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Post Google IPO: Now, the Really Hard Part

Having completed its initial public offering in a media circus, industry watchers suggest Google must grow bigger, smarter and stronger, or face being overtaken by its powerful rivals.

Analysts interviewed by internetnews.com say the sovereign of search must compete not only on its stock price, but on its core technology and its marketing.

GOOG traded at $100 at close of trading on the NASDAQ on Thursday, its opening day. The price is substantially lower than its initial price range of $108 to $135, but substantially higher than its IPO price of $85.

For other search providers and search engine marketing agencies, the IPO brought welcome attention to the industry.

"It's a big day for the industry," said Justin Osmer, a product manager for Microsoft's MSN search.

"It was a very successful IPO that shows the strength of the search engine market," said Jim Lanzone, senior vice president of search properties for Ask Jeeves. "We're happy to see the spotlight shone on search, the space deserves that kid of attention."

But some industry watchers think the stock price is still too high, given the rapid evolution of this industry.

"I see too much competition from Microsoft and Yahoo to really think they'll be able to sustain the same level, or even the market share they have," said Chris Winfield, president of search engine marketing firm 10E20. His firm manages more than $1 million worth of marketing campaigns on Google.

Winfield expects continual erosion of Google's market share, especially as Microsoft MSN rolls out its next-generation search.

Google was vague about what it would do with the billions it would raise from the public markets. "We currently have no specific plans for the use of the net proceeds of this offering," the prospectus said. "We anticipate that we will use the net proceeds received by us from this offering for general corporate purposes, including working capital. In addition, we may use a portion of the proceeds of this offering for acquisitions of complementary businesses, technologies or other assets."

Perhaps that's because Google didn't need the money. With 105.6 million last year on revenue of $961 million, rising quarterly revenue and $455 million in cash, the search leader went public not to raise cash, but because its size and amount of outstanding stock triggered an SEC rule that would have forced it to open its books anyway.

Technology acquisitions to extend Google features and services are surely on its mind. Earlier this month, it acquired Picasa, a company that provides software for digital photo management.

Google is in a features and technology race with the other search providers. They'll compete on basic search technology, access to specialized content and brand, said Ask Jeeves' Lanzone.

Continued on page 2 with: "Search is King"



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