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BusinessJournal article - Google Expands
"largest proposed lease in Silicon Valley"
dbowers




msg:1232836
 3:05 pm on Sep 2, 2002 (gmt 0)

[sanjose.bizjournals.com ]

Google, Inc. signs letter of intent for 10 year lease on 190,000 sq ft in former Silicon Graphics (SGI) buildings, with an option on 300,000 more. From the article: "It is the largest proposed lease this year in Silicon Valley...A rule of thumb in commercial real estate [regarding office space size]...implies the company could add up to 800 employees."

The buildings' insides were recently revamped and offices have an "unobstructed view" of San Francisco bay.

 

lazerzubb




msg:1232837
 3:09 pm on Sep 2, 2002 (gmt 0)

A rule of thumb in commercial real estate is that a company needs an average of 250 square feet of office space for each worker.

???

According to my experience you don't have that space unless you have a manager/executive role.

And they might wan't to store some of there 12000 computers there.

ciml




msg:1232838
 4:59 pm on Sep 2, 2002 (gmt 0)

Maybe Google's founders aren't asking "Why couldn't Google simply remain a small company?" [webmasterworld.com] any more.

Leasing room that could accommodate a large increase in staff. New financial officer post. It would be hard not to read something into this.

pvdm




msg:1232839
 5:58 pm on Sep 2, 2002 (gmt 0)


Up to today, they deserve the success they enjoy. Here are the next steps I expect:

1. In the near future, Google will be popping up in the news more and more, although no important news will be released regarding new algorithm or contracts. Both aspects in regard to the preparation of the IPO.
2. A successful IPO, bringing in huge capital to invest. A enormous worldwide publicity thanks to the successful IPO, one of the only successful IPO's in information technology in two years.
3. Investment money acquired from the IPO is used in acquisitions of other companies and more intellectual capital hiring. Big expectations and forecasts.
4. Bigger contracts and many new customers thanks to the publicity and the IPO trust.
5. Growing pressure from the old and new shareholders to produce profitable results. Google was profitable, but now it has to be profitable on a much larger scale.
6. As Google grows, growing pains appear, and major competitors appear (IBM, search companies in the mobile phone industry?).
7 Some major law suit actions regarding privacy and patents against the now 'rich' Google . These law suits cost lots of money and energy, disturbing the focus on the core business.
8. Google is big, but has big problems also. Many battles to fight on all fronts, loosing the once leading edge they once had. People start to question about it's near monopolistic position and attitude. Google's popularity fades.
9. Google is now a 'big' company, headed by a mix of the original founders and financing experts representing the venture capitalist and the shareholders. Conflicts between the founders and the greedy fincancial dept. arises. One of the founders quits.
10 We are 2005 now. All searches on Internet are commercial and paid for, or (nearly) worthless.
11. The hype regarding Google is over, Microsoft or IBM buy Google.

Well, I don't know about that last one. But it looks like a classic scenario to me that could happen? ;-)

skibum




msg:1232840
 8:06 pm on Sep 2, 2002 (gmt 0)

Sounds like some reasonable predictions. It'll be intersting to see how they play out.

scareduck




msg:1232841
 6:14 am on Sep 3, 2002 (gmt 0)

Re pvdm's comments:
2. A successful IPO, bringing in huge capital to invest. A enormous worldwide publicity thanks to the successful IPO, one of the only successful IPO's in information technology in two years.

Based on what? Are they profitable? Who knows! They're a private company -- they don't have to tell us. If they were in fact profitable -- and not just in the bogus, EBIDTA sense -- don't you think we'd have heard it from the high heavens now? Wouldn't Google's high-profile venture capital firm, Kleiner Perkins [google.com], want to undergo a "liquidity event" as they euphemistically call the fleecing of investors? Suuure they're profitable... and I'm Mary, Queen of Scots.

So scratch the rest of the fantasy.

Here's how I see Google playing out financially.

A hard market for tech IPOs (especially Internet IPOs -- when was the last one you saw that did well?) keeps Google private. Meantime, Google continues swinging its guns at a myriad of unrelated and unprofitable projects (images? news?). The people running things believe their own press -- but then the money starts to run out... and their advertisers aren't dumb...

