
Google IPO? No Thanks (2004) - sinzone
http://www.fool.com/investing/general/2004/04/30/google-ipo-no-thanks.aspx
======
mkr-hn
"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
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
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.

------
gamble
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
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/comSc...](http://comscore.com/Press_Events/Press_Releases/2011/2/comScore_Releases_January_2011_U.S._Search_Engine_Rankings)

~~~
dhimes
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.

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

~~~
rokhayakebe
Even more amazing, I think they only raised 75M total from VCs prior to their
IPO.

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

------
sucuri2
Easy to make fun of it now, but the domain "fool.com" fitted well for that
article :)

~~~
hessenwolf
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.

------
brisance
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-
upbea...](http://www.marketwatch.com/story/nvidia-shares-jump-on-upbeat-
results-2011-02-17)

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

------
jayhawg
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.

------
nikcub
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>

------
dreeves
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>

------
InclinedPlane
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).

------
coverband
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.

------
known
Bill Mann failing to realize the _potential_ of science & technology is not
new.
[https://secure.wikimedia.org/wikipedia/en/wiki/History_of_Mi...](https://secure.wikimedia.org/wikipedia/en/wiki/History_of_Microsoft)

------
sorbus
[2004]

------
rokhayakebe
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
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.

~~~
Zaak
Is there anyone currently giving the sort of advice that motley fool used to
give before they changed for the worse?

~~~
nika
Not that I'm aware of, but I have long since graduated from seeking such
advice.

I think the best source of investment insight comes from studying Warren
Buffett's methodology. Mary Buffett wrote a book called "Buffetology" which is
really accessible and quite good. An author by the name of Timothy Vick has
written several books on buffett. (How to pick stocks like warren buffet is a
good one.) For awhile there I bought all the ones I could find, and it was
probably the best $100 I spent.

Eventually I created a spreadsheet that I'd use to do my net-present value
analysis. I'd take the stock's price, the historical growth, my estimated
growth, and work back to figure out what my projected return would be in 5
years.

You know you've mastered investing when you're able to predict these returns
pretty accurately, though it takes time to know if you were right or not. It
is ok, there is no hurry, you can just put money aside and save it (though I'd
hedge against inflation- I'd store it in gold or silver these days.)

Once understanding investment, economics came to play a huge role in my
understanding of how things worked and where things are going.

The mises institute: <http://mises.org> is the best source of daily
informative articles on economics. They were talking about the housing bust
around 2000-2001. Mises himself predicted the great depression, the invasion
of Austria (where he was from, and where his fellow economists laughed when he
said that by the same time the next year the Nazis would have control) etc. I
don't read it all the time, and just read articles that I find useful.

The Mises institute has a lot of books for free from Mises and Rothbard that
you can download, and from many other economists.

But probably the best book on economics to read is "Economics in one lesson"
by Henry Hazlitt. You can get it in PDF form here, I believe:
<http://www.hacer.org/pdf/Hazlitt00.pdf>

Studying Buffet is investing 101, studying economics is investing 201.

I also read a lot of books like "The gorilla game" and "the wealthy barber"
and stuff like that. They were less useful than the Buffett books, but they
all had nuggets of good advice.

Eventually, I graduated to Options as a strategic investment. A $100 book that
became my bible.

\--

Please note also, I'm out of the markets right now. I think the outlook for
the US is not good, capital controls are coming and that there's going to be a
major, and very painful, rebalancing of the global economic structure.

Next time I buy stocks I expect they will be on an asian exchange.

~~~
davidw
Good advice on the stocks, but for those not in the know, mises.org presents a
sort of ultra-libertarian point of view, and pretty much only that. In other
words, they're not likely to ever present ideas differing much from their own.

While they may or may not have some good ideas, it's not really mainstream
economics, and there are some discussions covering that on the net that are
worth reading prior to reading their material.

~~~
hessenwolf
And one of Ludwig's chief chips was that we should all go back to the gold
standard, so take with a grain of salt the argument that you should put your
money in gold and silver to hedge against inflation (they are both in long-run
bull markets).

