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|Google's Price Tag|
How much is it worth?
I recently posted in another thread that Google will become corrupt, not if, but when. So I am wondering how much they are worth and how much it would cost to buy them? My hypothesis is that they will become corrupt after they are acquired. So, once again, not if, but when will they be acquired. I suspect either AOL, Verisign, or Microsoft will acquire them.
Mapquest sold for 1+ Billion. Hot Jobs sold for 1+ Billion. Home Grocer sold for 1+ Billion.
So I figure Google worth about 10 times one of these companies… So I would say Google is worth 10+ Billion. That rules out Verisign from buying them. But AOL and Microsoft are still left. Microsoft has the money but I don’t think they see the value in it. So, I nominate AOL as the new parent company of Google.
And like I said, I don’t think Google will sell before the IPO, but look for the announcement of AOL acquiring Google (GGLE) 1 or 2 years after the IPO.
Anyone else care to speculate on Google’s fate?
>So I would say Google is worth 10+ Billion
Their turnover is rumoured to be around $60 million, if we assume net profits of $6 million that makes them worth at most £120 million, even allowing for future growth.
I do not think they will IPO more than 49% of the shares. They like their work to much. Imagine these free thinking PHD's drilled to Bill's format?
By the way, the United Nations should take a healthy stake of the shares. Google is the most important medium for more or less objectively finding and therefore spreading information.
If google goes public - I predict their market cap will be 16 Billion Dollars a week after they go public.
If google was willing to sell for $120 Million (or even - ok what it the alt code for pound?)- there are companies now that would buy it up in a second.
vitaplease, Your comment that the UN should take stock in the company is valid... But that makes me wonder... Perhaps a CIA dummy corporation should buy it. What a perfect fit. An agency that wants to control Information and an Information resource like Google.
Chris_R, I agree. If Google was for sale for 1 Billion USD right now it would be swallowed up faster then you can say Sold.
Internet math is just plain goofy. I'd be surprised if Google would bring over 1b today. Comparing an se to something like HotJobs (megafuture), MapQuest (solid niche for years to come), to something like an se with an uncertain future is comparing apples and oranges.
HotJobs has huge market share and a proven past and proven future. When econ times get lean, HotJobs is just beginning as people look for work. It's a dead lock for a successful future if it is well managed.
MapQuest has also carved out market share. It has deep branding and partnerships. It has a technological infastructure that is very hard for a startup to duplicate. You can buy maps off the shelf without big bucks.
Compare that with a search engine. They are almost to commodity status. With off the shelf top of the line pc's just a fraction of the cost they used to be, a top end se can be built for less than a million.
Look at what WiseNut just did. In less than a year, they took off the shelf pc's, off the shelf software and built a leading edge se that in some respects is more advanced than Google. They run on very few pc's (not hundreds or thousands, but dozens).
Setting up a se at the beggining of the net, was all about the hardware. It was either top end workstations or main frames. Now, you and I can go to wallmart, buy their best pc off the shelf, buy off the shelf software over the net, and have a search engine that can index and build 100k se in a few days. Throw on some network cards, a few routers, a load sharing system, and poof - instant se.
Two years from now, a 2+gig hz machine with 4-8 gig of memory and 160 gig hard drive (sans monitor) will probably be in the $299 range from Emachines at Best Buy. So if you are considering buying an se, the hardware on the racks today will be worth about 10-30% of what it will be in two years time.
So what would you be buying? Market Share. Ok - so what? If you intend on changing the se to monetize it in some way - goodbye market share. (eg: look what happened to Altavista). It would be very tricky to monetize Google is some fashion other than what they've done so far. Google is as locked into a format as any site I've ever seen. Upset that balance, and it could have disasterous effects on market share. It's all moot until the Google IPO [webmasterworld.com].
> Comparing an se to something like HotJobs (megafuture)
Brett - I would argue that your comments regarding Google apply equally to HotJobs, or Yahoo! or Monster or any online only business. All your buying is market share in any exclusively online business. With amazon/bol etc the thing that makes the difference is the warehouse distribution system.
Agreed Internet based market share is very fickle - all you can do is try to be best in class, atm Google is and looks set to be for a while to come.
If I were google I would be looking for ways to diversify into areas where market share isn't as fickle, maybe selling Intranet search appliances to large corporates?