It's crunch time for Google -- and for all the boo-hooers on this forum who think they deserve free traffic.

Brett_Tabke




msg:1232842
 6:29 am on Sep 3, 2002 (gmt 0)

Have you taken a look at some of the numbers being floated about Google?

- They have said they have been profitable for the last 4 quarters.
- They just did a $100 million deal with AskJeeves for AdWords.
- AdWords didn't kick into gear until March.
- The AOL deal just started this summer.
- On the verge of being the only search engine of consequence on the net today - a legal monopoly.

They appear to be cash flush now. Probably have most of - if not all of - the orginal investments paid off. They are probably to the point of operating out-of-pocket cash on hand.

Obviously we don't know the real numbers, but I sure don't see a "crunch time" here for Google.

They've waited it out this long. They clearly weren't in it for the fast cut-n-run ipo buck. So why ipo now, just when the investment is starting to pay dividends? I can see it both ways - ipo - no ipo.

The no ipo scenario:
- google continues to acquire market share over the next year. The real question is how much growth is really left out there? The massive growth days are over and they are almost at market saturation (atleast in lucrative North American market).
- next summer/fall, they go subscription based. How many would subscribe? 10, 20, 30, 40 million? At $10-15 a month, we are into well over a billion a year before ads or services like aol/yahoo are even considered.

At those kinds of numbers, why ipo at all?

scareduck




msg:1232843
 7:33 am on Sep 3, 2002 (gmt 0)

Brett -- I understand your point of view, but I think you're being insufficiently skeptical here:

1) See earlier comments -- they don't say whether this is EBITDA "profitable", the real thing, or by how much. In the absence of hard data, it makes sense to doubt this amounts to a gold mine.
2) $100M or no, the AOL experience shows ad revenue accounting is suspcious at best, especially on Internet ventures.
3-5) Sure, but it doesn't matter if you're not delivering to your customers (i.e., how expensive are they relative to other paid referral services).

My point is the crowd here is looking at Google the wrong way -- they're in a far more precarious situation financially than most imagine. As to the idea of a subscription -- $10/mo? When the masses are used to paying $0/mo? Dude -- pass the bong! Show me a successful, profitable conversion of a search engine to a subscription model. Google could be the first, but I doubt it.

nutsandbolts




msg:1232844
 7:56 am on Sep 3, 2002 (gmt 0)

I think Sergey and Larry don't want to IPO. They like their lava lamps. They love the way the company "feels". Do they really want to see the company grow into such a huge beast that it kills the current funky and fresh working atmosphere? They love to do things differently at that company....

vitaplease




msg:1232845
 8:00 am on Sep 3, 2002 (gmt 0)

At those kinds of numbers, why ipo at all?

some reasons:

1. Branding. If Joe Blow is not using Google yet, he might just check it out, if he hears he should invest in it because his brother-in-law just made a killing with his Google shares.

2. Stock-options. Sooner or later those purist-idealistic Googlers will want to cash their stock-options, because with the second child coming its time for a bigger house. How do you value non-stock-market listed options? At 10 times PE?, at 20 times? What is fair?

go subscription based

Nice idea, maybe in two years time when everyone cannot do without, and maybe only for power business users with fixed IP's doing more than a threshold amount of searches a month.

caine




msg:1232846
 8:10 am on Sep 3, 2002 (gmt 0)

Google's fought its way to the top and has relegated yahoo, to third position behind MSN. Know it nows to stay their is going to be the hardest thing yet, especially in the SE game.

They've got the money, why not secure the battlegrounds.

ciml




msg:1232847
 8:49 am on Sep 3, 2002 (gmt 0)

vitaplease:
> Sooner or later those purist-idealistic Googlers will want to cash their stock-options...

We've discussed the VCs wanting to cash in at some point, but I don't remember covering this ground.

Anyone know where the land lies regarding stock options at Google?

inwaaaytoodeep




msg:1232848
 9:43 am on Sep 3, 2002 (gmt 0)

...another Google thread, what's being talked about today?

The size of their office. Great! ow!

chowcat




msg:1232849
 11:08 am on Sep 3, 2002 (gmt 0)

The reason that Google will go public is quite simple..

