Google Announces Secondary Public Offering: How Much is Google Worth? Why do they Need More Money?

Is Google...

Baidu IPO Hot

Having limited finacial assets, I have never shorted a stock, but the Chinese search engine Baidu (ticker: BIDU) seems a bit pricey at $120 a share, a 350% increase from the IPO price.

There are rumours of Google wanting to buy them, but I doubt they want to spend billions of dollars buying them and end up needing to worry about the issues of music sharing and the like, especially while Google wants to court some of those music labels to spend on search.

If I see internet stocks go up based on hits or pageviews I will make sure I am ready to sell what little stock I have. ;)

Financial News...

Stock Market & Search Stocks: Goog, Yhoo, Askj, Iaci

Hedge Funds:
Hedge fund investors have too much money chassing too few good deals:

With surging investor demand for hedge funds, buyout funds and venture capital firms, some funds are slamming the door to new investors, industry experts said at a New York conference on Wednesday. Some complain the industry has gotten too crowded to generate the double-digit returns they seek.

Summer is Slow for Search:
Earnings season is coming. Search is normally a bit slower in the Summer since people spend more time outside enjoying fun weather.

Google is nearing $300 again, and Google option prices are predicting a move:

"Options are already pricing in a plus or minus 14 percent move for Google's earnings, making outright option buying expensive," Goldman Sachs strategists Maria Grant and John Marshall wrote in their latest Weekly Options Watch commentary.

Goldman Sachs Internet analyst Anthony Noto believes investors should own Google and expects Google to post strong results on July 21. Noto said he prefers to wait until after the quarter to reassess attractive entry points, given the recent rally in the stock.

Yahoo! has gained nearly $3 a share in the last 5 days. Legg Mason (not exactly sure why but they one of my favorite analyst firms) initiated coverage on Yhoo at buy. Yahoo! recently started adding crawled web listings to their Hot Jobs job search.

InterActive Corp is supposed to spin off Expedia and close their Ask Jeeves purchase this month. Although I think they are under contract with Google until 2007 there are rumours that Ask Jeeves will be launching their own internal pay per click network. I can't see them doing it anytime soon though.

Andy Beal, author of SearchEngineLowdown, recently announced on his blog that he is quiting working for Websourced, which is the largest public SEO company (trading on AMEX as THK). He was a senior VP of marketing and prettymuch the face of as far as I know, so that is a huge blow to them.

Their stock price has been hovering in the $2 to $3 range recently. About a month ago they gained about $25 million in market capitalization which coincided with getting a $15 million loan. Since then the stock has dropped back to $2.05 a share, and currently their market capitalization sits at about 68 million dollars.

I believe WebSourced acquires many of their clients through leads from inqueries at search conferences, such as JupiterMedia's Search Engine Strategies conference (which is highly recommend and being held in San Jose from August 8TH to 11TH). KeywordRanking is sponsoring the San Jose event, but it will be interesting to see what happens with Andy. He is a popular speaker on the conference scene.

Recently WebSourced brought on Heather Lloyd-Martin and Mike Grehan (who is arguably one of the top trusted names in search), but in the last month they have lost Andy Beal and Jason Dowdell. Andy posted his reasons for leaving:

I wanted my readers to be the first to know that I have decided to resign my position at WebSourced, Inc. The five years that I have spent, helping the company grow from a start-up to the world’s largest search marketing company, have been some of the most rewarding, exciting and satisfying of my career.

In writing this letter, I hope to avoid any confusion as to why I decided to resign as VP of Marketing. This decision is not one that comes lightly. It is clear that my vision for the company’s future does not match-up with its current course. These philosophical differences have led me to conclude that WebSourced’s current path does not align with my own beliefs.

But you have to wonder the exact reason and how soon others may follow.

To run a successful search firm you only need one or two names and a small group of talented programmers and people who truely understand how the web works.

From my knowledge of the industry and how quickly stuff changes I can't fathom creating a business model that provided effective results and scaling it out to hundreds of employees and thousands of clients.

WebSourced's current business model has a ton of employees, and a small change in client acquisition could likely cost many jobs. It will be interesting to see how the stock market reacts to this news.

Internet Archive Sued:
the Internet Archive caches a history of the web. Recently the New York Times reported the Internet Archive is getting sued. If they are forced to pay any sort of fine that could have huge implications for the search business in general. gets ready for IPO

Shak says Chinese search engine Baidu is getting ready to go public.

Google owns 4% and may want the rest of the company, although the WebmasterWorld thread points to Baidu in a rather negative light. Interesting to get a glimpse of how search users around the globe think of different competing services. At the end of the day it is all about money though. Does Baidu have technology and marketshare worth far more than their price?

