Eager investors will just have to wait. Google’s co-founder and president of technology, Sergey Brin, told an audience on Tuesday that the search company was unlikely to file an initial public offering (IPO) anytime soon.
“It’s something that’s definitely been debated,” Brin said at PC Forum in Scottsdale, Ariz., according to reports from the conference “Thus far, laziness has always won.”
The news broke some hearts on Wall Street, which has salivated over a red-hot Google offering jumpstarting the moribund IPO market. Some estimates have a Google IPO netting up to $2 billion for the company.
The Google Mystique
By putting the brakes on the company’s seemingly headlong rush to the public markets, Brin not only avoids a rocky stock market but also the need to lift the shroud of secrecy over the Mountain View, Calif.-based company.
Brin acknowledged that going public would shift the focus to Google’s short-term financial performance.
“The distraction, I think, is a problem,” he said, “having to deal with numbers on a quarterly basis.”
Earlier this month, Google’s vice president of U.S. sales, Tim Armstrong, said the company has turned a profit the last eight or nine quarters. Yet financial analysts have differed in their estimates of how much money Google brings in or makes. Revenue estimates for the company are wildly different, ranging from $60 million to $300 million.
In fact, analysts have little idea of the company’s finances.
“Obviously it’s mostly fiction at this point until they start to file any sort of SEC document,” said Christa Sober, an analyst with Thomas Weisel Partners. “Anytime you don’t have to expose any of the warts, there’s an advantage, especially with all of the mystique that surrounds the company.”
The Overture Example
Some of the recent travails of rival Overture are instructive. Late last year, the company saw its stock slammed, as investors seized on the rise in its traffic-acquisition costs — a measure of how much Overture pays its partners.
Google, which last year took from Overture a key paid-listings distribution deal with AOL, does not need to reveal the revenue split for the deals.
However, Sober pointed out that Google’s site already accounts for about a third of all search traffic, with the company having no need to split that ad revenue with partners.
Without the pressure to meet earnings estimates, Google has little need to rush into paid inclusion, which is projected to be a big growth area of the search industry. In paid inclusion, advertisers pay to have certain Web pages crawled, increasing their chances of winding up in the top search results.
Overture officials have long groused that Google has gotten a free ride from an adoring press unwilling to question some of the company’s claims. For example, Google recently rolled out a contextual advertising program. In announcing the program, Google for the first time put a number of the size of its ad network: 100,000 advertisers worldwide.
The number surprised many in the industry, since it meant that in just a year Google had easily surpassed rival Overture, which reported 80,000 active advertisers at the end of 2002.
“We don’t know what the mix of that base, what’s large and small, and how much they’re spending,” Sober said.
No Outside Pressure
Google has resisted paid inclusion, which is offered by LookSmart and soon Overture. Yahoo! has plans to include paid inclusion on its network, while MSN already does. Google has decided paid inclusion is not the worth the risk of alienating its fiercely loyal user base.
“We wouldn’t venture down that path unless it was going to provide a better user experience,” Armstrong said.
The tight lid the company keeps on information extends far and wide. For example, in announcing search deals, such as the one struck last week with South Korea’s Daum Communications and another announced earlier in the month with Disney, the company would not even disclose the length of the agreement.
As a public company, with anxious investors and increased media scrutiny, Google would not have such a luxury, as it battles Overture for the nascent search market in Europe and Asia.
“If they feel they can go and start to place a foot in international markets without an IPO, they will certainly do so,” Sober said.
