Internet Marketing Blog

(Check out this article regarding Google's IPO strategy by Google Adwords aficionado, Perry Marshall ...)

Will going public ruin a great search engine? I've been concerned about that. And you should be too.

A public company could never come up with something as elegant as Google AdWords. Most public companies would bastardize it and ruin it.

So I have some interesting news to share.

Just two weeks ago, I met Patrick Keane, Google's Head of Sales Strategy. I asked him a question:

"Patrick, I think Google AdWords is the most important development in advertising this decade. But now there's all this hoopla about Google going public, and I'm afraid that if Google has to cater to the whims of shareholders and quarterly reports, a really really smart company will turn into a really dumb company."

He said, "I can't say whether we will or whether we won't. What I can say is 1) we don't need to go public; we've been profitable for the last 14 quarters and we've got plenty of cash. And 2) If we did choose go public, our mission would be to be a different kind of public company - to stick to the original values of our founders, Larry and Sergei.

"Our policy is to have all our employees spend 20% of their time coming up with "cool shit" and to have a culture of technology and innovation - to make all the world's information instantly available."

Well, okay Mr. Keane, that sounds good. But I've heard that kind of talk before. I was a key player in a private company that was bought by a public company, and the best business decision I've ever made was not taking the job they offered me at the new company!

In fact here's an email I sent to Google last summer:

Dear Google AdWords staff:

I don't know if the rumors are true -- Google PR says they're not -- but just in case the rumors are valid, please permit me to give you my two cents.

You guys literally built a better mousetrap and the world beat a path to your door. That is an exceedingly rare thing in today's business world. Congratulations on making a great search engine.

Now Wall Street wants Google. No question about it. And I'm sure the founders can collect at least a few hundred million of they go public.

But.... please listen.

19 months ago I helped sell a small private company to a publicly held firm. In anticipation of chaos, dismemberment and destruction, I bailed. I took the money and RAN as fast as I could.

Everyone else stayed.

The biggest shareholder, who got 80% of his money in a stock trade, subsequently lost $5 million in the space of a month as the share prices plummeted.

It was horrible, and everyone who stayed was probably envious of me because I got out, and because they found themselves reporting to a bunch of idiots.

Then those idiots gutted the company and it basically doesn't exist anymore.

So... please listen, if you go public, the world's greatest search engine will be cannibalized and sold for parts. All you wonderful people will suddenly be in a quarterly cycle of indentured slavery to quarterly reports. All the visionaries will be replaced by slave drivers.

In regards to the AdWords program: Wall Street will toss out your "relevancy requirement" in AdWords so they can make their numbers. The 0.5% minimum CTR will become 0.25% and then 0%. They'll also get rid of your bid price multiplier that rewards good CTR's and eventually you'll be like Overture --- just a big bunch of surly bidding war whores.

Please understand - It won't happen because YOU are evil, it's will happen because Wall Street is so insatiably greedy. Within two years Google will become merely a shell of its old self. And it will lose its popularity and someone else will be king.

So --- keep AdWords intact, it really is a brilliant system. And don't sell out to the dark side.

(Do you think I distrust public companies?)

Well... it was only this week that I started to hear some things that make me think they'll actually stay smart. Here's what's going on.

Google Gives Wall Street the Finger

I intensely distrust Wall Street. Apparently, so do the folks at Google. So yes, they're doing their IPO, but it's going to be different this time. Here's how:

* They're bypassing the usual Good-Ol-Boy network for issuing the stock and doing a dutch auction instead. That keeps all the investment bankers from limiting the availability, lining their pockets as the stock price runs up, and then driving the price up to insane levels so the unsuspecting public swallows all the risk. Bravo.
* They're issuing two kinds of stock: One kind to the founders, which gets 10 votes per share, another kind to the public, which only has 1 vote per share. The public doesn't get to run the company. That's good. Shareholders are stupid. They make stupid decisions. They hold smart people hostage, and eventually kill them.
* Larry and Sergei are not going to issue quarterly earnings forecasts. If they have a good quarter, they have a good quarter. If they have to invest heavily and the profits aren't so good in a different quarter, so be it.
* They say they're investing $250 million of the money they raise into new infrastructure. Wall Street thinks they're crazy. But that can't be a bad thing!
* They fired their investment banking firm Goldman Sachs for playing the usual Good-Ol-Boy network game. The Goldman guys are really hacked off now. Go Google.

So... maybe Mr. Keane is right, maybe Google will be a different kind of public company. I sure hope so. Because great companies are built on Elegant Ideas, not wheelbarrows full of money.

Oh yeah - you're probably wondering: "Should I buy some Google stock?"

Don't ask me. I'm not an investment advisor. It's just not a question I'm willing or qualified to answer.

Meanwhile I hope to personally shake your hand in Chicago at Fred Gleeck's Publicity Seminar, it's going to be a killer experience for you. And I'll be covering the latest developments and strategies for Google AdWords there, including the implications of the new Google IPO. Come to Chicago in June - http:/publicity.makeyourwebsitepay.com.

Sincerely,

Perry Marshall

Author, The Definitive Guide to Google AdWords