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INSIGHT
Google Goes Public
Aired July 14, 2004 - 23:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
JONATHAN MANN, CNN HOST (voice-over): Searching for answers on Google. A quirky California company has transformed the way the world finds things out. What will its laidback managers do once they become billionaires and outside investors buy their way in?
SERGEY BRING, GOOGLE CO-FOUNDER: I don't measure my success in sort of dollar terms. And, you know, I have a pretty modest lifestyle, so for any reasonable set of assumptions, I'll be plenty comfortable.
(END VIDEO CLIP)
MANN: Hello and welcome.
The name itself says a lot. It's simple, a bit silly and hardly high tech, but with a slightly different spelling Google literally means 10 to the 100th power, the kind of number only specialists tend to know. The company's founders chose it for their search engine because, as numbers go, it is a very, very big one.
Easy to use, enormous and eager to grow even more, Google is a phenomenon, a billion dollar company that has come to dominate a now commonplace task that few people had even heard of a decade a go: searching the Internet. Millions of people use Google daily and now that it plans to go public, there is no telling how many people will want to own it.
On our program today, Google.
Jonathan Rugman has this look.
(BEGIN VIDEOTAPE)
JONATHAN RUGMAN, ITV CORRESPONDENT (voice-over): Nestled in the hills just south of San Francisco is the headquarters of a multi-billion dollar business phenomenon. In the lobby, you're not asked to pull up a chair but can sit on a bouncy ball instead; pet dogs waddle in and out of conference rooms; babies can be brought to work; and everybody looks happy all the time.
A rainbow colored fun factor known as the Google-plex on a quest for global domination.
UNIDENTIFIED MALE: I think almost anybody who deals with information probably uses Google at some point.
RUGMAN: Our Silicon Valley fairytale begins here, at Stanford University, a leader in the field of computer science.
It was here six years ago that two students, Sergey Brin and Larry Page devised a new Internet search engine. Type in the box what you're looking for an Google scans over 4 billion Web pages for matching results.
Google chooses these results through a mix of looking for the closest word match and judging a page's relevance by counting how many other pages link to in, and none of Google's rivals had done that.
UNIDENTIFIED MALE: They really focused 100 percent on providing good quality search. Other search companies had diverted off into becoming portals with a broad range of services, including e-mail and sports and news and other features, whereas they focus on just providing what you really wanted as quickly as possible.
RUGMAN: Brin and Page abandoned their Ph.D.'s building Google's first server in this suburban garage. The friend who gave them the space joined the company and is now poised to become a multi-millionaire.
As is David Sheraton (ph), who stumped up his own cash to help the two college dropouts.
DAVID SHERATON (ph), GOOGLE INVESTOR: I like the service so much that I just wanted to have it around, and I really didn't have a clue how they would make money, but I figured something that valuable had to be valuable.
RUGMAN: In the coastal resort of Santa Cruz, Internet surfers wouldn't use anything else. In fact, all over the world, 140,000 Google searches a minute, profits from advertising estimated at $100 million a year.
Internet cafes like this one, Googling away.
(on camera): What do you use it for?
UNIDENTIFIED MALE: Well, if I have any kind of question whatsoever, regardless of what subject it's related to, I'll start by typing that question or some keywords from that question into Google and see where that takes me.
RUGMAN: So, has it changed your life?
UNIDENTIFIED MALE: As much as anything computer related can change your life.
RUGMAN (voice-over): And Google has entered the language as Xerox and Hoover did before it.
UNIDENTIFIED FEMALE: The person that I'm seeing, before we went on our first date, I Googled him, just because I didn't know him very well and wanted to, yeah, sort of see if he was a criminal.
RUGMAN: And demand for what Google does has swollen its workforce to over 1,000 strong, the pick of the crop of America's geeks and nerds. In the company canteen, the food is free and supplied by the caterer who used to cook for the rock group The Grateful Dead.
(on camera): Yes, this is a very hip place to be, and almost nobody looks over the age of 30.
(voice-over): We'd been scheduled to spend half an hour with Sergey Brin, Google's cofounder, but Mr. Brin is apparently so busy changing the world, he told us he was pressed for time.
BRIN: Five minutes or so?
RUGMAN (on camera): Can you give us a bit more?
BRIN: Not really, sorry.
RUGMAN (voice-over): Along with Larry Page, Brin is a magazine cover boy with an estimated net worth of $1 billion, all before his 31st birthday.
(on camera): What do you most like about your creation, in terms of what you're most proud of about it?