That way your internet search basically becomes a branding and PR tool... a loss leader.
Two ways of estimating Google's future value:
1. Wisenut becomes so extremely good after Looksmarts investment that Google's value is its break-up value = 10.000 servers x $1.000 = 10 million $ :).
2. The intranet intercompany search facilities pays for all 220 personnel + servers.
150 million searches per day x (average)1 Adword per search x (conservatieve)$ 0.05 per click x 2% click through = 150.000 $ per day income x 365 days = 55 million $ per year x Price/earning of 20 = 1 billion stock value worth.
(this is the way I will convince myself in investing in the IPO).
$1B - why don't you just give it away :)
I would like to compare prices to prospective PE values for companies like Amazon, Akamai, Yahoo, AOL, and the like - but I can't - they all have negative earnings per share over the last 12 months.
eBay is trading at 183 times earnings.
At $1B this would be ~$5M a year - close to what NFFC believes to be earnings. At $16B - we are talking $87M a year.
If Google can't make $87M a year - let me run it - I could have them doing that every year no problem.
Granted 183 times earnings is a little steep, but I think google can earn much more than 87 Million a year and won't need such a high PR value to sustain $16B in market cap.
Google has tons of potential (what my parents used to say about me - and at least with google it is true).
Once they come out with their customized SERPs - the third generation of Search Engines will have arrived and wall street will eat google up like a Krispy Kreme donut.
I wonder how relevant a search ON Google for "Google's Market Cap" would be >)
>If Google can't make $87M a year
hehe, they can't even turnover that currently, never mind make that in profit.
>eBay is trading at 183 times earnings
|>If Google can't make $87M a year |
hehe, they can't even turnover that currently, never mind make that in profit.
>eBay is trading at 183 times earnings
Hey - is that any better than those with billions of dollars of market cap that are losing money :)
They might not be making that currently - but they could be. I know someone that will probably make $500K - $1M this year just off of google traffic.
Their traffic is worth money. The number of ads they got jumped almost overnight as I am sure you noticed after they came out with PPC. I am not sure where you got your data from, but I expect next quarter - they will be making a lot more.
I don't think they have really touched the tip of the iceberg yet. I am convinced that they will come out with customized SERP. Once this happens - they will be able to target ads like no one has ever seen before.
I may be a little optimistic, but I like to look at the long term.
>They might not be making that currently - but they could be
If my Aunty had ******** she would be my uncle :)
>but I like to look at the long term
It's the www, there is no long term.
As Brett points out the cost of entry to the market is getting lower by the day, the next Google is just around the corner ready to continue the cycle:
good idea > market leadership > drive for profit > bye bye
All of course imho.
seems t be in between what Brett and NFFC think
Suggest analysts expect google to be earning 50 m a year
suggests even 3B is ridiculous.
So I guess my suggestion of 16B is laughable.
Well 16B is my story and I'm sticking to it.
>Internet math is just plain goofy
Then you'll love brand math...
The Best Global Brands [businessweek.com]
The World's 10 Most Valuable Brands [businessweek.com]
There's no accounting for taste, especially taste in accounting.
>>I recently posted in another thread that Google will become corrupt, not if, but when. <<
I believe the heart of the google business model is to remain "clean".
I believe in the near future all of the PFI, PPC, and other schemes that "pose" as valid serps will fail miserably. We all appreciate integrity in our dealings and google seeems to be the only player that holds the standard.
Corrupt business practices don't play out well in the long term.
I think you are 100% correct John.
If google can make even $50m a year - they are doing better than 99.9% of internet businesses - and doing so in a way that will serve them well in the long term.
I disagree there is no such thing as long term in WWW. The problem is that most people have felt that way.
how many people are still using yahoo? Tons.
In the adult market - there are two sites that have stood for quality and have been around for more than 5 years. One starts with P and the other H.
Both still get plenty of visitors every day, because of this. In fact - neither was started to make a profit. One even refused advertising until someone kept begging her.
Google can make a profit with their current business model. Selling out would cost them money in the long term.
They aren't in it for the short term - if they were they would have gone for the IPO a long time ago.
OVER is worth approx $2 billion. They are more monopolistic, & have greater top line and bottom line growth, in their niche than Google is in theirs.
