Thursday, November 11, 2004

What is Google worth?

When Google was nearing its IPO the share offer price implied a valuation of about $30B for the company. Since then its market cap has skyrocketed to about $45B.

At the time I used to joke around that for $1B I could easily build a competitor to Google that had 80-90% of its capabilities. Now, with Microsoft about to launch its new search service, codenamed underdog, my assertion seems to be proved, as they spent a reported $100M and 20 months to build it.

So, does this shake your faith in Google's lofty valuation? Only time will tell.

What is clear is that online advertising has become a huge industry - about $4B per year in revenues, and growing rapidly. Interestingly, there is not a single strong competitor in the search industry outside the US (except perhaps in China, and those companies are focused primarily on Chinese-language search).

Say what you want about US competitiveness, but in this case a leading new technology is completely dominated by Americans.


Carson C. Chow said...

Well evidently, underdog is still a bit under the Google. I typed in my name and my own web page didn't show up. It was number one on Google. Haven't quite got those eigenvalues right I guess.

Steve Hsu said...

Hmm... I played with it a bit and the quality of results wasn't quite as good as Google, but also not bad. Google is degrading a bit with everyone trying to game it.

Anyway, to validate my assertion they still have another $900M to spend to get to 80-90% parity :-)

I really do think it is going to be easier for Google or MSFT to invade, e.g., the Arabic or French markets for search than for some local company to succeed. We may see a U.S. monopoly on what is increasingly a crucial tool for knowledge workers...

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