Uncertain Future

 
 
By John Pallatto  |  Posted 2004-04-30 Print this article Print
 
 
 
 
 
 
 


Google, incorporated in 1998, has rapidly built a highly successful business based on search-engine technology that is efficient enough to let users search more than 4 billion Web pages. It makes its money by selling advertising linked to search results and by letting advertisers purchase premium placements for their Web links.

Google is able to do this profitably because the speed, scope and efficiency of its search algorithms make it far and away the most popular search engine on the Internet.

But despite its success, it will not be easy for Google to justify the estimated $20 billion market valuation that a successful IPO will produce for the company. While the companys growth over the past six years has been remarkable, there is no guarantee that the company can continue to grow and produce profits over the long term.

Google faces a lot of challenges. A swarm of competitors are chasing after it, including its former principal customer, Yahoo Inc., along with LookSmart Ltd., Vivisimo Inc. and Ask Jeeves Inc. This week, the Kartoo Co., a French search-software company, announced the launch of Ujiko.com, which it is pitching yet another alternative to Google.

Read more here about Yahoo dropping Googles Web search results. Google is also facing lawsuits from two companies—American Blind and Wallpaper Factory Inc. and European insurance giant AXA Inc.—claiming that certain keyword searches violate their trademarks.

Click here to read about how Googles keyword search is sparking debate about the use of commercial trademarks. The issue here is whether Googles practice of letting advertisers bid on the use of keywords to get prominent display in search results inherently violates trademarks. If the two companies prevail in the lawsuits, Google might have to deal with an avalanche of such suits or severely curtail its use of any keywords that could be claimed as trademarks.

Click here to read about the latest trademark infringement lawsuit filed against Google. The value of Googles stock to investors will depend on the companys ability to remain on top of the search-technology market. The high-tech industrys history has shown that it is extremely hard for any company to remain on top year after year. Advances in technology have always had a way of quickly knocking companies off the top of the heap.

Before bidding up Googles IPO to outlandish heights, rank-and-file investors should recall what happened just a few short years before. Googles prospects, which seem so euphorically bright today, have to be weighed against its ability to generate investor value for the long term.

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John Pallatto John Pallatto is eWEEK.com's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.
 
 
 
 
 
 
 

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