Why settle for hundreds of millions when you could be worth billions?
Googles strength lies in the fact that they are where they are because they got there by word of mouth. No advertising like Y! or M$. Its the way of the web, all online business are volatile, so when they peek, cash in and get the hell out of there. Thats what I'd do.

Bearing in mind there are hundreds of young Larry Page's and Sergey Brin's out there trying to replicate and better Google.

Every dog has his day, and these office expansions can logically only mean one thing. IPO preparation.

Which for us means:

Number 1 today.
Burried under 3 pages of paid for ads tomorrow. :(

alex_h




msg:1232850
 12:51 pm on Sep 3, 2002 (gmt 0)

Of course they'll IPO...

The founders can love their work environment all they want. You want to explain to your spouse that your kids can't go to the expensive private school or whatever because you like having Lava lamps at the office?

Everyone grows up sometimes.

That said, I don't understand where the IPO => bad search engine connection is.

Enhancing shareholder value does NOT mean destroying your core business.

Y'all are paranoid and delusional.

Google will go ad-heavy or ad-light regardless of IPO. The IPO shakes up the ownership, not necessarily management.

Alex

inwaaaytoodeep




msg:1232851
 1:09 pm on Sep 3, 2002 (gmt 0)

"The IPO shakes up the ownership, not necessarily management"

Sorry, do you really mean that? When was the last time the managers of a company sat down in a room and told the owners how the business should run??

IPO can be a bad thing if you IPO before your business has any objectives and goals. Otherwise major shareholders, often with the real experience, come in and mould you into their creation. And, without the goals and O's you see the company go down the toilet.

If, on the other hand, you IPO and have a clear understanding of your business there is more resistance from management as the owners try to shape the company and the result is a company that can still retain its own integrity, while developing with anything the owners suggest.

I've seen both these scenarios and am not setting them up as templates for the way things are, but am just making a passing comment based on my experience.

Sorry don't agree with your post Alex.

alex_h




msg:1232852
 1:41 pm on Sep 3, 2002 (gmt 0)

Keep in mind that in tech IPOs, it wasn't uncommon to only sell 10%-20% of the stock in the IPO. The founders will retain their large stakes (unless they sell quickly). If the goal was to fleece the investors, the insiders dumped in 6 months, leaving management with very little of the company. If the insiders hold their shares, management may maintain 30%-35% of the stock.

inwaaaytoodeep




msg:1232853
 2:57 pm on Sep 3, 2002 (gmt 0)

"it wasn't uncommon to only sell 10%-20% of the stock in the IPO. The founders will retain their large stakes (unless they sell quickly)."

True, to begin with but as we moved through .bomb so those percentages from IPO went in favour of the New Owners rather than the founders, also many founders were youn and innexperienced and so sold it all off too quickly.

So that meant larger % in favour of the investors. But because the investors knew what they were doing, they'd dazzle the founders with figures and then get them to sign the contract with a lock-in period of say 4 years.

I saw founders of a new media company owning it one day and becoming full-time employees for the next 4 years. Immagine that, from founder to general pleb.

Do you think they stayed around? Nope,

Do you think they learnt a harsh lesson? Yup.

scareduck




msg:1232854
 3:06 pm on Sep 3, 2002 (gmt 0)

chowcat said
Every dog has his day, and these office expansions can logically only mean one thing. IPO preparation.

Yes, it makes perfect sense -- acquire a big mess of office space just before pitching to investors how your company's not like those other failed IPOs, how your company's lean and mean.

Yeah.

It doesn't "logically" mean any such thing.

Mikkel Svendsen




msg:1232855
 10:41 pm on Sep 3, 2002 (gmt 0)

scareduck, Denmarks largest portal (owned by Lycos) actually went partly subscription based last year (approx $35 a year) - and they did it very successfully! I believe they are the first ones to do so. I am not allowed to tell you the numbers but trust me the program is VERY successful indeed!

There is nothing about Denmark or the Danish Internet population that makes us so special that the same subscription model cannot be implemented the US and other European countries and I am sure it will. However, it is not easy and there is a long storry to tell about why Jubii succeeded in Denmark but I think that is for another thread :)

skibum




msg:1232856
 2:19 pm on Sep 4, 2002 (gmt 0)

Is the subscription just for search or is it more like subscribing to all the stuff that a YAHOO! would provide?

