So why all the excitement over the Google IPO?
Why would anyone consider Google a potential gold mine? How is Google supposed to make money?
This just seems like another (albeit belated) example of dot com investor frenzy over a company that has no real prospects for significant profits.
But maybe I’m wrong. Your thoughts?
Google owns market share to such an extent that searching for something on the Internet is known as Googling. Therefore, it stands to reason that if they provide other services that people or advertisers would be willing to pay for and they link them on their home page that they could make a lot of money. The money raised from their IPO will enable that expansion.
Google is valuable, but the price it sold for was insane. Perhaps this is the last of the dot-come craziness - one more kick at the cat.
The biggest things that would concern me as an investor are: 1) A shaky revenue model, and 2) Big-time risk. Sure, Google is the best search engine today. But I think many people don’t realize just how easy it would be for Google to lose that position. Google is already suffering some problems. For instance, web-log linking is promoting blogs to the top of searches all out of proportion to their real value. It’s getting harder and harder to search for things on Google because the first few pages invariably are filled with fringe political sites and web logs.
Plus, there is going to be big-time pressure on Google to raise revenue by selling search promotion (company pays money to ensure that it comes to the top of a search for specific keywords), advertising, and other schemes that could degrade the quality of its searches.
Finally, it’s just software. Someone could come out tomorrow with a better search algorithm and Google could be chewing its dust in a month.
I’m tempted to short Google stock right now.
[QUOTE=Sam Stone]
Plus, there is going to be big-time pressure on Google to raise revenue by selling search promotion (company pays money to ensure that it comes to the top of a search for specific keywords), advertising, and other schemes that could degrade the quality of its searches.
[QUOTE]
Exactly.
Seems to me a great part of Google’s appeal has been that it doesn’t inundate its users with advertising. If it starts doing that now, either directly (with banners and pop-ups) or indirectly in the manner Sam describes, I would imagine Google would be ripe for replacement by another search engine.
I don’t think Google has a business model that will produce a reliable profit.
Holy crap!
I didn’t read details of their IPO, but I just assumed google was expecting the majority of their revenue from it’s B2B services/products. Is this not the case?
It certainly is the case. They serve the most efficient advertisments by a large margin, not to mention their search engine they sell to people. The blog issue will be solved shortly, but www.google.com is not where they make money. It’s a tech demonstrator. And remember… the reason they’re not selling voting rights is because their first commandment is “don’t be evil”. They don’t want to answer to the shareholders, they want to do right for the company, short and long term.