Comment Articles

Google's IPO risks another bubble

George Colony CNET News.com

Published: 13 Feb 2004 16:00 GMT

For a reviving tech equities market, Google will be an awful first IPO.

It will all feel very familiar: overexcited investment bankers pumping air into the offering; a gullible, breathless press; cheering venture capitalists led by the Teflon-like Kleiner Perkins Caufield & Byers; and thousands of actual users of the technology that will tee up their broker to get a piece of the "new eBay."

What the world needs now is a calm, ordered, rational, smart equities market in technology -- not overpriced froth. Google at a $6bn (£3.17bn) valuation would be great. Google with a market cap north of $15bn blows in the stench of Bubble II.

It's redolent of Netscape's IPO in 1995, when the company slammed through a $2bn-plus market cap on its first day of trading. But its hold on the browser market quickly succumbed with Microsoft's entry, and Netscape ceased to exist as an independent company in 1999.

Now it's denouement time in the portal market. AOL fades: with no competitive search and no compelling experience, customer losses will accelerate. The big battle will be Google versus Microsoft versus Yahoo.

Microsoft won't have the best technology -- it never does and never will. But it will have the advantage of tying the desktop to MSN and adding a new generation of search. Microsoft is going to persist, in its dogged way, and end up as No. 1.

Yahoo, playing off of its consistent experience and Overture/Inktomi soon-to-be-improved search, will play a strong No. 2 to Microsoft.

Google, if it doesn't swoon over its IPO, will be in position for a long-shot challenge. The company's primary strategy should be a diversification beyond search and the "we've got the best technology" syndrome into a defendable market position.

Google's a great company, with smart people and fantastic technology. But perspective is the order of the day, not irrational exuberance. Google can't survive on search alone.