Google has done an amazing thing in creating a non-stop self perpetuating media storm over their initial public offering. It was not a surprise that their IPO finally happened in the least. However, what is riveting about the Google story connects to what so many investors and venture capitalists were searching for during the turn of the century; an already profitable dot com that could provide solvency in the future and a recognizable and trusted brand in the present.
Clearly, Google has some hurdles to overcome (GMail), dissenters to convince and competitors (Yahoo and the host of other search engines). Some investors and stock experts are openly questioning the young management of the company, intent on doing business their own way (with an eye to Warren Buffet). Investors and experts have also remarked on the prospectus Google released concerning the IPO and its lack of details in terms of long range plans, advertiser numbers, employee costs and so on. Whether individual investors heed cautionary tales will determine the market demand for the stock.
However, the verb “googling” has already made it into the everyday vernacular of Americans online and offline, and there is little doubt that Google will be a household name well into the future as they raise an amazing amount with their IPO and have investors scrambling to figure out how to join in the fray.
The NY Times reports that last year Google had $962 million in sales and $106 million in profits. The report goes on to say:
“But that significantly understates the company's true profitability, because Google had unusually high tax and option expenses last year. In reality, it appears to have generated $570 million in pretax cash profits last year. That is still more than Yahoo, but Google is also spending more heavily than its chief Internet rival on new computers and equipment.”
Yahoo’s shares fell around 8% last week on announcement of Google’s offering but is still valued at $33 billion. eBay is another household name comparable to Google in that their respective market appears to be dominated by their share. eBay is actually dominating the online auction market and stands at a current valuation of $52 billion. Depending on investor action and demand in the marketplace, Google is looking to be valuated between $25 to $40 billion dollars.
However, we are still discussing Google, just as CNBC, CNNfn and CBS Marketwatch, along with the “Business” or “Money” page of every national paper have been over the last week and a half. Google’s public relations efforts have been met with astounding success (aside from a few hiccups over GMail). What has also been met with astounding success is the Google platform itself in online advertising/marketing and consumer use.
Google has been able to run with the search marketing “killer app” idea and exceed all expectations from both the business and consumer side on how an operation can run successfully that performs such a supposed easy-to-corrupt task as search marketing. By combining a favorable user experience with automation, Google has a unique perch on the rest of the search market that demands respect and envy.
Google’s consumer usability didn’t come about overnight or through a media blitz of titanic proportions. Rather, Google built its base through years of making the consumer happy and making advertisers happy. When Google launched, it faced an uphill battle in beating the competition and claiming market share. We can all remember passing around the newest and greatest search engine application, trying to see which had the “best results with fewest ads.” With an absence of pops from its pages, Google has been able to signal to the consumer an implicit communication of trust and worthiness. The consumer visits and uses Google time and again because it is fast, friendly and doesn’t inundate the screen with banner farms or a pop on every page.
Equally astonishing is the automation that Google employs in its advertising platforms. Unlike other sites, Google allows both large and small players to enter the market place. Someone looking to spend just a few dollars a day on search marketing can try their hand and test the results in almost no time. Large players can rely on the pixeling to show what keywords offer the most sales from their efforts. There is no account executive to call, no personalities to deal with, no voicemail to return. Everything is instant, easy and without the human error element. This democratization through automation is a great model to follow for our industry, and more applications beyond search are sure to follow the lead.
Beyond the young management, light on details prospectus, GMail dealings and competitors, Google still stands to have a bright future, both in the immediate sense with investors, and in the long term with advertisers and consumers. Google follows netiquette to the max through its policies and has proven that taken with the right dose of creativity and ingenuity, netiquette can be the road to billions.
Sam Harrelson is the Co-Editor of the Digital Moses Confidential. Send comments and questions to sam@digitalmoses.com
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