Google Stock Price Climbs (2005)
After beginning its journey at an IPO price of $85 a share, Google stock price (GOOG on Nasdaq) has just nudged $320. This was after announcing yet another growth in profits driven by their adwords advertising program.
Google’s profit increased last quarter to $342 Million. Sales actually doubled against last years totals, far outpacing search industry analysts estimates. Clearly, analysts are undervaluing not only the Google stock price and value, but also the force and strength of Internet commerce. Google is expected to outperform the rest of the market by 20%.
Flashback to Google’s Stock Price in 2005:
July 24, 2005 Google Price
Change: 11.54 (3.68%)
Prev Close: 313.94
Day’s Range: 296.33 – 309.25
52wk Range: 95.96 – 317.80
Avg Vol (3m): 14,267,800
Market Cap: 84.00B
P/E (ttm): 119.53
EPS (ttm): 2.53
Although Yahoo is still the most visited Web site in 2005, Google also outpaced Yahoo in search volume and marketshare. Google’s ownership of search is now at 55% globally. Yahoo itself reported growth in its earnings and a profit of 754 million. Yahoo’s stock price seems to have recovered from its freefall last May where it lost over 50% of its value.Yahoo travel seems to be the company’s crowning glory.
Google and Text Link Advertising
When a search engine business goes public, it faces tremendous pressure to monetize every aspect of its operations in order to increase shareholder profit. What’s unusual about search engines though, is the fact that the results users want are those that aren’t tainted by the influence of money. Certainly users and even Google want Web sites to be funded well enough to be of value to users, but they don’t want money playing any more influence than this.
Google has done a great job of fending off the influence of paid manipulation of its results but the threat is ever-present and the biggest task the company faces is to keep search results unaffected by sponsored or paid influence. In some areas, well funded organizations are seeing success by linking huge networks of Web sites.
Today, a huge market exists for text link advertising, which Google built actually built its own business upon. It’s Golden egg is also a poison pill if swallowed. Google then, similar to other search engines, has to fend off the very same economic force that drives their profits. This is one reason why the company separates organic and paid search into separate business units. Where the two touch, contamination occurs. As long as the two have no conjoined area of activity, Google’s success will continue.
Google built its search engine on popularity, yet popularity can be bought through advertising. The original search algorithm is no longer relevant, and the company has improved its search engineering to filter out most paid text link advertising. When they decided to filter out link exchanges, the majority of web site owners were almost forced to buy links on other Web sites in order to create inbound links to their sites. That spawned the text link ad industry which is now extremely lucrative for sellers. Where people once laughed at the idea of brokering text links, today, these are the hottest form of Web site property. A top rank for text link advertising in search engines may be very profitable.
The Google stock price shows investors confidence in the company, yet you have to wonder if these investors really understand how they get their organic search users. If the company can’t stay on top of the collaborative efforts of big link network manipulators, the search results will drop in quality. Yes, Google has an enormous marketshare and a brand that continues to represent any kind of quest for information on the Internet, however SEO’s are best able to tell you how effective Google is in keeping the results clean.
Remember the Google IPO?
The Google IPO mania evened slowed the SEC web site with traffic increasing 900% as a result of the Google filing. After launching their stock at $85 dollars, it has now climbed to over $210 (Feb 02, 2005) which is over 150 percent above the initial public offering price of $85 in August. Check Nasdaq’s analysis and Flash Quotes here.
Goldman Sachs gave Google a green light with its report that Google’s stock is actually worth $215 a share, so you may even want to consider buying now. They forecast Google’s revenue growth at 20% up to 2009 along with a 25% earnings-per-share growth. Google just reported a record fourth-quarter 2004 profit of $204 million, or 71 cents a share.
Google founders Sergey Brin and Larry Page are , according to a story in the Washington Post, selling 7.2 million shares of their Google stock over the next 18 months. That would net about $1 Billion for each of them. In the same filing, their chief executive, Eric E. Schmidt, intends to sell 2.2 million shares.
If money deeply affects which sites gain visibility in Google, it will change the SEO landscape. Search engines are already heavily monetized so money plays a big role. Web sites today are technologically sophisticated, so a certain level of investment is needed to optimize them anyway. Like it or not, big money is already a factor. Advertising is a big part of the monetization factor too, yet strangely, Google doesn’t push the on page advertising it does. The ads are low key and visitors are not encouraged to click on them. That may play a key role in the value of Google’s initial stock offering.
