6 ms·

Google IPO? No Thanks (2004)

71 points by sinzone 16y ago

mkr-hn 16y ago
"But these are all just window dressing. Here's the thing that I would fear as a Google investor: Ask Jeeves' (Nasdaq: ASKJ) algorithmic search engine Teoma already receives rave reviews for its results, and Yahoo! recently unbundled Google's search so it could feature its Inktomi technology. And wouldn't you know it, Microsoft (Nasdaq: MSFT), not one to leave nickels in billion-dollar stacks lying on the ground, will include an algorithmic search engine bundled in its next generation of Windows products, due out next year." --- It's amazing to think that this was only a handful of years ago.
- shaddi 16y ago
  Seriously. This article was published a year before Maps existed. Less than a month after the Gmail beta started. Facebook was less than six months old. This was all seven years ago! How times have changed.
  - dasil003 16y ago
    What's really crazy for me is that I've been at my current startup for over half of that time span, and that I've been into Rails almost the full span.
- noibl 16y ago
  That argument didn't make a lot of sense then either. The specific algorithms that Google had patented gave it a runaway lead in implementing the kind of index that we now recognise as a crucial element of relevance. Anyone with knowledge of the domain could see that this was a revolution. Even odder is that there's no mention in the piece about the long-raging battle with Yahoo over the Overture ad-bidding IP, a huge achilles heel for Google at the time which somehow just melted away 10 days before the IPO (but 4 months after this article).
  - deleted 16y ago
    [deleted]
sorbus 16y ago
[2004]
- deleted 16y ago
  [deleted]
sucuri2 16y ago
Easy to make fun of it now, but the domain "fool.com" fitted well for that article :)
- hessenwolf 16y ago
  Being wrong doesn't make you a fool. He clearly didn't have some of the insider SEO knowledge that some commenters are mentioning, but does not seem to me to be an unreasonable perspective.
deleted 16y ago
[deleted]
hristov 16y ago
Kudos to the motley fool for keeping that one on their website.
dstein 16y ago
Google went public with a $25B market cap? That puts the absurd valuations you see thrown around today into perspective.
- btipling 16y ago
  Not everyone is a Google.
- rokhayakebe 16y ago
  Even more amazing, I think they only raised 75M total from VCs prior to their IPO.
gamble 16y ago
It's not an unreasonable opinion. Google is dependent on a single product, there's almost no barrier for users or advertisers to switch, and most of Google's proprietary technology in software and datacenter design is completely opaque to investors. I'm not sure Google is a slam-dunk investment even today. They have their fingers in a lot of pies, but the company is still entirely dependent on an advertising product that hasn't changed substantially in years. If the market changed in a way that disrupts adwords, things could go south quickly. They remind me a bit of Microsoft - very oriented on protecting a lucrative monopoly, but in doing so their other products tend to be designed to support the monopoly, not generate revenue on their own.
- noibl 16y ago
  If you look at what they actually have in AdWords, it's not easy to see how it could be seriously disrupted. You're right that Google's real monopoly is not on search but on their immense network of advertisers and content sites, which has economies of scale built in that benefit everyone involved. Simply by being the biggest, Google's network is the best. The only thing that has come close to challenging that is the walled garden of Facebook, because of its unprecedented scale. Now Facebook surely has some growing left to do but even they would still need to pretty much cannibalise over half of the web's pageviews to have a shot at usurping Google's ad network. Compare Microsoft, whose monopoly positions are relatively brittle. As we see with IE9, if Microsoft slips to even 66% market share (that's the current US market share for Google Search[1]), they need to start thinking seriously about interoperability. An advertising monopoly is something much more fluid. I think Google would have to majorly drop the ball to get toppled in the medium term (maybe failing to respond to an extreme price challenge over several years from a large rival network, or some really catastrophic privacy blunder). [1] http://comscore.com/Press_Events/Press_Releases/2011/2/comScore_Releases_January_2011_U.S._Search_Engine_Rankings http://comscore.com/Press_Events/Press_Releases/2011/2/comSc...
  - dhimes 16y ago
    These days they have a good hold on their position. But back then, if IE had shipped with ad-blockers built in, Google would have had a serious struggle.
brisance 16y ago
It's just his opinion advising caution. Not bad advice, really. On the other hand, Citigroup analyst Glen Yeung was commenting that NVDA runs the risk of having "excess inventory" for tablets. I honestly have no idea how that can happen considering production for Tegra 2 is barely out the gate. http://www.marketwatch.com/story/nvidia-shares-jump-on-upbeat-results-2011-02-17 http://www.marketwatch.com/story/nvidia-shares-jump-on-upbea...
rokhayakebe 16y ago
I wondered what the author does now for a living. I almost sent him the article. It seems like now he is part of the AOL team through the HPost acquisition.
nika 16y ago