BRIN: The thing I like most about it is that it serves a very important need to a huge number of people worldwide, which is information. And I think it also makes -- it democratizes information, so it's not just the haves and have-nots who have access to things.
Google brings access to most of the world's information to almost all the world's people who have any kind of Internet access.
RUGMAN (voice-over): And that access has produced remarkable results. A teenager in Los Angeles typed his name into Google and found himself listed on a missing person's website in Canada. Abducted by his mother as a child, he's now preparing to see his father for the first time in 14 years.
Then there are the so-called ego surfers, Googling themselves to see what's written about them. Type in "miserable failure" and turn up the Web site for the Bush White House. That's because thousands of naughty nerds have manipulated the system, setting up Web sites containing the words "miserable failure" and then linking those Web sites to the presidents. And there are even those who like Google's bedside manner when they could be about to die.
UNIDENTIFIED MALE: We've had people mail in saying, well, you know, their chest hurt, they searched for "heart attack symptoms" on Google, they got their result, they went to the hospital and, you know, just in the nick of time, and they survived due to the operation that they got.
RUGMAN: Since the middle ages, we've relied on books, but the Google age is changing that. University libraries reporting a 20 percent drop in book use, according to one study. Over 70 percent of U.S. high school students now said to use Google as their primary research tool. Even though the Internet is full of propaganda and information which is wrong or out of date.
UNIDENTIFIED MALE: It's very ephemeral. The average life of a Web page is only 100 days. So in just three months, on average, half the Web pages have either changed or disappeared. It's very different from the library of times gone by.
RUGMAN (on camera): Why does that matter?
UNIDENTIFIED MALE: If we're really bringing people up such that they're using the Internet as their information resource, if you cant count on it, either the content in it or that it's there over time, then you're building a civilization on shifting sand.
BRIN: I don't think it's a substitute. I think it lets people research much more effectively and in fact many people sit in the university libraries at computer terminals using Google to research something.
RUGMAN (voice-over): But Mr. Brin doesn't make money through student search results but through the ads which appear next door. Every time users click on an ad, the advertiser pays Google. And if it's a glorified Yellow Pages, you can't help wondering whether industry valuations of up to $20 billion are just the latest dot-com absurdity.
BRIN: You know, maybe $1 billion is ridiculous. Maybe $200 billion isn't. I -- we try to focus our company on creating a great user experience.
I don't measure my success in sort of dollar terms. And, you know, I have a pretty modest lifestyle, so for any reasonable set of assumptions, I'll be plenty comfortable.
RUGMAN (on camera): What car do you drive?
BRIN: I have a $20,000 Toyota.
RUGMAN (voice-over): If Google does float on the stock exchange, Mr. Brin wants to stay true to his California dream by keeping it one of the simplest and yet most technically advanced Web sites ever built. Yet there are predators on the horizon.
Yahoo investing over $1 billion, jealous that its Google rather than Yahoo which has become a verb. And Microsoft, planning a new search engine after Bill Gates reportedly tried to buy Google for $10 billion and failed.
Why Mr. Brin won't sell reveals a lot about him.
BRIN: The business looks really good in terms of revenue profit and so forth, so we don't feel like us selling off would make sense right now, and also I don't think it would be a good thing for the world.
RUGMAN: Call it geeky idealism, call it the arrogance of youth, yet Google's creator really does see his search engine as a force for global good. His big challenge now: to keep the unique business culture of babies at play, of a grand piano in the foyer, of spaniels on patrol, and yet to grow as a corporation owned by banks and shareholders whose only research query is "where's the money."
(END VIDEOTAPE)
MANN: Jonathan Rugman.
We take a break. When we come back, Google goes public.
Stay with us.
(COMMERCIAL BREAK)
MANN: The New York Stock Exchange welcomes companies that go public all the time. You see their executives on the balcony over the trading floor ringing the opening or closing bell. But you won't see the guys from Google. Both NASDAQ and the NYSE reportedly courted the company aggressively, hoping to get its initial public offering. This week, NASDAQ won out. One headline called it a blow to the big board.
Welcome back.
The New York Stock Exchange wanted it. Underwriters wanted it. Everybody wants it. Google has been so confident of investors' appetite for its shares that it's selling them in a very unusual way and imposed the kind of conditions most companies can only dream of. It's even warning people that they may immediately lose money.
Joining us now to talk about what's ahead is Daniel Roth, senior editor at "Fortune" magazine.
Thanks so much for being with us.
