Google IPO

[mmerlin]

Following on from this thread (http://www.somersoft.com/forums/showthread.php?p=110058#post110058) I thought I would raise the subject of the Google IPO

I'd be happy to sell everything I own to get in on the google IPO. Australia doesn't have any Googles.

IMHO Google has few places to go.

I am not a major stock market investor by any stretch of the imagination, but I have been thinking it might be nice to put a few thousand into Google just because I use Google every day, and I also make a bit of money from the Google AdSense program (http://business.asksim.com/forums/showthread.php?p=112#post112)

So I thought I'd start this post to solicit some comments and opinions on the IPO.

I'm interested in things like


Can Australians participate in the Google IPO? If so, who do we need to have an account with?
What is the potential upside of the Google IPO?
What is the potential downside of the Google IPO?

[geoffw]

Here's one site (http://www.google-ipo.com/) with some details

From a linked article on http://www.siliconvalley.com/mld/siliconvalley/news/9106732.htmIn a financial document filed with the Securities and Exchange Commission, Google emphasized again that its shares are at high risk of dropping in value right after the deal -- rather than soaring, as some did during the Internet bubble. That's largely because of the unusual way Google is setting the price for its initial public offering of stock, or IPO.

[Aceyducey]

I've been following the search market for years (since before start of tech boom) and looked into Google's IPO filing quite extensively. I actually shifted my position on Google after reviewing their prospectus & related materials from a 'buy' to an 'avoid'.

Personally I believe Google have a great business in a niche market.

Their search technology is excellent & they have first rate people.

My personal concerns are over their ability to manage their market & their reliance on the advertising revenue streams. They are significantly (several times) more reliant on online advertisements than companies like Yahoo.

The advertising market is one that is severely affected by swings in economic climate, and for Google this in particular means the US economy.

This makes their base cashflow unstable. It's likely to experience significant swings in revenue year on year beyond their control. That's not good.

They could look at 'unniching' & becoming a portal as Yahoo has done. Well good luck, but that does pit them against significantly larger and more entrenched competition. They've shown indications that they intent pursuing this course through their Gmail concept - which still has a number of legal bugs to resolve.....but from here Google is playing follow-me rather than leading. Even though GMail is planned to offer large storage ability, that's easily replicable & their personalised ads concept offers little to users.

Google has no inherent competitive advantage in the portal area - it's sole competitive advantage is in search technology. Thus it would have to rely on some new and unknown competitive advantage to succeed in this area.

Also while their search technology is excellent, there are significant competitors working to take parts of this market back.

Google has lost a number of its large back-ender deals with people like Microsoft and Yahoo. Yahoo has made several significant purchases in the search technology area and has 'reclaimed' it's position as an innovater in search. Microsoft has shown some promising early stage prototypes of a highly functional, if not flashy, search engine of its own.

Google will retain some advantage in terms of it's databse size & strong, yet simple design. However this is an erodable advantage.

My forecast is that Google will remain a strong niche competitor while struggling to achieve a foothold in the portal market.

It will underachieve for investors in the 2+ year timeframe, finding it hard to find the growth to justify the valuations & within 5 years will either settle into a niche, increasingly facilitator/back-end role or will be sold to another player at a fraction of the list price.

So if you want to make quick dollars on speculation, consider the IPO. But if you're looking for a medium-term growth stock, look further.

Gratuitous Plug - BTW: I also wrote a bit about them in the context of the battle between search engines in a Internet.au article that should be on shelves in the near future (under Jas's name) ;)

Cheers,

Aceyducey

[mmerlin]

I agree they are heavily reliant on advertising revenue.

But on the other hand, since Google is the search engine of choice for many people, my gut instinct is that they will retain a strong advertising revenue.

In my opinion, internet advertising (especially Google adsense) is here to stay because
- it is highly trackable (ROI can be measured effectively)
- it is context sensitive
- people click if they are already interested in the subject... therefore it is more of a "pull" technology than a "push" or "hard sell"

Google also owns sites like
www.deja.com
www.blogger.com
www.orkut.com
which help contribute to it's relevance of search results.

Google is one of the few search engines that can index the more complex database driven websites (although admittedly this is no doubt changing).

I have also read about the cancellation of some "back end deals" with other major search portals, so this is a factor.

I seem to remember reading that the google founders have stated that they dont plan on paying much in the way of dividends.

However... what will Google do with all of the IPO money?

Go on a spending spree, buying more companies? That could certainly change their revenue streams, but of course it is a huge unknown.

I am really feeling like I want to buy at least a some Google shares... but perhaps this is just irrational sentimentality :)

[mmerlin]

At a proposed listing price of >USD$100, as much as I love google's technology (and related sites/services) I am now feeling that it will be better to sit this one out and see what happens.

Your analysis could prove quite prescient Acey.

