Will Microsoft go ahead with its plans to buy Google?
Colin Selfridge is worried that a deal could erode the ethos that
has made the search engine so popular, and at worst lead to another
dotcom bust.
Microsoft's statement that it might be interested in either
buying or merging with Google follows in the wake of the latter's
announcement that it is considering floating on the stock
market.
Microsoft has an established track record of either bidding for a
successful company within a particular market, or for developing a
rival version of a product with a view to carving out a significant
market share.
Google has meanwhile caused some consternation within the financial
community through its adoption of a "Dutch style" float, whereby
bankers are by-passed and stocks are offered directly to the
public.
Established in the late 1990s by two Stanford University students,
at the end of its first year Google's turnover was £600,000. Two
years later turnover was £14.7m. Today, its turnover is in the
region of £1.2bn and it is valued at £6bn to £9bn.
As it is not yet publicly listed, commentators can only speculate
about Google's profitability, with estimates ranging from £30m to
£177m. Google currently boasts about 67 million users worldwide and
performs about 150 million searches a day.
At its launch, Google could perform a basic search in about four
seconds. It can now scan three billion web pages in about 0.2
seconds. The reason Google has been so successful, and where it
differs from competing search engines, is that rather than ranking
results according to payment, they are ranked according to
relevance.
Google generates revenue from two main sources: advertising revenue
and by licensing its search technology to third parties, including
search engines such as Yahoo. Just as its results are ranked
according to relevance, so its on-screen adverts are linked to web
searches, making them more relevant than adverts on competing
search engines.
Would Google's intuitive, rank-based search engine alter in the
wake of a successful bid from Microsoft? Might Microsoft be tempted
to attach a higher priority to its own products and adverts than
its competitors, thereby pushing them up the ranks in the search
results? Would a rebranded Google (Microogle?) become mired in a
multitude of links to other Microsoft products and services?
Cynics and Microsoft's many critics might not hesitate to answer in
the affirmative, but were Microsoft to do so, it would be
threatening the one feature that has made Google a success.
An aspect of Google that may appeal to Microsoft is that, as the
former continually develops its product and launches offshoots -
such as price comparison engine Froogle - it remains a search
engine. In contrast, Microsoft offers a diverse range of products
requiring significant investment in research and development over a
range of sectors.
But as Microsoft's interest in Google raises various anti-trust
issues, it seems that any bid will be subject to scrutiny by the US
Federal Trade Commission.
Meanwhile, given the degree of uncertainty about Google's
profitability, the stock exchange and the IT industry have already
expressed concern that any deal between Microsoft and Google might
not so much fuel a new IT or dotcom boom, but lead instead to a new
dotcom bust.
Could we be set to return to the mid to late 1990s, when internet
companies were grossly overvalued as a consequence of the
popularity of their shares? Certainly, the memory of many
financiers and investors is short, and history has a tendency of
repeating itself.
What do you think?
Would you approve of Microsoft buying Google?
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Colin Selfridge is senior IT manager at French
Duncan chartered accountants