Google goes public tech

US$4bil is a lot of cash, and it's roughly the amount that Google plans to get by selling off a third of their company in stock during their newly announced IPO.

A year-old-article at Wired points out that Google's overriding philosophy up to this point has been "don't be evil". But the author, Josh McHugh, also notes that while Google has been able to stick to its principles and still be profitable, some of the decision to continue to adhere to the "no evil" policy will be taken out of their hands by their new shareholders. The following excerpt from the Wired article illustrates this well:

As a private company, Google has one master: users. As a public company, there are shareholders to worry about. And more than happy users, shareholders want ever-greater profits... Such pressure could cause Brin to rethink other policies, like his decision to refuse all alcohol and tobacco advertising. The fact that Google accepts advertising for adult content sites is an intriguing commentary on Brin's morality: Cigarettes and booze are evil; porn is not. It's a policy that would become progressively harder to defend were Google to go public.

If the company is profitable, then why open up ownership to others who may not care about your principles? The obvious answer is cash - the most common reason for a profitable company to issue an IPO is to fund growth (i.e. use the money to invest in the company in order to be even more profitable than it already is). On the other hand, if you're not profitable, then you use an IPO to stay alive long enough to play out your strategy and survive to profitability.

Despite Google's profitability, this IPO seems more about survival than about growth. I believe Google senses a threat - one that starts with "M" and ends with "icrosoft" - and is about to embark on a technological arms race in order to secure its position as the search engine of choice for the forseeable future.

Microsoft plays dirty - there's no question about that. Consider the fact that most error pages displayed by Internet Explorer take you to the MSN search engine, and you'll think "hmmm... anti-competitive?" Now, what if I told all of you non-IE users that the default Internet Explorer home page is http://www.msn.com/ ? Nothing inherently wrong with that, I suppose. But what if I went on to explain that the index page for msn.com has a little piece of markup in it that looks like this:

<body onload="document.all.S1.focus">

That tag means that if you try to start typing a URL in the "Address" bar of IE while the default home page is loading, the focus is changed to the MSN search engine text field on www.msn.com and you "accidentally" end up searching for whatever URL you were typing. This has the triple effect of providing business intelligence to Microsoft about the web pages users are trying to navigate to manually when their browser first opens, increasing consumer awareness of the MSN search engine, and artificially boosting the engine's Nielsen//NetRatings to make the service more attractive to advertisers. It's no wonder, then, that this searchenginewatch.com article says that "even MSN admits some people may not realize how they ended up doing a search at its service."

So how do you fight a competitor that has no history of or interest in playing fair? You can try to fight fire with fire, but frankly Google (or just about any tech company) has no chance to out-weasel Microsoft. So it won't do that, instead sticking to its #2 truism: "It's best to do one thing really, really well." Google's core competency is not mudslinging, so the only option it has is to rise above dirty tactics and just be better. Period. I imagine that the bulk of their newfound US$4bil is going to go straight into R&D, and specificially, natural language processing. My recent work on creating a self-authoring weblog uses Bayesian analysis to help determine what to post. As you might expect, I wanted to see what (if anything) others were doing regarding Bayesian analysis of HTML and XML documents, and look who pops up as the first paid advertiser when you search for the word "Bayesian" on Google?

Let's hope that Google's soon-to-be shareholders understand that Google's marketshare thus far has been derived from treating the users correctly and being the best damn search technology on the web - and in order for those shareholders to see real value over the long haul (i.e., win a fight with Microsoft on its way to true market dominance) Google simply has to continue to be better than the rest, both in terms of customer satisfaction and technology.

Posted by Dan on January 06, 2004 at 09:47 AM | TrackBack


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