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Google IPO - 1st Quarter 03 - forbes.com article
a definite maybe on a Google IPO
NFFC




msg:1235949
 7:43 pm on Dec 31, 2002 (gmt 0)

The search site Google is queued up for a first-quarter IPO off of surprisingly virile numbers--some $300 million in 2002 sales, $100 million in profit.

[forbes.com...]

 

Brett_Tabke




msg:1236009
 1:51 am on Jan 2, 2003 (gmt 0)

Google has the money river all lined up and ready to turn on the tap. Paid inclusion, higher ppc prices, commercial search services, custom data feed services, portal services - they can take 25-35% of yahoo's daily users in a matter of months.

It just depends if Google turns on some of these revenue streams before or after an IPO. If they do it before to jack up the initial offering price, it might be a bad buy. However, long term, only amazon shows so much promise.

These guys haven't been setting around the plex waxing philosophic about a shopping engine for 3 years. They've got stuff setup and ready to roll that we've not heard of yet. There are more ways for Google to make money this year, than any other major site.

HackingLawyer




msg:1236010
 3:03 am on Jan 2, 2003 (gmt 0)


__________________________________________________________
It just depends if Google turns on some of these revenue streams before or after an IPO. If they do it before to jack up the initial offering price, it might be a bad buy. However, long term, only amazon shows so much promise.
__________________________________________________________


If Google shows no promise over the long term then it simply is not a good investment. Short term is simply to speculative. The IPO will probably be very successful and the price produce PE multiples that will factor in lots of future growth.

From what I am seeing Google seems to have long term prospects. However, this is only a Guestimate. The Frugal will buy Google cautiously with an eye toward long term prospects.

EquityMind




msg:1236011
 3:12 am on Jan 2, 2003 (gmt 0)

You're absolutely right BT and to be bluntly honest, I have never seen the value of Yahoo! and always wondered what all of the buzz was about other than their being in the right place at the right time. Yahoo! has not bred any of their own technology and the majority of their usage has primarily been as a portal (email, directory) utilizing other technology company's search technology.

The market usually rewards innovation by applying valuations based on earnings multiples based upon classification i.e. a service based company might fetch a 4x to 5x earnings valuation whereas a true technology company earns many times that in their valuation simply because of the perceived asset and barrier to entry.

Google has all of the tools in place and it would not surprise me AT ALL that the day of the Google IPO that Google will have a greater market capitalization than Yahoo! (please mark this thread for future reference - I want to be the first to predict that).

HackingLawyer




msg:1236012
 3:29 am on Jan 2, 2003 (gmt 0)

The value of Yahoo was in their listing sites using human editors based on content. The value of objective hand editing has been eroded by paid inclusion.

Google, on the other hand, uses technology for rankings and includes most any site in the directory (unless they play dirty tricks to increase their visibility).

It would ruin Google's value as an information source to require payment for inclusion in the directory.

dauction




msg:1236013
 3:53 am on Jan 2, 2003 (gmt 0)

Google IPO in Q1? .. not going to happen..

You dont IPO INTO a bear ..Forbes is simply testing the interest for capital investors..

You wont see much of any IPO's until after the situation with Iraq is settled.. as far as that goes you wont see any sustained growth in the Markets at all until then IMO

dauction




msg:1236014
 4:04 am on Jan 2, 2003 (gmt 0)

Investing in Google is a totally new game also..

one and only one thing matters ..PROFIT..THats all investors care about anymore (as it should be) they are incredibiliy more savy than they were 5 years ago..

They dont care about who Goolge is doing business with , what great new products are in the works etc..

They understand those great new "partnerships" those great new services and products go in the EXPENSE column ...and it's a wait and see if the promised revenues actually arrive and if Google will actually know how to make a PROFIT out of those revenues..

