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Google IPO
As predicted in our last issue, Google announced its IPO
this week. You can view the official papers here: form
10-12G, form
S-1
Google also published the "Letter from the Founders"
- an open letter attached to the IPO filing. We have searched
the IPO documents for the most interesting pieces of news
regarding Google and the search engine world.
About Google's management:
"We run Google as a triumvirate. Sergey and I
have worked closely together for the last eight years, five
at Google. Eric, our CEO, joined Google three years ago.
The three of us run the company collaboratively with Sergey
and me as Presidents. The structure is unconventional, but
we have worked successfully in this way.
To facilitate timely decisions, Eric, Sergey and I meet
daily to update each other on the business and to focus
our collaborative thinking on the most important and immediate
issues. Decisions are often made by one of us, with the
others being briefed later.
This works because we have tremendous trust and respect
for each other and we generally think alike. Because of
our intense long term working relationship, we can often
predict differences of opinion among the three of us. We
know that when we disagree, the correct decision is far
from obvious.
For important decisions, we discuss the issue with
the larger team. Eric, Sergey and I run the company without
any significant internal conflict, but with healthy debate.
As different topics come up, we often delegate decision-making
responsibility to one of us."
About the risks:
"We will not shy away from high-risk, high-reward
projects because of short term earnings pressure. Some of
our past bets have gone extraordinarily well, and others
have not."
"Currently, we consider our primary competitors to
be Microsoft and Yahoo."
"We expect our growth rates to decline and anticipate
downward pressure on our operating margin in the future."
"We are in the process of transferring to a third-party
service provider our worldwide billing, collection and credit
evaluation functions. [...] If we do not successfully implement
this project, our business, reputation and operating results
could be harmed."
"An increasing amount of information on the Internet
is provided in proprietary document formats such as Microsoft
Word. The providers of the software application used to
create these documents could engineer the document format
to prevent or interfere with our ability to access the document
contents with our search technology."
"For example, there is a risk that the word 'Google'
could become so commonly used that it becomes synonymous
with the word 'search'. If this happens, we could lose protection
for this trademark, which could result in other people using
the word 'Google' to refer to their own products, thus diminishing
our brand."
"In connection with our AdSense revenue share
agreements, the Company is periodically required to make
non-cancelable guaranteed minimum revenue share payments
to a small number of its Google Network members over the
term of the respective contracts."
"Overture Services (now owned by Yahoo) has sued
the Company, claiming that the Google AdWords program infringes
certain claims of an Overture Services patent. It also claims
that the patent relates to an Overture Services own bid-for-ad
placement business model and its pay-for-performance technologies.
The Company is currently litigating this case. If Overture
Services wins, it may significantly limit the Company's
ability to use the AdWords program, and the Company also
may be required to pay damages."
About the Google ranking algorithm:
"Our text-based scoring techniques do far more than
count the number of times a search term appears on a web
page. For example, our technology determines the proximity
of individual search terms to each other on a given web
page, and prioritizes results that have the search terms
near each other."
Google chose Morgan Stanley and Credit Suisse First Boston
to serve as lead underwriters for its offering. Google has
plans to employ the Dutch auction system for the IPO. They
didn't specify a date for the IPO.
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