Nik Cubrilovic

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The Google IPO Skeptics




The market cap of Google today is $196 Billion. The company has grown to become one of the largest and most influential technology companies of all time. It is difficult to imagine, but there was a time where many were skeptical of Google and its potential to be successful. In August of 2004, in the leadup to the Google IPO, the New York Times published an article titled: “Loving Google but not its public offering”.

The summary of the story is that Silicon Valley was sceptical about Google, and a number of industry experts were cited as sources of the scepticism. From the article:

“those who bought the shares in the auction or in the early days of trading were likely to lose money” — Mitch Kapor

“I’m not buying,” – Woz

“I wouldn’t be buying Google stock, and I don’t know anyone who would” — Jerry Kaplan

Mr. Kaplan said he had warned his mother not to buy Google stock.

John Gage, director of the science office at Sun Microsystems, said he intended to place a bid for several shares, for sentimental reasons.

Far worse for the company would be if the bear market forced the company to withdraw its stock offering altogether.

A single source supportive of the company, Randy Komisar of KPCB (A Google investor). At the time Google was well entrenched as the search leader and was profitable. The problem was that nobody believed that search would ever become a viable long-term business.

In its early days, Google obfuscated its revenue figures to prevent competitors from noticing the market and competing with it in search (namely Microsoft). It seems that it did such a good job that they convinced almost everybody that there is no business in search, even as late as its IPO.

This all seems so obvious today, but it was not so at the time. New and profitable markets are often hard to explain and see, and even harder to believe in. If they weren’t, then building new billion-dollar opportunities would be easy and everybody would be doing it. But almost every new large market opportunity in technology is met with skepticism.

In five or ten years time the opinions of these experts will be forgotten again – nobody will remember the criticism from today because multi-billion dollar Facebook, Twitter, Zynga, et al will seem so obvious that nobody could possibly have ever doubted it.