Google hype wont cut it out in the world of open 10Ks

chiyo




msg:1236015
 4:34 am on Jan 2, 2003 (gmt 0)

Agree big time with Brett and others that the prospective revenue streams are ready to deliver enough profits to make public shareholders happy without ever having to moneitize their main index - (which is basically their hook - monetize that and youve killed the golden goose). That is their free service hook - the things on the side reel in the punters to the revenue boat.

Watch for Froogle to be monetized earlier than you think. Watch for premium news.google. Watch for Adwords to become more popular after the Overture/Google suit plays out. Watch for premium listing rates to be increased to what the market will bear. Wacth for more licensing of their pure database and more MYWAy type deals. And watch for more revenue generators than we can ever think of now.

As an outside bet, look for a premium search service of their main database with as possibilities email alerts, saved queries, a personal search portal etc etc. High quality and priced accordingly (maybe at two levels) for professional researchers and those who take search seriously, plus mainstream jo blow searchers.

Google's main competitors lie in Fast, Teoma, and owners of other relatively "pure" braodboased search engine databases (including maybe Y!/Inktomi if Y! performs an incredibly unlikely turnaround in the way I expect they will integrate Inktomi in their services - Ink pure is looking better and better.. I doubt Yinktomi will be as pure)

If i had the money, I would be there in a twinkle of the eye. It's all in the brand.

Helpmebe1




msg:1236016
 6:27 am on Jan 2, 2003 (gmt 0)

To those that say " I met the nice folks at google and they are not greedy"... its not up to them to be or not.. they have to be! A public company looses control.. its the stock holders who own them and they say we want to see lots of money, lots of profit.. the google employees say "WE MUST PERFORM" They have no choice.. its not up to them anymore.. trust me... been their, lived it, seen it, breathed it.

EquityMind




msg:1236017
 6:42 am on Jan 2, 2003 (gmt 0)

Oh I've lived it too, but I've also lived through a venture capital funding as well and believe me the pressure to provide a return on investment is equally intense. Don't think that the investors have handed Google $35 MM and then forgot about the investment. The minute you take on outside capital you no longer have control so essentially there is no difference between a venture funded privately held company and a public one. The pressure is on either way to perform (or to provide the VC's an exit strategy whose number one preferred method of liquidation is an IPO). Greed by Google is not a factor here.

chiyo




msg:1236018
 7:48 am on Jan 2, 2003 (gmt 0)

Helpmebe and Equity.. I think you have valid points. But the key point is that "google must perform" - as you say.

While we agree on that point, we may differ on HOW google is best placed to acheive it.

My view is it cannot do this without maintaining and extending the value of it's free "pure" index. That brings the eyeballs. The advertising and licensing brings in the income as a result. Google is not a direct sales site.

Take that away and its market and brand advantage is lost and they merely become an equal competitor with many other search services. That would be the quickest way to make sure Google does not perform and im not willing to assume that public investors at large will not realise that.

That would mean a complete rebranding and strategy, starting from stage 1, and competing in a crowded established market place. Google has neither the experience nor skills to do that, at least at present. It's predominance was simply because of a service quality far exceeding established competitors and a grass roots understanding of how the Web works and Web browsers think.

That's not to say it wont happen, but its extremely unlikely to happen and their hard earned brand equity will disappear overnight.

I have more faith in the intelligence and longer term view of the 2003 investor compared to the opportnists of previous years. We are now in a more austere era and that will continue throughout most of this decade at least. Substance counts, spin works less, patience wins.

Borrowing from the fave phrase of others here that I see frequently..

This may well be the era of the grasshopper...

Jillibert




msg:1236019
 8:00 am on Jan 2, 2003 (gmt 0)

Dauction.....you are one of the very few on here who seem to have got it.

All i have seen from others on here is Google hype and that does not cut it in the world of SEC reporting.Forget about the VC guys who ponied up for Google,that was a lifetime ago in terms of the market and anyone with an idea could get VC capital.

Google went cap in hand to get the original seach deal with Yahoo and in return for $7m in revenue gave away 10% of the company.Who knows what the AOL deal cost them in terms of revenue sharing etc to oust OVER.

