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Friday, June 25th, 2004

Google Update – IPO, SERPS, Open & Outsourcing, GMAIL

 

Over the past seven years, it is fairly safe to say that the use of search engines has revolutionized our methods of finding and valuing information. Almost any activity involving research from personal travel planning to corporate business planning has been made far easier through the use of search engines. When one search tool or firm dominates as Google has for the past three years, it will get a lot more attention from the public and the media. Case in point, Google. Synonymous with search, Google has changed the world. For the most part, Google has made it a better place to live. That in itself justifies the intense scrutiny constantly focused at virtually every move made in the Googleplex. The fact they are changing rapidly further justifies the public and media interest and the hoopla.

This week, Google continues to find itself in the public spotlight despite the Securities Exchange Commission (SEC) imposed “Quiet Period” preceding the issuance of their long awaited IPO. It has been a busy week in Mountain View California. Google has made several announcements in the past few days, each of which could warrant a full column on their own. Here is a quick run-down of the past seven days of activity.

IPO NEWS

As anyone with a computer knows, Google is issuing its Initial Public (stock) Offering in a “Dutch-Auction” format. This means that individual investors will have a short window of time to bid on Google shares in an auction format. As with all auctions, the highest bidders will get the goods. In order to issue public shares, Google had to file detailed plans with the SEC. As with most businesses, especially in the tech world, plans often change when the business or technical environment changes. This week, Google made a few modifications to their original filing with the SEC.

1) Google has lowered the minimum number of shares individuals can bid on to 5 from the traditional 100. This will allow smaller investors the opportunity to participate in the auction by purchasing a smaller block of shares. Google has issued a warning to investors stating that over-enthusiastic bidding might push the price of shares to a cost-price that has no relationship with the actual value of the company, thus pushing the price of shares to unsustainable levels. If this was to happen, speculators and professional investors might choose to short the stock, an action that would burst the balloon and quickly devalue the price of shares.

2) Google is going to outsource its “critical financial functions” which include billing, credit evaluation and collections. This is extremely important to Google as the number of revenue-sharing agreements with individuals, webmasters and other corporations grows exponentially. Google does not have the experience or person-power to track the millions of agreements it has made while it continues to base its bottom line on revenues generated through these agreements. This section of their filing concludes with the statement, “If we do not successfully implement this project, our business, reputation and operating results could be harmed.”

3) Google has dropped the venerable brokerage Merrill Lynch from its roster of underwriters. While neither Google or Merrill Lynch are able to discuss details, sources in the financial media cite Merrill Lynch’s unwillingness to modify its operating procedures to meet the auction format for such a small profit margin.

GMAIL NEWS

Google’s new GMail system will electronically scan the text of all Emails and place contextual advertising based on the topic of the Email. This has raised a great deal of concern for privacy advocates and may prompt legislation banning the practice as is currently being debated in California and Massachusetts. Google has noted that concerns around the collection, use of, or sharing of, personal information found in GMails might “hurt its reputation”. In reaction to our increasingly prurient culture, Google has announced several sectors that will not be allowed to target GMail recipients. GMails with words relating to sex, guns, drugs, online dating, and other topics that might offend “family values” will not have advertisements displayed in them. Google will also avoid displaying an ad beside text that criticizes a product or series of products. In other words, if your (BRAND NAME HERE) car breaks down and you write your friend about it, Google will not show ads for cars in that GMail.

Google Dancing with the Penguin? (Open Source Google)

One of the most interesting Google rumours from the past week comes from a tech recruitment trip to Australia where Google hopes to open a Research and Development centre. According to company VP of engineering Wayne Rosing, Google’s technical director Craig Silverstein has initiated a project to scan Google’s code to determine which parts can be released to the public safely. While they will not open the entire box of code that makes Google operate, especially with Microsoft breathing down their necks, there are several (massive) sections of code that would be of great benefit to the development community.

Google PR and Backlink Update (Just in case you haven’t noticed)

Google is in the midst of what appears to be a major update of the Search Engine Results Pages (SERPs), starting with a change in the number of incoming links being measured and a subsequent change in PageRank for most sites. In the past four hours, we have seen PageRanks (as measured by the Google Toolbar) fluctuate wildly, in some cases defying what we understand as “Google Physics”. On a Quit-Smoking affiliate product site owned by StepForth’s marketing director Dave Davies, the INDEX page was recorded as a PR5 while one of the internal pages showed a PR6! One of our clients wrote me this morning to tell me that a new site which had a PR0 was now a PR5! We measure backlinks twice each day with our first check at 9:15am and our second at 4:15pm. This morning we noted that Google showed StepForth.com had over 2250 incoming links. A few minutes later we noted only 1540 as seen by Google. Similar fluctuations are being shown for several client sites as well.

These fluctuations will have an impact on the rankings as shown in the SERPs. We expect to see some fairly significant changes to the SERPs in the coming days. Google is in an interesting position today. The responsibilties of being the most popular information resource in the world must be enormous. Add the responsibilities of running one of the largest tech-businesses and one can emphasize with the pressures on the executive trio running the show at the Googleplex.


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