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Last Updated: Wednesday, 18 August, 2004, 12:13 GMT 13:13 UK
Google flotation
Google founders, Larry Page and Sergey Brin

Before Google became a synonym for a search engine, it was a number with a huge number of noughts on the end of it - 100 to be precise.

The owners of the internet company will no doubt be hoping to add a few noughts to the end of their bank balances when the company is launched onto the Nasdaq stock market.

But the way in which the founders of Google have gone about the flotation has raised eyebrows, not least an interview with Playboy magazine which some suggested fell foul of rules relating to information released ahead of an initial public offering.

Jon Sopel was joined by John Heilemann in New York - a long time Silicon Valley journalist, and author of a forthcoming book on the rise and fall of the new economy; and by Andrew Orlowski in Manchester - he writes and lectures in California on IT issues.

JON SOPEL:
John, let me read you a bit of copy from Reuters, that's that the US Securities and Exchange Commission this evening did not declare effective Google's registration statement for its IPO. Do we know what's going on?

JOHN HEILEMANN:
(JOURNALIST AND AUTHOR)

I have no idea. I heard in your earlier report there was talk of them going effective tomorrow. The earliest I heard was Thursday morning or Friday.

SOPEL:
Is this sort of part of a signal of the hiccups that there have been all the way along the path?

HEILEMANN:
It certainly has been a tumultuous run up to this offering, more so than anybody would have expected. I'm not sure if the information you just read me has told me whether the SEC is putting a delay on the offering or if it has not yet OK-ed the offering. That's a pretty pivotal distinction.

SOPEL:
Andrew Orlowski the way that Google are marketing themselves, the line that they say Google is not a conventional company, it's the tech hippies, yet multibillionaires. Does it work?

ANDREW ORLOWSKI:
(THE REGISTER, ONLINE TECHNOLOGY MAGAZINE)

I think it's worked very well so far. We're talking about an advertising broker and we wouldn't be sitting here talking about something which is very dull. Google is the public face of the internet and has tremendous responsibilities. This campaign has always been light, fluffy and friendly and that's served it very well. But those responsibilities can't be puffed away like that.

SOPEL:
Is it sustainable to play the role as the anti-capitalists saying we are more interested in the small investors than big institutional ones?

HEILEMANN:
It's not so much an anti-capitalist attitude. But it's right that when Google announced its offering it put itself at odds with the old IPO system. It put itself at odds to some extent with Wall Street and it tried it align itself with smaller investigators. Most importantly it's trying to have it both ways right now. It's trying to say we will be a public company but we will act like a private company. The big question is once its shares are traded on the public market whether it's going to be able to maintain that posture which says we're going to do what's good for the long-term, we're not going try to please Wall Street, we're going to do what's in the long-term interest of the business. That's the big question going forward. I'm not sure if that's sustainable.

SOPEL:
Andrew, do you think that's a sustainable position?

ORLOWSKI:
I think it's going to have a lot of problems reconciling itself. I wonder if the families wish they'd done all this two years ago when the growth was ahead of the company and its reputation as a search engine was untarnished.

SOPEL:
Why do you say untarnished?

ORLOWSKI:
It's a problem for every search engine, the good stuff on the internet is disappearing faster than the rain forest. It's disappearing behind registration sites and log ins. Most of the computerised databases in the world where good stuff resides, because information is expensive, is in collections. Google only has the public web to work with.

SOPEL:
And John, the way they've gone about this, sort of organising an auction of what the share price will be, what price are you prepared to pay, how many shares are you prepared to buy. It has got everyone talking. Is it an effective way of doing business as well?

HEILEMANN:
We'll find that out fairly soon. The lesson of the dotcom boom was that a lot of companies went public through the process by which they went public and the setting of the prices by the investment banks, you had a situation where you would get extraordinary first day leaps in the share price. So you got a lot of great publicity. On the first day of trading your company would rocket up by 100%. But that really meant that the companies themselves had left a lot of money on the table. Those were profits for the people who first held the shares, but not the money that was actually being extracted by the company to put back into its business. What Google has done with the auction in addition to stirring up a lot of conversation, is it's hoping to find an actual maximising price at which it will be able to take as much money as possible out of the system. In theory it's a pretty good way to do that. We will find out whether or not it works as well in practice.

SOPEL:
How do they grow a company when it's already as big as it is?

ORLOWSKI:
That's largely because the market hasn't really been tapped. This is a new business, classified advertisements. Google stumbled into it following the market leader, Overture are a clever company, it was bought by Yahoo last year, pioneered this. Google depends on its intellectual property. They settled a patent dispute a couple of weeks ago. It's almost like Pepsi depending on Coca Cola's secret source.

SOPEL:
John, has Google passed its high watermark in the sense that other competitors are coming in with technology as good or better than Google?

HEILEMANN:
I think it's right that many companies when they start out, when they do their IPO they think they've reached the end of a process, but they've actually just reached the beginning. Much to Google's credit they recognise the difficult situation they're in. There is no doubt that Yahoo has much of the same key technology that Google has and Microsoft is about to enter this business in a big way. There are not a whole lot of businesses that Microsoft has regarded as very important that it hasn't ended up owning. So Google may very well prove to be very successful, but it's not going to be easy.

SOPEL:
John Heilemann and Andrew Orlowski thanks very much.


This transcript was produced from the teletext subtitles that are generated live for Newsnight. It has been checked against the programme as broadcast, however Newsnight can accept no responsibility for any factual inaccuracies. We will be happy to correct serious errors.

WATCH AND LISTEN
Jon Sopel
discussed the Google flotation with John Heilemann and Andrew Orlowski.



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