No denying Google is an excellent search product but sadly for Google whilst it is popular there are many others who are as equally good now as the field has certainly caught them up.The likes of Fast,Teoma and Wisenut all offer excellent search results and Google is trying to morph into the 4th portal.

None of the other major portals AOL,Yahoo or MSN have even looked like making a profit,Google not only faces history but a very wary investor and very strong and established competitors.

For Google to even contemplate an IPO suggests they cannot make money in their current form.

vitaplease




msg:1236020
 11:48 am on Jan 2, 2003 (gmt 0)

- $100 in profits, I find that impressive.
- $200 in costs, where would that have gone into?

Just guessing how much impovement could be possilbe in the next three years...

- They have 50% of the search market on which their own adds appear.
+ could that max to 75%?

- How much more will the average cpc rise?
+ Double?

- How much more will actual cpc advertising at Google grow?
+ Triple?

- How much growth will there occur in SE searches per average internet user?
+ 500%?

- How many new internet users?
+ 25%?

Google: $100 profits times PE 30? = market value 3 billion..

Tor




msg:1236021
 12:19 pm on Jan 2, 2003 (gmt 0)

Google: $100 profits times PE 30? = market value 3 billion..

That`s a too high PE Vitaplease. Investors are much more carefull (scared) after the last 2 years events. Even for Google I would estimate a PE of 15-20 as realistic.

vitaplease




msg:1236022
 12:33 pm on Jan 2, 2003 (gmt 0)

That`s a too high PE Vitaplease

I thought so as well [webmasterworld.com] Tor.

But I guess we are still in the crazy America's here, if you compare what PE value they are giving E-bay.

Certainly given the potential growth as guessed above, they should go above 20?

Tor




msg:1236023
 2:07 pm on Jan 2, 2003 (gmt 0)

The American stock market has for many years been operating with high PE`s. I still think the share prices are way to high in most countries and especially in the US. Therefore I think we will se a more sober pricing of future IPO`s in all parts of the world.

spagmoid




msg:1236024
 4:17 pm on Jan 2, 2003 (gmt 0)

To those that say " I met the nice folks at google and they are not greedy"... its not up to them to be or not.. they have to be! A public company looses control.. its the stock holders who own them and they say we want to see lots of money, lots of profit.. the google employees say "WE MUST PERFORM" They have no choice.. its not up to them anymore.. trust me... been their, lived it, seen it, breathed it.

Exactly - the stock market takes the humanity from business ownership, and turns everyone in a company, from the CEO down, into a servant of an ANONYMOUS lord. It's the new slavery. It's the worst when a company like Google goes public, because I think they DO care. It will only be downhill.

And despite the extra funding, I think most companies would be better off private in the long run. The pride and work ethic of a private company in good hands leads to more innovation and long term profits. Anonymous stockholders/masters only care about short term (1-5 year) profits. The welfare of the employees is important only in as much as how it will effect the delivery of profit, and employees WILL notice the change. It is disgusting. Do the owners of a company like Google really care so little about their creation, or are they just foolishly following the bandwagon?

KevinC




msg:1236025
 5:19 pm on Jan 2, 2003 (gmt 0)

I don't know a heck of a lot about the markets but Google is a GIANT! In fact he's the biggest damn giant of the giants. I think they know what they are doing and really have a finger on the pulse of the internet. Maybe they will fail like the others, but the likes of Alta vista and such were just in the right place at the right time. Goole has been kick ass when everybody else has been just trying to stay a float. Expect big things from Google.

EquityMind




msg:1236026
 6:32 pm on Jan 2, 2003 (gmt 0)

Spagmoid and others who say Google is doing this for greed and will lose focus and shouldn't go public - You just aren't getting it. It's not whether Google cares or not - it is inevitable because part of the ownership mix of Google are investors who plunked down in excess of $35MM. These investors want at LEAST a 10x return on investment so unless Google has $350 MM in spare cash lying around to leverage an MBO (managment buyout) they have to appease their initial investors (highly unlikely since it would be unwise to part with that kind of money as a startup).