I've been in this position many times. I remember when I first heard of Amazon in 1994. I remember when Google went public. I knew google was a great company, because I was in the search industry, but I didn't invest. I didn't feel it was in my circle of confidence. I remember when Apple was at $13 and had $6 of cash in the bank, and I still passed. I don't regret any of that. Ok, well, I do, it stings a little. I'm greedy, I can't deny it. But when I have invested, after a few years stumbling I ended up making more than a %100 return a year for many years of the last decade. I saw the housing boom before it happened (when Motley fool was recommending real estate) and profited from the boom and the bust (Which really started in 2006, though wasn't in the popular consciousness until 2008.) And then I got out in 2007, after my best year ever. Why? The market was not acting the way I believed was rational (or the rational irrationality typical of the market that creates inefficiencies allowing me to profit). It was a tough decision, getting out in 2007. But I felt great when just the next year it became clear my timing was perfect. (This is not a super power on my part, it was just good timing. I could have made more by waiting 6 months, but by comparison, I did fantastic.) These hard decisions may look foolish in retrospect or like genius. I don't fault fool.com for being cautious about google. The point of investing is that you have to do it based on rationality and the calculated return given the amount of risk. A high price and a low confidence factor in the underlying business can mean a bad investment. Consequently a 100 year old company that is "boring" and thus unpopular can produce a massive return, because the price and the risk is low. Jumping in to ride up over valued companies (like google was at least for many of those years) is what led to the original dotcom. I lost money on a couple of my positions there because I fell into that trap... and learned my lesson. So. Don't look at this as stupidity. It is wise to pass. You do better by not taking flyers on things that don't seem like mathematical sure things (risk factored in) within your circle of confidence. I'm no investing genius, but I am disciplined... and that's all it takes. On fool.com: The motley fool was a great and useful website for investing in the 1990s. When the dotcom boom was happening they advised caution (though they made their rep in the early days by recommending companies like iomega). Then around 2000-2001 they seemed to have a change in management, or at least a change in focus. They switched from being prudent contrarian investment advice, to more mainstream and more "opinion" oriented. It is kind of impressive to think that I stopped going there a decade ago. I literally haven't visit that site for 10 years, and I used to spend a lot of time there, to the point where I had quite a following.
davidmathers 16y ago
Best sentence: "As rivals such as Yahoo! that have access to all their other internal resources catch up, what will the competitive pressure on Google be then?"
- akamaka 16y ago
  My favourite was about how Microsoft "will include an algorithmic search engine bundled in its next generation of Windows products, due out next year."
nikcub 16y ago
don't like self-linking, but I wrote about this on my blog a while ago, with a link to old media articles being pessimistic about the Google IPO, quotes from 'tech experts' and the comparison to Facebook, Zynga and the new crop. so instead of a comment, a link: http://nikcub.appspot.com/the-google-ipo-skeptics http://nikcub.appspot.com/the-google-ipo-skeptics
jayhawg 16y ago
After seeing them on PBS around '98 The Motley Fool was to me at 19 what I'm sure Jim Cramer was to many folks around '05: a contrast to everything else at the time. I thought they were young, funny, and old-fashioned, which was appealing. But the disjointed approach soured me on them. I feel like they wrote and spoke about value investing but then sold newsletters on timely hot picks. So, in my mind they fell back in with everyone else contributing noise.
dreeves 16y ago
To call this foolish is pure hindsight bias. Winning the lottery doesn't mean it was smart to play. (To get technical, it was dumb to play ex ante but smart to play ex post. Or, more simply: hindsight is 20-20.) Though I admit it's fun to play shoulda/woulda/coulda, as I did myself recently: http://messymatters.com/babygoog http://messymatters.com/babygoog
InclinedPlane 16y ago
The key misunderstanding of google here was in thinking that google was merely "better algorithmic search" and nothing more. In truth Google's unique advantages come down to competency in three unique areas: state of the art algorithmic search; cutting edge software engineering; and revolutionary data center management. Google didn't win the search provider war by providing merely better search results. It won by providing better results faster with greater reliability and at lower cost than the competition. Better due to better algorithms and smarter filtering. Faster due to solid software engineering (sharding, map reduce) using distributed computing. Cheaper because the distributed computing aspect was enabled not via traditional beefy and expensive servers managed largely manually by humans but by larger numbers of low cost commodity hardware based systems largely managed via automated processes. Each of these aspects is a strong asset for any company, but google had all 3. What's more, each of these competencies are complementary and self-reinforcing with the others. State of the art distributed computing systems and revolutionarily cheap clustered computing systems go together like peanut butter and chocolate. What's more, low cost/high performance server infrastructure means that it's possible to dedicate more of the profits towards improving the search algorithms and the software engineering expertise, creating a positive feedback loop that allows google to out-accelerate its competition. A lot of companies have been able to match google roughly on a few aspects, but no company has been able to clone google's complete triumvirate of core skills to any significant degree. Many of the strongest companies in the tech field have a similar array of synergistic but unlikely multiple core competencies. Apple has strong engineering and strong aesthetic and design sensibilities. Amazon has strong software and IT engineering abilities and strong logistics management at scale (to the same degree, perhaps even more so, that led walmart to such success).
known 16y ago
Bill Mann failing to realize the potential of science & technology is not new. https://secure.wikimedia.org/wikipedia/en/wiki/History_of_Microsoft https://secure.wikimedia.org/wikipedia/en/wiki/History_of_Mi...
coverband 16y ago
Note also that this is just one member's opinion that was published on Motley Fool. That doesn't mean the whole MF team was thinking along the same lines at the time. In fact, I only see a few old writings by the author. It seems he was only active in the member forums.