Thanks for the google-ipo.com link Geoff, it's been interesting reading.

This post (http://www.google-ipo.com/message-board/viewthread.php?tid=371) seems like a plausible scenario. Time will tell.

[Andrew]

At their proposed issue price the PE multiple is over 300. A throwback
to the dot-com days surely.

If you look back in history I think you'll have difficulty finding any stock
with a PE of this magnitude that was justified and went on to create the
growth that this PE implies.

Good luck to google, it's a great search engine but I won't be buying the
stock at issue.

andy

[Sim]

Just remember the "deep web". Google don't go there. Don't for a second beleive that if it ain't in Google then it doesn't exist - there's about 10 times as much data in the "deep web" as there is stuff that Google can find.

Lotsa money to be had from mining the deep web. Microsoft are coming out with some technology to help there - and IBM already have some of the best corporate tools for managing this type of stuff.

[mmerlin]

I agree, a lot of databased websites, and especially Flash-based websites aren't indexed very well.

Google seems to do fairly well indexing sites that use popular open source CMS systems.

One good test is to do a search at google like this
site:maq.com

and this shows you many of the pages that google "knows" about on the website. It doesnt return all pages, but it seems fairly good.

try it with site:somersoft.com (http://www.google.com.au/search?num=20&hl=en&ie=UTF-8&newwindow=1&q=site%3Asomersoft.com&btnG=Search&meta=)

[Aceyducey]

Did someone mention mining?

:D

Cheers,

Aceyducey

[Aceyducey]

Latest from Google IPO:

News Update from Google IPO Watch - http://www.googleipowatch.com

Google IPO - Auction to Open on Friday, August 13, 2004
----------------------------------------------------------------------------
Please be advised that Google and its underwriters expect to open the
auction for the shares of Google's Class A common stock at 9:00 a.m. (EDT)
on Friday, August 13, 2004. You must already have a bidder ID if you intend
to submit a bid in the auction for Google's Class A common stock.

Pricing of IPO Expected to be Announced During the Week of August 16, 2004
----------------------------------------------------------------------------
Google and its underwriters expect to announce the initial public offering
price for Google's Class A common stock during the week of August 16, 2004.

Cheers,

Aceyducey

[Aceyducey]

Here's some more news....a big OOPS! :)

Google is fourth in line to register the trademark 'Gmail'...

While news of the beta launch of Gmail, Google's free Webmail service, thrilled the public, it sent a few companies running to the U.S. Patent & Trademark Office to stake their claims.

According to USPTO records, Google's March 31 news inspired a bit of a land rush, with four other companies filing applications to set their claims in stone.


"The application process is first come, first served," said Sharon Marsh, a USPTO administrator. "Applications are processed as they're received, and the person second in line will get a refusal of registration from our examiner."

Google is fourth in line. First is Cencourse, a Miami, Fla., company that provides multimedia services, with an application filed March 31,2004, the same day Google's news broke. Next up is Precision Research, a Santa Barbara, Calif., company that consults on the design of high-tech equipment, with an application dated April 2. Following them is the British firm Independent International Investment Research (IIIR), formerly known as The Market Age, which operates Pronet Analytics, a stock research service; IIIR applied on April 3. Google didn't file its application until April 7, but at least it beat the Gospel Music Association's April 8 paperwork.

Source: internetnews.com (http://www.internetnews.com/bus-news/article.php/3394361)

Cheers,

Aceyducey

[geoffw]

Google is fourth in line to register the trademark 'Gmail'...Then maybe they could try "GooMail"?

[Aceyducey]

Oh, if you don't reckon that Google is worth investing in, it might be more lucrative to bet on the company's opening price:

Online Betting Service Temporarily Suspends Wagering on Google IPO Price

SportsBook911.com, a leading online betting service, temporarily suspended
"over-under" wagering on the Google IPO auction after an onslaught of bets
from New York and California saying the search engine would have an opening
price of less than $110 per share, the mark set as the over-under by the
online wagering site as well as the price expected by most money managers.
Google itself is predicting an opening price of $108-$135.

"The reality is that the general public does not usually buy stocks over
$100, which we think will severely reduce the possible investor pool,
therefore there will not be enough buyers to support that price," according
to Mike Nickels, president of GC Sports Group, which operates SportsBook911.

The temporary suspension was lifted today with a revised wagering
platform that includes five price points, with varying odds for each, for
the stock's opening price and closing price. Initial wagering was for the
opening price only.
Cheers,

Aceyducey

[geoffw]

IPOs are a gamble anyway- maybe this is a form of an option on the IPO?

[Aceyducey]

IPOs are a gamble anyway- maybe this is a form of an option on the IPO?
Geoff, I'm surprised at you!

Just like property, businesses & other investments - if you don't do your research they are gambles.

But if you know what you're doing & select your investments with care they're calculated risks. Including IPOs.