I like vitaplease's back of the envelope calculation --
|150 million searches per day x (average)1 Adword per search x (conservatieve)$ 0.05 per click x 2% click through = 150.000 $ per day income x 365 days = 55 million $ per year x Price/earning of 20 = 1 billion stock value worth. |
Even given the Krispy Kreme-type of fan worship that Google will garner, $2 billion has to be considered the top that it is worth, and that would assume that the market would expect (& price into their market cap) new products that we haven't thought of yet, and that their P/E would be something crazy like OVER's is.
My back of the envelope calculation is a bit high on the average one advert per search for the moment.
However, number of searches now: 150 million will certainly rise before the IPO.
Number of adverts will rise.
Average click cost of 0.05$ is low. (what is Overture's?)
Assuming Google IPO's sometime end this year, there will be no competition worth while or even less competition. Investors will not look further than one to two years and for them a price/earning of 20 is not high for such an excellent company.
I guess I had better work for Google immediately and lock in some stock-options.
Googleguy will be answering this forum from his retirement soon...
I would give google about half the valuation of YHOO or EBAY- so about $6B - $8B range at current market prices.
any guesses on Google ticker ... GGLE?
It's always hard to put a figure on brand loyalty. We all know that Google are clued up, and we all know that our friends will think that we're clued up if we buy from Google. The post-IPO credit cards, life insurance, etc. could make more money than AdWords, Yahoo! licensing fees or even the polo shirts.
Seriously though, what are Google meant to do with all this new money when they float? New jets for the founders and $65 million per month on adverts for the next three years might sound appealing, but right now they just run a damn good search engine and that's how it should be.
$2.5 billion (say 50% stock of 5 billion valuation) isn't going to make Google 40 times better. Just 40 times less focussed.
IIRC some analysts quizzed last year gave a $250M value to a public Google. Assuming 2001 revenues of $70M, costs of $55M, then Google currently has about 1/4 the revenue-generation power of Overture ($2B market cap) or 1/12 of Yahoo ($12B market cap).
The point of an IPO is to raise cash (for growth) or to indirectly pay back early investors. Google could more easily do the first by borrowing (debt is cheaper than equity) or finding another private investor (surely not difficult for a profitable Internet company?). Besides, I think Google management would like to avoid institutional investor pressure to tinker with their "no advertising, quality over profit" motto.
Wait another 2 years until GoogleGuy & coworker options vest. Then you'll see demands for an IPO. :)
The Orginal Yahoo secretary retired a multi-millionaire. Same thing will happen at Google. Everyone down to the famous ex-rock star's chef will retire a multi-millionaire. GoogleGuy is not going to comment on this thread but I am sure he is standing back counting how much he will be worth. The pressure is to great not cave. Look at WiseNut, they gave in for a token $9M. (But Perhaps Wisenut was all smoke and mirrors). I still think Google is worth over $1B. Perhaps not $10B like I guessimated. I would refine my guess to $6B. And yes, I think their ticker will be GGLE.
|I would refine my guess to $6B. |
I guess the dozen or so quality posts, based in reality, that preceded yours haven't yet persuaded you that that's silly.;)
(edited by: TomWaits at 10:42 pm (utc) on Mar. 12, 2002)
TomWaits, I think you missed a :) off your post, here's one from me too :)
<<My hypothesis is that they will become corrupt after they are acquired. So, once again, not if, but when will they be acquired. I suspect either AOL, Verisign, or Microsoft will acquire them.
Mapquest sold for 1+ Billion. Hot Jobs sold for 1+ Billion. Home Grocer sold for 1+ Billion. >>
These valuations are not all in cash. Blue Mountain Arts was bought by Excite for $780 million (later revised value was over $1b) - but this was mostly stock. In other words I wouldn't put too much "stock" in these numbers.
As for Google getting acquired, no I highly doubt this - as the other posters pointed out, they will IPO and get the money they need to fund growth and to ward off competitors.
<<So, I nominate AOL as the new parent company of Google. >>
Great, AOL, the death of all things good and holy.
<<And like I said, I don’t think Google will sell before the IPO, but look for the announcement of AOL acquiring Google (GGLE) 1 or 2 years after the IPO.>>
Google engineers saw what happened to Netscape. Ain't gonna happen.