Kleiner Perkins and Sequoia have a history of IPO's under their belts and combined have built some of the largest companies (Amazon, AOL, Netscape, Intuit, Genentech, Compaq, Sun, Juniper, Apple, Cisco, Yahoo etc). I highly doubt that they for even 1 minute would consider an MBO as part of the exit strategy for their capital. The only acceptable way to earn back the money that they invested on behalf of their limited partners in the funds that invested is through an IPO or to be aquired by a company with whose stock they can easily liquidate (i.e. public stock).

It will happen whether the founders want to or not, it may not even occur this year, personally I think it will and will lead to a resurgence in the marketplace and will hopefully restore consumer confidence in the markets.

Namaste




msg:1236027
 7:16 pm on Jan 2, 2003 (gmt 0)

Interesting article. I heard very differently from a leading investment banker: Microsoft is trying to buy Google. Makes more sense that a Google IPO...IPOs are messy things, in a straight sale the investors in Google will make their money without the mess. MS will happily pay $1 billion plus for Google. It' pocket change for them
Don't forget Forbes is owned by AOL. And Q1 03 is v. bad IPO timing. You put 2 & 2 together :)

nyehouse




msg:1236028
 8:54 pm on Jan 2, 2003 (gmt 0)

I think the biggest thing that Google can do if they want to avoid the disenchantment of all the core fans and webmasters who have helped make Google what it is, would be to make sure that we can participate in any IPO for starters. I know that I have zero chance of buying any stock at the issue price, as it will be overcommitted to all the big brokers.

I had an idea that Google should set aside 1% or 2% of the float for small investors, and issue them based on some form of points system kind of like Air Miles. A webmaster can apply for a ID, and for every adwords dollar spent, they get so many points which can be redeemed for google merchandise, or even the right to buy google stock. Even without an IPO, this idea makes sense IMHO.

If not this, then run a lottery. Allow us small investors to own part of something we beleive in, and do not cave to corporate america's greed. If done properly, an IPO can be a positive thing. If anyone can make an IPO work, it should be Google.

Plus, I certainly think a lot less of us will be griping, if we make some money from the IPO. :-)

Any one agree, or am I suffering from Google Dance euphoria (nowhere to #3)

Tim

spagmoid




msg:1236029
 1:06 am on Jan 3, 2003 (gmt 0)

Spagmoid and others who say Google is doing this for greed and will lose focus and shouldn't go public - You just aren't getting it.

My words were exact, read them again before you tell my I don't get it. I didn't say google was doing it out of greed. I said stockholders are greedy, and no matter what google's intentions are now, the will of the stockholders will eventually pervade the company.

SlyOldDog




msg:1236030
 1:30 am on Jan 3, 2003 (gmt 0)

Just a note to a post above: Microsoft will never buy Google. The anti-trust regulators would wet their pants laughing if Microsoft tried. ;)

Just a couple of questions that are important to determine the IPO motive:

1) How much of Google's stock is owned by the VCs?

2) How much stock will be floated?

It's important to know these things, because if the VCs are the only ones dumping their stock, the landscape will not change much at Google, with the VCs being swapped out for Joe public. Big deal. Joe public has less of a voice than a VC.

The other thing that's worth noting, and was mentioned earlier in the thread is that the US is in the middle of a bear market. Why float now? Well, in Google's case there's only one good reason: to determine the value of Google stock. To make it into a currency that they can use for both internal (stock options) and external (acquisitions)reasons. They would certainly be crazy to exit now.

Worse times may be ahead for technology stocks in the short term, but there will be a recovery, and I'm sure it will be worth waiting for.

