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Monday, August 16, 2004

$1.35 Billion (So Far)

Sure, things have gotten a bit messy. Playboy interviews have been stapled, along with notes from Larry and Sergey's legal guardians and formal corrections of outdated comments (such as "Google has only about 1,000 employees"), to SEC filings. A big charge (read: loss) is anticipated for next quarter as Google issues more stock to Yahoo to cover the settlement in the patent dispute. Not the clean debut one might have hoped for. New shareholders will have to look forward to working through a huge overhang of stock that youthful millionaires will be only too happy to blow out as soon as possible. But just look at the numbers and try not to be impressed in spite of all that.

On the eve of Google's IPO (GOOG is expected to begin trading as early as Wednesday), its 10-Q filing is available. It shows revenues of $1.35 billion for the first six months of 2004. That's up over 100% from the same period a year ago.

Since folks began speculating on Google's income and on its growth curve, the company has been routinely underestimated. You'll certainly read more newspaper stories about the risks facing the company, or predictions of the growth tailing off, than you will hear reminders that this AdWords phenomenon continues to blow the doors off expectations. Why does Google keep raking it in? The answer's still very simple. Search advertising works, and it's easy to prove as much. Some of Google's recent growth is in international markets. I'm not sure when the pundits are going to predict that tail-off, but given that many of these markets have barely dipped a toe into the water, we're looking at 100% annual growth in some of them for the foreseeable future.

In any case, when even the harshest critics have dampened down their "tail-off" predictions to something like "growth may be as low as 30% by 2009," you know you've done pretty well. For the non-jaded among us, Google's ability to rack up $700 million in revenues in a quarter makes the ol' eyeballs pop out of the ol' head. Prediction: Q4 will make the ol' head spin.

As a non-US person, I can't buy shares in the IPO. Since so much of the hype is so negative right now, though, I'm almost glad of that fact. I'd love to see smart investors pick up some GOOG at bargain-basement prices if it goes through any rough patches in the next 12 months. Sometimes the best way to deal with hype -- be it positive or negative -- is to stick with your convictions. And keep the facts handy.

Posted by Andrew Goodman




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