If they should go to subscription, they ought to partner with an ISP and bundle the subscription to Google. Earthlink might be the most logical choice since they probably have the least interest in the search market or competing with Google.

powerstar




msg:1232857
 1:17 am on Sep 6, 2002 (gmt 0)

subscription for search? yeah right that will be the day.

Google before or after the IPO will tap into the search results and start selling it. Like all the other search engines before them. Google and eveybody here know that the money is in the search results. There is no otherway to make money in this business. I think the first thing they will do will be to move Adwords to the front. Same as Overture with the free results after. They will make more money and they will resolve some of they problems they have like spam.

Filipe




msg:1232858
 9:39 pm on Sep 9, 2002 (gmt 0)

Hmmm, a lot of negative speculation in this thread... kind of saddens me.

Google before or after the IPO will tap into the search results and start selling it. Like all the other search engines before them. Google and eveybody here know that the money is in the search results.

The thing is, unadulterated search results is what made Google as big as it is today. The founders knew it, and current owners know it. That's why they keep ad-words clearly separate from results. Google is trying to provide a good product, not a profitable one. They've always expected profit to follow suit, and they report profit and astounding growth (100% annual growth in revenues).

The money is in the search results on the consumer end, but that doesn't make it right to assume they'll start selling those for that purpose alone.

There is no otherway to make money in this business.

You're thinking mostly in terms of their B2C (business to consumer) services, but Google is largely a B2B (business to business) provider. They make a lot of money through lucrative search deals with others (Yahoo!, AOL, etc.) and by selling their search hardware. Their B2C services result in B2B transaction profit too (adwords) but there's no evidence to suggest that they need more revenue of this type.

I think the first thing they will do will be to move Adwords to the front. Same as Overture with the free results after. They will make more money and they will resolve some of they problems they have like spam.

2 problems with this.

(1) I can't imagine anyone trying to be like Overture. They have a limited lifespan. They can provide paid results, but no-one WANTS paid results but those paying for them. Remember Disney's GO.com? They relied on paid results and failed. Who wants results from the highest bidder?

(2) The problems they have with spam? Paid results will only affect this worse. Who cares about SPAM when you're getting results that didn't earn their position through actual relevancy anyway? Secondly, among all the search engines, most would agree with me in saying Google has the most relevant results, and the least spam out of any full web search solution available (excluding ones that focus on paid results - which as I mentioned earlier should go overlooked).

General Thoughts on the Whole Issue

I don't want Google to go public simply because I don't think the trading public has the sense to own or run a business like Google. As long as the founders and current owners maintain the greatest share and only non-voting stock is sold in great amounts to the public, it's fine I guess, but I can see going IPO as a problem in the long run for the product, and then, as follows suit, a problem for the business.

In any case, more power to them, whatever their decision.

lazerzubb




msg:1232859
 11:36 am on Oct 4, 2002 (gmt 0)

I just checked out [google.com...] to see if there was anything that GoogleGuy could hook me up to ;) and they are really expanding! i counted it to 91 jobs and 13 offices worldwide, which is a lot, for a company which have an approximation of 400 employees.

Interesting to see how the future goes.

Mike_Mackin




msg:1232860
 11:44 am on Oct 4, 2002 (gmt 0)

Job pages at major companies are most often out of date. Many of those jobs could have been filled months ago. imho

lazerzubb




msg:1232861
 11:49 am on Oct 4, 2002 (gmt 0)

>>major companies

Well i wouldn't call Google major, 400 isn't much :)

2000 posts is though ;)

But Google always want to present FRESH! content, so it would be strange if they where draging behind on that page, also i remember reading that they recieve over 1000 job applications per day, if you let a job that has been filled stay on the page, you will recieve more applications than you wnat.

GoogleGuy




msg:1232862
 3:42 pm on Oct 4, 2002 (gmt 0)

"Well i wouldn't call Google major, 400 isn't much."

People talk about Google getting bigger, but it still seems pretty small to me.
2000 posts? Sheesh. That'll take me like 4 years. :)

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