The WebmasterWorld thread also points at this article, which states:

According to sources, Eric Schmidt, CEO of Google who just concluded his visit to China, said recently Google would enter China's market this year, and how it enters the market would depend on its talks with Baidu.

There are two options for Google, said Schmidt. One is that Google holds shares of Baidu and the other is that both sides deepen cooperation, and Google would hold more Baidu's stakes or even set up a joint venture. This may lead to Google's takeover of Baidu, turning Baidu into its subsidiary in China.

It is not uncommon for firms to go public to raise buyout bids. did it not too long ago before being bought out by eBay. Incidentally Paypal is opening up shop in China soon:

PayPal China will offer payments in the local currency through 15 Chinese banks and more than 20 different debit cards. The company also will offer buyer protection on EachNet, an e-commerce firm acquired by eBay in 2002.

Barry Dillar's IAC Sells Stake in Vivendi Universal for 3.4 Billion

Barry Dillar's IAC Sells Stake in Vivendi Universal for 3.4 Billion. TheStreet reports:

"The transaction results in after tax proceeds to IAC that, by any measure, exceed the company's publicly stated valuation of the VUE securities," Diller said in a statement. "After paying applicable taxes on the transaction, IAC will have netted approximately $1 billion in cash, repurchased 56.6 million IAC shares, and obtained approximately $100 million in advertising across NBC-Universal's various networks over the next three years."

Well that ought to pay for Ask. IACI is up over 5% on the day so far.

In other business news, I think I have seen about 100 articles stating that Google is the #1 media stock, slightly larger than Time Warner, which has recently dropped the walled garden approach hoping to increase ad dollars.

Google Advertising Local Search Offline, New Yahoo! Search Patent

Spam Tools:
Ploppy gets evil

Paul Graham:
I think I link to every article he writes. his latest: Hiring is Obsolete, which says if you are the young & motivated type you can let the market determine your value by starting a startup instead of going to work for mega corp for lower than market value wages.

Free Book:
JenSense spots a new AdSense advertisement video which offers a free copy of Building Your Business with Google for Dummies.

Kansas City:
here I come. says Google Local ads, they are now advertising on radio and in the news paper.

Stock Market:

Yahoo! Adds Trends to Concept Analysis:
Barry notes a Cre8asite thread about a new Yahoo! patent. I have not read it yet, but Bill states:

Amongst other things, the patent application begins to explain how MyYahoo! information might be used to help the search engine create search results.

InfoSearch Media Reports Quarterly Results

From the release:

InfoSearch recently introduced a content licensing model that allows its clients to license the content, generally for a one year period, with renewal rights at the conclusion of the license term. Further, InfoSearch is gradually transitioning the current traffic model through its network from a fixed CPC (cost per click) rate to a bidded CPC rate. After these new initiatives are integrated into the existing business model, the Company expects that they will provide continued revenue growth over the longer term.

I think it will be fun to watch to see what they can make of it.

They have over $4 million in the bank and are cashflow positive, but:

  • business models like Constant Content may squeeze out the marketability of the content leasing business model

  • making their ArticleInsider network an open auction goes against their primary selling point of a low fixed cost. I can't imagine current customers will be pleased with the transition.

    After they do make the transition they become a second (or third) tier PPC service. Looking at how some of those search stocks are doing in the market with lowering bid prices and marketshare makes you wonder how this helps them.

  • after you reach a point in market saturation there are some topics which are not as profitable to create content for. what then?
  • I think creating services or multiple compelling channels that keep consumers wanting to come back is a far better longterm model than profiting from static content.
    • the direct channels get direct traffic and search traffic

    • the direct channels are more likely to build natural linkage data
    • the direct channels, which frequently update, give people an excuse to come back and view more content & ads

It is interesting watching InfoSearch, because I think their business models & being a public company show the constricting forces placed on most all SEO business models.

Overture VS FindWhat - Mistrial

Huge news for the beaten down FWHT stock, which was recently down to 4.07 from it's 52 week high of 23.94, gained about 10% on the day.

A judge declared a mistrial in a patent infringement lawsuit between Yahoo Inc. and Inc. after a jury failed to reach a decision on all of the issues in the case, said on Thursday.

In a note to clients on Wednesday, RBC Capital Markets analyst Jordan Rohan said the most likely outcome of the case would be a modest out-of-court settlement. He estimated that FindWhat could settle the case for around $7 million to $8 million.

Rohan said some investors had worried that a ruling against FindWhat in the case could wipe out the majority of the company's $50 million cash balance.

Most of the second tier search stocks are fading into irrelevance. Maybe this will help FWHT hang on a little longer. Also noted eariler today: noted the judge has yet to rule on the issue of whether the patent is unenforceable because of inequitable conduct committed by Overture. A hearing on the inequitable conduct issue and other motions that could impact the ultimate outcome of the case is currently scheduled for June 24, 2005.