71 points by sinzone 16y ago

"But these are all just window dressing. Here's the thing that I would fear as a Google investor: Ask Jeeves' (Nasdaq: ASKJ) algorithmic search engine Teoma already receives rave reviews for its results, and Yahoo! recently unbundled Google's search so it could feature its Inktomi technology. And wouldn't you know it, Microsoft (Nasdaq: MSFT), not one to leave nickels in billion-dollar stacks lying on the ground, will include an algorithmic search engine bundled in its next generation of Windows products, due out next year." --- It's amazing to think that this was only a handful of years ago.

shaddi 16y ago
Seriously. This article was published a year before Maps existed. Less than a month after the Gmail beta started. Facebook was less than six months old. This was all seven years ago! How times have changed.
- dasil003 16y ago
  What's really crazy for me is that I've been at my current startup for over half of that time span, and that I've been into Rails almost the full span.
noibl 16y ago
That argument didn't make a lot of sense then either. The specific algorithms that Google had patented gave it a runaway lead in implementing the kind of index that we now recognise as a crucial element of relevance. Anyone with knowledge of the domain could see that this was a revolution. Even odder is that there's no mention in the piece about the long-raging battle with Yahoo over the Overture ad-bidding IP, a huge achilles heel for Google at the time which somehow just melted away 10 days before the IPO (but 4 months after this article).
- deleted 16y ago
  [deleted]

sorbus 16y ago

[2004]

deleted 16y ago
[deleted]

sucuri2 16y ago

Easy to make fun of it now, but the domain "fool.com" fitted well for that article :)

hessenwolf 16y ago
Being wrong doesn't make you a fool. He clearly didn't have some of the insider SEO knowledge that some commenters are mentioning, but does not seem to me to be an unreasonable perspective.

deleted 16y ago

[deleted]

hristov 16y ago

Kudos to the motley fool for keeping that one on their website.

dstein 16y ago

Google went public with a $25B market cap? That puts the absurd valuations you see thrown around today into perspective.