DANIEL ROTH, "FORTUNE": Great to be here.
MANN: How different is this IPO from the run of the mill way that companies go public?
ROTH: Well, you're looking at an auction process here. It's very different.
During the dot-com boom, the way the companies went public was they took their shares out of the low price, they looked for that opening explosion. The stocks would double, triple, and institutional investors and Wall Street made a lot of money on it, and the companies that went public left a lot on the table.
Google is trying to avoid that. They're doing an auction process, meaning everyone bids for the price of a share they're willing to buy, and it means that Google gets to keep as much money as possible and investors get in at the price they think is reasonable.
MANN: How much are the founders going to make, do you think?
ROTH: If the company is valued at about $20 to $25 billion, we're looking at about -- the founders should be worth anywhere from $5 to $6 billion each after the IPO.
MANN: That is a lot of money and --
ROTH: That's a lot of money.
MANN: -- in return for that kind of money -- in return for a lot less money -- people who create companies, when they sell their companies, sell their control of the companies. The two tend to go with each other. In Google's case, that's not quite happening, is it?
ROTH: Right. Larry and Sergey have done a great job in keeping control of the company. What they have done is setup two classes of shares of stock, class A and class B.
Class A are what investors can buy. Class B is what the insiders own. Larry and Sergey together own 33 percent of the class B shares, which have 10 times the voting rights of the class A shares. So these guys are going to have control of the company no matter how much they sell.
MANN: They are going to make billions of dollars and they're going to keep control of the company. It looks pretty clever from the outside.
ROTH: It's very clever and yet people still want to get in. Typically, when you have two classes of shares, it can mean for investors a reason not to get in. They don't have as much say in a company as they would normally. But people love Google. They love the name. They love the business model, and they want to get in for whatever price they can.
MANN: People loved a lot of other high tech companies and they lost a lot of money because of their passion. Is that going to happen here, do you think?
ROTH: I wish I knew. Google looks like -- one of the ideas behind the auction process is that Google will, or should be, fairly valued when it goes public. That means people are going to pay what they think it's worth instead of buying it hoping to flip it the next day. Now, that's the idea. There will still be plenty of people that are going to try to flip it.
If it works out the way that they think it will with the auction process, then there shouldn't be a massive explosion or implosion of the stock later. But, you know what, we all have to wait and see. We all called it wrong during the dot-com boom, so I'm not willing to go out on a limb right now and say anything.
MANN: How does all of the hoopla and excitement about Google compare with the atmosphere elsewhere in Silicon Valley? There's a lot of people who have lost a lot of money, a lot of people who have lost their jobs. It seems strange. Is it disruptive? Are people angry about it?
ROTH: No, people are pretty excited about it. You've got to remember that if Google -- if the IPO of Google goes well, that could open the door for a lot of other IPOs. So it's not a question of some guys getting rich and everyone else being poor. It's a question of some guys getting rich and paving the way for others to get rich also.
Silicon Valley has seen a lot of growth in the last year. People are starting to feel good again. The roads are starting to clog up with traffic; that's a good sign. That means business is being done. A Google IPO could mean that the good times might be back.
MANN: Okay. So when does it start? When is the IPO actually going to happen?
ROTH: We're still waiting to see the exact date right now. They're trying to work out the auction process. There are 30 brokerage houses that have to coordinate with each other and with Google to make sure that people can do all of their bidding and that Google can keep track of who is bidding what.
Once that's all done, then Google is expected to announce the date of the IPO.
MANN: A very big deal.
ROTH: Yes.
MANN: Daniel Roth of "Fortune" magazine, thanks so much for this.
ROTH: Thank you.
MANN: We take another break, and then when we come back, Google's place in our culture and in our history.
Stay with us.
(COMMERCIAL BREAK)
MANN: It may seem bizarre, even blasphemous, but some people compare Google to God. Columnist and author Thomas Friedman gave the two a certain parity by quoting a computer use who said that Google knows everything, goes everywhere, and is available to everyone in need.
Welcome back.
That comparison aside, how big, how important is Google getting to the world's economy, to its culture?
Joining me now to talk about that is Sir Harold Evans, whose forthcoming book profiles some of the great innovations of U.S. history; "They Made America."
Thanks so much for being with.
Where do you put Google in all the innovations and inventions that you've looked at over the years?
SIR. HAROLD EVANS, AUTHOR: Well, it's terribly important. They share many of the characteristics of some of the great inventors like Colt (ph) and Ensor (ph) and all the great famous people, the Wright Brothers, in persevering. And I think it is going to make -- has already made a tremendous impact on American society.