Is Google and its IPO Unique?
Of course, the other Web search engines offer these same services too. So what is it about Google that allows them the opportunity to launch an initial public offering of stock with an estimated 2.7 billion dollars? The company has kept true to providing uncontaminated search results, search results that are useful to the search engine’s users. At the bottom of it all, is an mathematical search engine algorithm that applies a value of relevance to each of the 4.2 billion+ pages in its index. We all unconsciously let Google make the decision about what is relevant in our search for information, products and services.
The company has estimated earnings of about $100 million per year and many believe that revenue is rising fast. In its usual inconoclastic style, it is bypassing the stock market to sell them in an auction. Everyone has access and an opportunity. The health of Google is revitalizing the .com revolution. If this flies as expected, it could lead to a new era in the Internet economy. The influx of cash will allow Google to do things previously unheard of, even beyond eBay and Amazon.
Banks Were Invited to Underwrite IPO
Corporations offering IPOs hire investment bankers to help the sell their new stock. This process is called underwriting. The investment bankers act as an intermediary between the issuing corporation and the general public. Eight Banks were invited to underwrite Google’s first IPO offering and two, Morgan Stanley and Credit Suisse First Boston were chosen as the official underwriters. Soon after that announcement though, one of the banks Morgan Stanley was charged with fraud in another IPO offering!
As of May 25th, 29 additional investment firms were added to underwrite the IPO.
Many would be investors and excited investment bankers have been eagerly awaiting this IPO thinking that its value will surely soar. This speculation is part of the reason why the auction prices may be very high. Some are warning potential Google-airres to be careful because regulatory issues and others wonder about legal ties to Stanford University. You might want to check with your broker about whether to buy now or later.
Google owners Sergei Brin and Larry Page have been quoted as saying the company won’t abandon its free and open search results despite any potential pressure from shareholders. Google’s search engine algorithm is more than PageRank as many people believe. It is comprised of numerous criteria and mathematical computations of its database. Numerous search engines before declined in marketshare when their listings were affected, or were outright purchased by advertisers. The search results became less useful and those search engines lost the trust of users who believed they were getting the most relevant results. Many of those SEs went out of business or bought up for pennies on the dollar by surviving search engines.
Is Search Engine Optimization Responsible for Google’s Success?
There are those who suggest that Google’s success is due to its dedication to delivering the most relevant search results. However, it is search engine optimization professionals who clean up the unruly clutter known as the web so that it is compatible with search engine robots and indexes. Google has been strongly supported by search engine optimization pros too, but only because Google represented the ideal that SEO people sought – making web sites visible to the public. If Google no longer represents that ideal, why would search engine optimization people support it?
Altogether, Google has benefited by completing a force begun by online business to make their web sites easy to access. Google and Yahoo and other search engines saw the opportunity to be the final cog in that wheel by presenting the optimized sites to the public. Google did not go to each web site and make them accessible. Many Flash sites for instance deter any robot access. It was the site owners and Google search engine optimization people who made their site’s suit the primitive algorithms used by the search engines.
So, although it appears Google management and staff create a useful presentation format for searchers, it is the SEO Companies who make the Web sites indexable and searchable.
Google Founders Retain Control
Some US bank representatives are critical of the IPO due to the fact that the founders of the company will still retain control of business decisions. If shareholders were to have control, Google could be completely monetized and the organic search engine listings could contaminated with paid placements. That would result in a short term burst of ad revenues, but would lead to severe erosion of the brand image that Google now surfs on. If such contamination were to occur, it would lead to a rapid abandonment by current users.
Although most consumers have no awareness of the complexity of search engines and the nature of the search business, word does get around about the quality and honesty of the results. Consumers don’t like to feel duped, even though they have no idea that they may be duped. Google’s brand is built on the word free and open, and that theme must be integral in any future business plan and activities.
Google’s IPO even has relevance to search engine optimizaton professionals who make their livelihood from advertising in Google’s search results. It is the source of much discussion at discussion forums such as Webmasterworld, Jimworld, and SEOchat. The monetization of the site holds important implications for the future of optimization services on the Web.
Would you like to know more about Google’s Search Engine optimization? Would you like to know more about search engine positioning and how to create high Google rankings?