btipling 16y ago
Not everyone is a Google.
rokhayakebe 16y ago
Even more amazing, I think they only raised 75M total from VCs prior to their IPO.

gamble 16y ago

It's not an unreasonable opinion. Google is dependent on a single product, there's almost no barrier for users or advertisers to switch, and most of Google's proprietary technology in software and datacenter design is completely opaque to investors. I'm not sure Google is a slam-dunk investment even today. They have their fingers in a lot of pies, but the company is still entirely dependent on an advertising product that hasn't changed substantially in years. If the market changed in a way that disrupts adwords, things could go south quickly. They remind me a bit of Microsoft - very oriented on protecting a lucrative monopoly, but in doing so their other products tend to be designed to support the monopoly, not generate revenue on their own.

noibl 16y ago
If you look at what they actually have in AdWords, it's not easy to see how it could be seriously disrupted. You're right that Google's real monopoly is not on search but on their immense network of advertisers and content sites, which has economies of scale built in that benefit everyone involved. Simply by being the biggest, Google's network is the best. The only thing that has come close to challenging that is the walled garden of Facebook, because of its unprecedented scale. Now Facebook surely has some growing left to do but even they would still need to pretty much cannibalise over half of the web's pageviews to have a shot at usurping Google's ad network. Compare Microsoft, whose monopoly positions are relatively brittle. As we see with IE9, if Microsoft slips to even 66% market share (that's the current US market share for Google Search[1]), they need to start thinking seriously about interoperability. An advertising monopoly is something much more fluid. I think Google would have to majorly drop the ball to get toppled in the medium term (maybe failing to respond to an extreme price challenge over several years from a large rival network, or some really catastrophic privacy blunder). [1] http://comscore.com/Press_Events/Press_Releases/2011/2/comScore_Releases_January_2011_U.S._Search_Engine_Rankings http://comscore.com/Press_Events/Press_Releases/2011/2/comSc...
- dhimes 16y ago
  These days they have a good hold on their position. But back then, if IE had shipped with ad-blockers built in, Google would have had a serious struggle.

brisance 16y ago

It's just his opinion advising caution. Not bad advice, really. On the other hand, Citigroup analyst Glen Yeung was commenting that NVDA runs the risk of having "excess inventory" for tablets. I honestly have no idea how that can happen considering production for Tegra 2 is barely out the gate. http://www.marketwatch.com/story/nvidia-shares-jump-on-upbeat-results-2011-02-17 http://www.marketwatch.com/story/nvidia-shares-jump-on-upbea...

rokhayakebe 16y ago

I wondered what the author does now for a living. I almost sent him the article. It seems like now he is part of the AOL team through the HPost acquisition.

nika 16y ago

I've been in this position many times. I remember when I first heard of Amazon in 1994. I remember when Google went public. I knew google was a great company, because I was in the search industry, but I didn't invest. I didn't feel it was in my circle of confidence. I remember when Apple was at $13 and had $6 of cash in the bank, and I still passed. I don't regret any of that. Ok, well, I do, it stings a little. I'm greedy, I can't deny it. But when I have invested, after a few years stumbling I ended up making more than a %100 return a year for many years of the last decade. I saw the housing boom before it happened (when Motley fool was recommending real estate) and profited from the boom and the bust (Which really started in 2006, though wasn't in the popular consciousness until 2008.) And then I got out in 2007, after my best year ever. Why? The market was not acting the way I believed was rational (or the rational irrationality typical of the market that creates inefficiencies allowing me to profit). It was a tough decision, getting out in 2007. But I felt great when just the next year it became clear my timing was perfect. (This is not a super power on my part, it was just good timing. I could have made more by waiting 6 months, but by comparison, I did fantastic.) These hard decisions may look foolish in retrospect or like genius. I don't fault fool.com for being cautious about google. The point of investing is that you have to do it based on rationality and the calculated return given the amount of risk. A high price and a low confidence factor in the underlying business can mean a bad investment. Consequently a 100 year old company that is "boring" and thus unpopular can produce a massive return, because the price and the risk is low. Jumping in to ride up over valued companies (like google was at least for many of those years) is what led to the original dotcom. I lost money on a couple of my positions there because I fell into that trap... and learned my lesson. So. Don't look at this as stupidity. It is wise to pass. You do better by not taking flyers on things that don't seem like mathematical sure things (risk factored in) within your circle of confidence. I'm no investing genius, but I am disciplined... and that's all it takes. On fool.com: The motley fool was a great and useful website for investing in the 1990s. When the dotcom boom was happening they advised caution (though they made their rep in the early days by recommending companies like iomega). Then around 2000-2001 they seemed to have a change in management, or at least a change in focus. They switched from being prudent contrarian investment advice, to more mainstream and more "opinion" oriented. It is kind of impressive to think that I stopped going there a decade ago. I literally haven't visit that site for 10 years, and I used to spend a lot of time there, to the point where I had quite a following.