Cheers,

Aceyducey

[geoffw]

Geoff, I'm surprised at you!

Just like property, businesses & other investments - if you don't do your research they are gambles.

But if you know what you're doing & select your investments with care they're calculated risks. Including IPOs.OK, I have no real experience with IPOs.

And no knowledge on how to evaluate them.

I did OK on Telstra 1 and Sydney Swans.

And have not looked at many since.

I'd rather more controllable ways to invest.

A property gives me many chances to change things. A share offereing gives me zilch.

Sorry, showing my bias here.

[Andrew_A]

We are all showing our biases tonight.

I think I am also witnessing the "endowment effect" in action :D

http://www.travismorien.com/FAQ/psychology/endowmenteffect.htm

WaySolid

[Lucifer_au]

One think they do have is that they are currently the dominant category killers for search engines. Amazon is the dominant killer for books, and I can see them becoming stronger and stronger (esp. with their innovations as well as giving books to consumer cheaper - Consumers love that and seem to support companies which do that also).

I guess people are paying for the advertising revenue, but alos what else Google can do. It's kind of like a big box of stuff - no one knows whats in the box (it could be junk, or it could be gold), but some people will be willing to be that the box contains some gold....

Well my thoughts - and the Google IPO dosen't really interest me enough to buy shares.

Rgds.
Lucifer_au

[Aceyducey]

I think I am also witnessing the "endowment effect" in action :D
Definitely! - but don't people always do this :)

Personally I do the research BEFORE entering a deal, so I'd only advocate an investment that either I personally felt was a good deal or where I can see it would be a good deal for others.

Once I'm in a deal, unless things go irretrievably wrong, I'll support my own decision to be involved.

Too many people get overcome by buyers' remorse, or panic at the first setback & get out.

I've seen people over time advocating all kinds of investments - and putting down the same range.

The most important question to ask those people is - are you involved with that deal & why are you involved?

Then you must ask yourself - is this a deal that I'd like to be involved with, and why?

You must first understand the investment yourself before believing or disbelieving in it.

Back to Google I reckon I understand the company & I enthusiastically use it's products - but I don't believe in it as an investment except in very short-term speculative timeframes.

Cheers,

Aceyducey

[Thommo]

Seems it didn't go too good :p

I'm copying another post here;

Google hoped to sell a small share in their business - 25.7 million shares - at a price in the range of $108 to $135 a share. Instead Google has ended up selling just 19.6 million shares at just $85 a share.

Such is life.

T

[geoffw]

http://www.abc.net.au/news/newsitems/200408/s1180907.htm

Google's sour stock launch turns sweet
Internet search giant Google's shares have soared in a hectic launch on the Nasdaq exchange in New York, a spectacular comeback from the humiliation of its cut-price initial public offering (IPO).

Google, conducting the biggest Internet-related float since the 1990s technology bubble, soared 21.2 per cent to $US103 in the first hour, valuing the entire company at $US28 billion.

More than 12 million shares changed hands as the price bumped around, hitting a high of $US104.

Google's shares ended the day just higher than $US100...

[Lucifer_au]

With google I don't know if they have enough going for them in the long term, saying that the one thing they do have is that they are currently the dominant category killers for search engines. Amazon is the dominant killer for books, and I can see them becoming stronger and stronger (esp. with their innovations 'Gold Box' as well as giving books to consumer cheaper), so perhaps this is investors great hope for Google.

I guess people are paying for the advertising revenue, but also what else Google can do. It's kind of like a big box of stuff - no one knows whats in the box (it could be junk, or it could be gold), but some people will be willing to bet that the box contains some gold....

I wonder if it will copy yahoo (search engine, email, groups, etc)?

Rgds.
Lucifer_au

(Sorry Re-Edit as it didn't come up to well, since it was typed around 1:00Am.... I apologise for my bad forum form).

[Aceyducey]

To recap on this thread, Google is travelling nicely - but at a HUGE multiple on income!

Those who were bullish on Google - did any of you buy shares?

Google Inc took over the top spot as the most highly valued media company this week, surpassing Time Warner Inc in just 10 months of trading as a public company.

Google's share price on the Nasdaq rose another $US2.18, or 0.75 per cent, to close at $US293.12 on Tuesday, an all-time high. Stock market analysts have suggested the stock could go as high as $US325 or $US350 a share.

With a current stock market capitalisation of more than $US80 billion, Google is now worth more than any other media company in the world. That includes Time Warner, created five years ago when AOL purchased Time Warner for $US106 billion in a much-hyped combination of old and new media.
Source: http://www.smh.com.au/news/Technology/Google-tops-the-charts/2005/06/08/1118123884936.html

I must admit, I've been very impressed at some of the uses of Google maps - such as overlaying train lines & house sales.

And their new translation software looks brilliant (but not in public domain as yet).

Cheers,

Aceyducey