Last week, after a good year of media and industry speculation with a scoop of government pressure, Google – the Internet’s most popular search engine and search advertising network, filed to go public. The Google IPO has been on the tips of the tongues of many investors, web site owners, and techies; proving that what was once a Stanford University project is now a multibillion dollar company that has laid the groundwork for Internet innovation.
Google filed to raise as much as $2.72 billion in an initial public offering (IPO) that will give the company more funding to compete against Yahoo, Microsoft and others focusing on the search engine, online advertising and browser industries. Valued at a $20-$25 billion dollar company, Google will have a lot of cash to work with after going IPO, almost $3 billion dollars.
Sure, for a large company competing with Microsoft, Google could blow through that money in no time, or, more than likely, they’ll spend it wisely on additions to Google and acquisitions that will surprise the entire industry. However, instead of spending our time questioning analysts and industry insiders, the Search Engine Journal questioned some of our readers who are web site and search engine owners and operators on their thoughts about Google, its IPO, and the dutch auction format for buying initial shares.
Google’s IPO and the Future of Google
Mel Strocen is the CEO of ExactSeek, a search engine and webmaster network which has recently made news by adding the Alexa ranking numbers as part of its relevancy and popularity algorithm. Mel gives his first thoughts on Google and their IPO; ” I think Google’s IPO should have a positive impact on the whole tech sector and should certainly provide Google with tremendous resources to improve their search technology and search options.” Strocen adds that “Assuming Google is able to maintain its search focus and resist investor to pressure to over commercialize its search results and web site, the future for Google appears golden.”
Dennis Pallett of NoCertainty.com takes a more middle of the road approach to Google’s IPO; “I’m fairly neutral on the Google IPO. It has its advantages and disadvantages. The main disadvantage I’m afraid of is the fact the Google won’t be as innovative anymore, and will become a lot more short-term focused, mainly to please their investors. They have promised they won’t do this (in their S1-form), but it remains to be seen whether they actually stick to that current policy.”
Pallett further expresses his Google worries; “Another thing I fear is all the hype around the Google IPO. The price of their shares will probably increase, to such an extent that it’s not longer real. It may cause another internet/dotcom bubble. On the other hand, Google will be doing their IPO in a very different way (Dutch auction, duel-class stocks), and they have warned in their S1-form about short-term profits.”
Jeremy C. Wright has been following the Google IPO buzz on his blog, Ensight, since the first Googler whispered “IPO.” Jeremy sees the auction as beneficial to the well being of Google and the Dutch format lessening the IPO hype in some cases (not that the post IPO stock hype won’t be huge).
“To be honest, the auction way of doing things will, in my opinion, lessen the hype for 2 reasons. First, it’s an extra step people have to take. It’s a little bit of extra commitment. I’ve already heard from dozens of people who were planning on investing that thanks to this extra step they won’t be.”
Wright also points out that “because it’s an auction, there should be less of a typical IPO “wave”, because the selling price isn’t dictated by the market (initially) so much as by what someone is willing to pay (or feels everyone else is willing to pay). As a result, you’ll have less buyers, spending less money. A smaller pool, a cleaner pool and a more knowledgeable pool. All a good thing.”
However, Oliver Thymann counters Jeremy’s point (as posted on the Ensight blog): “The Auction process will actually push the price of the initial share offering up. The initial wave on the stock market with an IPO mostly comes from the fact that the underwriters underprice the shares, as to be sure to have a good opening with the finishing price being below the offer price. This helps them to convince other banks to get in, who can sell their shares again swiftly and with a profit, providing a very liquid market in the shares to start with.”
Has Google “Sold Out”?
Jeremy C. Wright, who stirred up blog buzz with his view of the Google IPO being evil, gives his thoughts on if Google has put aside their morals and cashed in; “Google sold out a long time ago. There was a time when the entire company was focussed so much on the product. The line “do no evil” has changed in meaning over time. It’s now much more [George W.] “Bush-y”. It now means “do less evil”. Or, it means “do no Evil” (whereas before it essentially meant “do no bad”).
Google has taken on a more survivalist mentality…I just think they’ve changed their core values and mentality. The way this IPO was done, the way staff were told, everything is evidence of minor changes….I say minor, because Google is obviously still a company with heart (the auction style IPO is strong evidence of this, as is their continued investment in Blogger, for instance)…So, maybe sold out’s the wrong word. Maybe “changed” is a better one.”
ExactSeek’s Mel Strocen sees otherwise and feels Google should not be judged just yet; “It’s a little too early to label Google as a ‘sellout’. The 6 to 12 months following the IPO will answer that
question. Google will have an unprecedented opportunity following the IPO to capitalize on its enhanced public profile and translate that into increased search market share. Whether or not that happens will depend on how adept Google management is at balancing bottom line pressures and the public’s perception of changes to Google’s search results.”
NoCertainty.com’s Pallett adds “I don’t think Google has sold out as such, but there is certainly a change. Google used to be the ‘good company’, as they weren’t in for the money but for the users/webmasters. Now it seems that Google IS in for the money. Again, in their S1-form they have promised to not be evil, but can they keep up such a policy, when the investors are pressuring for profit?”
The main question in the minds of our web expert focus group is can Google maintain the image of a bunch of techies who want to do good, or will they fall to the demands of being a public company. In their initial filing, Google addresses this worry as the primary focus of their owners manual :
“Now the time has come for the company to move to public ownership. This change will bring important benefits for our employees, for our present and future shareholders, for our customers, and most of all for Google users. But the standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google’s past success and that we consider most fundamental for its future. Therefore, we have designed a corporate structure that will protect Google’s ability to innovate and retain its most distinctive characteristics. We are confident that, in the long run, this will bring Google and its shareholders, old and new, the greatest economic returns. We want to clearly explain our plans and the reasoning and values behind them.”
If you’d like to share your thoughts on the Google IPO, please leave a comment below.