davidmathers 16y ago

Best sentence: "As rivals such as Yahoo! that have access to all their other internal resources catch up, what will the competitive pressure on Google be then?"

akamaka 16y ago
My favourite was about how Microsoft "will include an algorithmic search engine bundled in its next generation of Windows products, due out next year."

nikcub 16y ago

don't like self-linking, but I wrote about this on my blog a while ago, with a link to old media articles being pessimistic about the Google IPO, quotes from 'tech experts' and the comparison to Facebook, Zynga and the new crop. so instead of a comment, a link: http://nikcub.appspot.com/the-google-ipo-skeptics http://nikcub.appspot.com/the-google-ipo-skeptics

jayhawg 16y ago

After seeing them on PBS around '98 The Motley Fool was to me at 19 what I'm sure Jim Cramer was to many folks around '05: a contrast to everything else at the time. I thought they were young, funny, and old-fashioned, which was appealing. But the disjointed approach soured me on them. I feel like they wrote and spoke about value investing but then sold newsletters on timely hot picks. So, in my mind they fell back in with everyone else contributing noise.

dreeves 16y ago

To call this foolish is pure hindsight bias. Winning the lottery doesn't mean it was smart to play. (To get technical, it was dumb to play ex ante but smart to play ex post. Or, more simply: hindsight is 20-20.) Though I admit it's fun to play shoulda/woulda/coulda, as I did myself recently: http://messymatters.com/babygoog http://messymatters.com/babygoog

InclinedPlane 16y ago

The key misunderstanding of google here was in thinking that google was merely "better algorithmic search" and nothing more. In truth Google's unique advantages come down to competency in three unique areas: state of the art algorithmic search; cutting edge software engineering; and revolutionary data center management. Google didn't win the search provider war by providing merely better search results. It won by providing better results faster with greater reliability and at lower cost than the competition. Better due to better algorithms and smarter filtering. Faster due to solid software engineering (sharding, map reduce) using distributed computing. Cheaper because the distributed computing aspect was enabled not via traditional beefy and expensive servers managed largely manually by humans but by larger numbers of low cost commodity hardware based systems largely managed via automated processes. Each of these aspects is a strong asset for any company, but google had all 3. What's more, each of these competencies are complementary and self-reinforcing with the others. State of the art distributed computing systems and revolutionarily cheap clustered computing systems go together like peanut butter and chocolate. What's more, low cost/high performance server infrastructure means that it's possible to dedicate more of the profits towards improving the search algorithms and the software engineering expertise, creating a positive feedback loop that allows google to out-accelerate its competition. A lot of companies have been able to match google roughly on a few aspects, but no company has been able to clone google's complete triumvirate of core skills to any significant degree. Many of the strongest companies in the tech field have a similar array of synergistic but unlikely multiple core competencies. Apple has strong engineering and strong aesthetic and design sensibilities. Amazon has strong software and IT engineering abilities and strong logistics management at scale (to the same degree, perhaps even more so, that led walmart to such success).

known 16y ago

Bill Mann failing to realize the potential of science & technology is not new. https://secure.wikimedia.org/wikipedia/en/wiki/History_of_Microsoft https://secure.wikimedia.org/wikipedia/en/wiki/History_of_Mi...

coverband 16y ago

Note also that this is just one member's opinion that was published on Motley Fool. That doesn't mean the whole MF team was thinking along the same lines at the time. In fact, I only see a few old writings by the author. It seems he was only active in the member forums.