over” the agency business.

“I think to a certain degree, that fear is still with us,” she said, noting that despite the recent tumble in Google’s share price, the company’s market capitalization is still four times the size of Madison Avenue’s agency holding companies: $149 billion vs. the $41 billion combined market cap of the agency stocks.

“I think the market is saying they fear the agency business. Google is going to take over the agency business,” she inferred, emphasizing that Bear Stearns equity research team doesn’t believe that. “And not just because Tim said it,” she said referring to Google ad chief Tim Armstrong’s keynote on Thursday, in which he made the case that Google is really Madison Avenue’s best friend, and no frienemy.

The main reason why Quadrani does not fear Google’s intentions toward the agency world, she said, was that the big ad shops simply represent too much of Google’s revenue stream.

“Why would Google bit off the hand that feeds them,” she asked?