By the way, my guess on an opening day p/e is 50. I have faith in this growth stock :)

psoares




msg:1236031
 2:55 am on Jan 3, 2003 (gmt 0)

nyehouse : some brokers have an allocated number of IPO shares for their customers.

if you're really interested contact your broker and ask if they can reserve some Google shares at the IPO for you as well, I bet they'll have some allocated for their own customers as most brokers do this kind of primary market ;)

your broker might already be a venture capitalist in google....who knows.

also, sometimes the broker won't make this public! write them an email or call - ask about the Google IPO and if they're being a part of it. if they say yes, ask if customers can buy in smaller quantities from the brokers allocation. you never know, you might get a yes for an answer and make a good buy ;)

cheers.

EquityMind




msg:1236032
 5:18 am on Jan 3, 2003 (gmt 0)

Spagmoid I was referring to this in your post:

<Do the owners of a company like Google really care so little about their creation, or are they just foolishly following the bandwagon?>

What I am referring to is that it is not Google's will but the VC's which at the current moment would be the same as a public market because they no longer have control so what is the difference.

Sly Old Dog, If your P/E prediction is correct then I could be right in my prediction that Google will have a higher market cap than Yahoo!.

I'm not sure of the current cap table for Google or what they might possibly float to the public markets, if anyone has heard of which investment banker is underwriting the offering that would help although at this point I imagine that it is still speculative and a rumour. Kleiner Perkins has good relationship with Goldman Saks so if there were to be an offering I'm sure they would lead.

ALurkingFriend




msg:1236033
 5:43 am on Jan 3, 2003 (gmt 0)


Don't forget Forbes is owned by AOL.

You're thinking of Fortune, which is part of AOL TW. Forbes is independent.

(One conspiracy theory bites the dust...)

Namaste




msg:1236034
 8:04 am on Jan 3, 2003 (gmt 0)

Why would there be an antitrust problem if MS bought GG? Y! just bought Inktomi. Further, MS has no search engine of it's own. Infact they have very smartly stayed away from developing their own search engine.
Ms will definetly do something, it is not their style to sit around and watch something like this and not be a major part of it.

vitaplease




msg:1236035
 8:25 am on Jan 3, 2003 (gmt 0)

I thought there already was an anti-trust problem when Yahoo went Google [webmasterworld.com].
Never understood why that was possible, that's why I thought they had to include a third partners search results.

SlyOldDog




msg:1236036
 5:07 pm on Jan 3, 2003 (gmt 0)

Microsoft won't be able to buy Google because they would be creating a near monopoly in search because of their MSN holding. The situation with Yahoo and Inktomi nowhere near created any monopoly.

Regulators are likely to scrutinize any move Microsoft makes, since they have already had a slap on the wrist.

SlyOldDog




msg:1236037
 5:16 pm on Jan 3, 2003 (gmt 0)

Mind you, Microsoft could buy Google and dump MSN. That would make sense since it is really awful.

EquityMind




msg:1236038
 5:26 pm on Jan 3, 2003 (gmt 0)

If MS were to buy Google it would be an end to relevancy and the greatness that Google has brought to search because Microsoft tends to be self serving in their relevancy results - just do a search for 'travel', 'shopping', 'cars' etc and MS owned or influenced properties always come up first under 'featured sites'.

Napoleon




msg:1236039
 5:40 pm on Jan 3, 2003 (gmt 0)

>> Microsoft could buy Google and dump MSN. That would make sense since it is really awful. <<

And within weeks Google would be truly awful as well. MSN search is the way Microsoft want it - slanted to their own products/properties, dependent upon payment (essentially to them via puppets like L$) for placement, etc.

All they care about is increasing revenue, NOTHING else matters. They clearly have no shame about what they are prepared to do to acheive that. They will squash anyone at all who gets in their way without a second thought or ethical consideration... if they are allowed to.

All the protective legislation and regulation in the world was created to curb the likes of M$. They are more or less the worst case scenario in terms of unbridled uncaring and aggressive capitalism. Real ugly in the extreme.

Ask Netscape, Sun, or anyone who has ever stood in their way.

By the way - the above is the highly diplomatic toned down version!

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