As for what will happen, the main thing that will happen is Google continues to be a stubbornly independent, profitable company. The trappings of success are just that, trappings. To talk of who is acquiring who next is to forget that companies very often prefer to stay independent, thank you very much. Hell, they could shock the world and remain a private company and pay stockholders annual dividends and that's that.
But more likely they will all cash in sooner by selling shares in an IPO. As a result, the co. will be flush with large and increasing cash levels which should give it the longevity and independence it needs to achieve the multiple goals of warding off competitors, avoiding takeovers, turning a regular profit, and still remaining true to the unbiased search results that makes them a favorite with users.
What would be their undoing - and I see it as unlikely - is that they reach a watershed point in the industry where they must make a "big cash bet" on something that fails. Remember when Michael Cowpland ruined his quietly successful graphics company, Corel, by going hog wild and acquiring WordPerfect? If Google were to do that (on a larger scale), they could conceivably screw up.
In the long run I see Google as a little like Apple. Proudly independent with staying power (but one might hope, with a more consistently profitable history).
Of course, we all know that Apple is a shadow of its former self, and Microsoft even bought a stake in it. :( But it had a hell of a run. None of this 3 years and bought out crap.
A company like Google is in a better position than their predecessors (like AV) because fads are out, and sound, cash flow producing business models and "adult supervision" are in. Rather than IPO'ing into a fantasyland of ideas, they are going to be producing a great product and tapping into a big slice of the economic activity which takes place "through" and "around" search engines.
I'd say the co. is worth $2-5 billion today. In other words, it's not for sale.
It will be interesting to see if they become as successful as eBay, and whether eBay continues to be so profitable...
The Google engineers have nothing to do with being acquired. I once worked at a dot com and then we merged with another dot com in 1999. Then in 2000 we were acquired by a fortune 500. Then in 2000 we were spun off. Then in 2001 we bought our largest competitor. Then in late 2001 I was laid off. The company I was with grew from 20 people when I started to over 3000 employees and then back down to 400 employees. As a lead engineer I know about the engineer's prospective. :)
If there is one thing I have learned. Never assume that a company will do what you expect it to do. CEOs are very shifty and they are interested in one thing. Maximizing Profit! They don't tell you and they aren’t allowed to tell you about the big deals until it is announced publicly. MSFT has $40 Billion in cash. And that number increase by $5 Billion each quarter. I am not sure what AOL-Time has but I am sure it is plenty.
Mapquest IPOed, and they got plenty of money…So why did they sell to AOL after that? Because the founders wanted another cash out. Why did AOL buy it, because they want to monpo-late like MSFT is. Both AOL and MSFT lack a great search engine. So it only makes sense that one of them will buy the best SE. Give it time, but it will happen!
|I would refine my guess to $6B. |
Gee thanks alot - you leave me as the lone crazy person. I am sticking to 16 Billion - I could refine my guess to $7 Billion to be the closest without going over, but I believe that is what its market cap will be. Something is "worth" what the market says it will be. I give you all permission to make fun of me after the IPO.
IMHO Google's not gonna either sell or go IPO during at least the next couple of years. They still have the money and the potential to grow, brilliant ideas and they'll add value to their services before they take any actional. Their business model is pretty unique among other dotcoms, but still not sufficient to survive.
TomWaits' calculation is pretty much correct, however, don't forget other sources of the revenue, Yahoo!, their network appliances and much more. And the number of searches have been increased and still increasing every day.
I would estimate their annual income to be a little less than 100 million with 300% growth in two years, and market cap of 6+ billion after going public.
Oops, I forgot to add that Google cannot be compared neither to Yahoo! nor AOL because of the nature of their services. Maybe someday! Lets hope not :-)
I agree they do not need a lot of money.
10 % IPO would be more than enough cash input to hire more staff and increase the number of servers.
More cash could get the directors to spend foolishly.
Where to invest all this money?
Nearly nothing is worth buying and I guess those PHD's are of the type "not invented here" is no good.
The IPO will give them the advantage of a lot more (free) publicity. I am still amazed that many people do not know of Google.
A disadvantage of the IPO is that Googleguy will have to be very careful with what he posts here. No more "guys have a look at this new feature" as that is stock market sensitive information.
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