I used Google myself when I was writing "They Made America," and it's fantastically useful. Just one caution: you really have to be very careful about many of the points of information that you get through Google. It's not their fault, but there are many Web sites that are wrong. But I think Google is a tremendous tool and I love the way they're launching this stock.
MANN: Now, the Wright Brothers receive their acclaim because they invented the first working airplane. Google was not the working search engine. Are we just using it generically to applaud a technology that was coming along anyway?
EVANS: Well, the technology really needed Google to come along and make it more precise, and one of the great things I hope from this innovation, when they launch their stock, is that Google will be able to make the search engine more and more refined, so that you can get more and more particular with it.
You know, you get millions of answers and you really want to know the two or three you're after.
But Google shares many characteristics with innovations in American history and I hope it will share this one: keep innovating. As soon as innovators stop innovating, it's over.
MANN: You have been in the newspaper business. You have been in the magazine business. You have been in the book publishing business. So let me ask you: how do you think Google is going to change the way we use and communicate information over the long run?
EVANS: Well, I think Google is -- it's two ways for Google. One is, you can get raw information off it about hotels, travels, places, your daughter's homework, whatever it may be. But you can also get signposts to where original documents are stored.
For instance, if you go on the Google Web site and type in Thomas Edison, you can be led to Rutgers University, and if you're really interested, you can go to Rutgers and look at the original documents.
So I think Google is the world's great signpost to a new and exciting world, provided we use it with discrimination and intelligence.
MANN: Why would anyone, to use your example, even go to Rutgers? Is the library at Rutgers essentially going to be an anachronism now?
EVANS: Oh, no. I don't think so. I think these original source libraries are still very important.
Don't forget, at the end of te day electronic information, even when you print it out, first of all needs to be checked and secondly, there are many things you cant manipulate with electronic information. Take images, for instance.
And I wanted, when I was writing "They Made America" to look at the handwriting of Otis (ph). No, yes, you can get some of that, and eventually you can get all of it, but we will still need these original sources. In fact, Google depends on the libraries as well as on the clever people and the nutcases who file Web pages.
MANN: Well, we're certainly going to need the world's great libraries and any country is going to need its leading libraries. Is the corner library now redundant?
EVANS: I don't think it's redundant. I think it may have to define itself more particularly. Libraries may have to become very specialized.
You know, you'll still get your grandmother or mother going and borrowing fiction from the library, but I think the great libraries, like the Library of Congress, are always going to be of surpassing value, and I think Google is not an enemy of the library system, though as you reported earlier in the program, it's led to some diminution in library access.
I still think people also always want to open a book. I was in publishing, so I speak with a certain vested interest, I suppose, but I know that when I was doing the research for my book, and I used Google a lot, I nonetheless wanted to get hold of the memoir of this person, sit down and read it and not sit at the computer all the time.
MANN: I'm curious about something. One of the astounding things about Google is that people cannot program their own VCRs properly. People get angry at technology. They can't use. And Google, with its happy name and its bright graphics, seems terribly friendly to us.
EVANS: Oh, it's Google --
MANN: Is it ominous, though? Is it getting too powerful?
EVANS: I think, you know, Google has had this problem about referencing anti-Jewish sites and things like that, and I think they really have to think very carefully about the use of propaganda. It's become quite a problem for them.
But I find Google very friend. And as you say, completely easy of access. I mean, it is a very joyful site. It's not cluttered with appalling graphics and ads. The atmosphere within the company, as you've demonstrated, is jolly, and I think both as an instrument of technology and as a way of managing companies in the future, Google is a very good signpost for the future.
MANN: A quick last question for you. What are the chances that that prediction really isn't going to come true because some other company, some other search engine, whether powered by one of the giants or an upstart, is going to supplant it in the next year or two?
EVANS: You're quite right. Google has to be aware of Bill Gates, whose in the undergrowth with billions of dollars, Yahoo!, and that's why Google has to keep innovating, not simply adding services, but refining the search.
For instance, when I typed "Walt Disney" and I got 2.5 million entries, and I wanted to go to a particular point. It took a little longer. In the end, I got what I wanted. But Google has to keep on innovating. Innovate or die.
MANN: On that note, Sir Harold Evans, author most recently of the forth coming "They Made America." Thanks so much for this.
EVANS: Thanks you. Pleasure.
MANN: That's INSIGHT for this day. I'm Jonathan Mann. The news continues.
END
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