Four ways Google changed tech IPOs (and the tech world itself)
The technology landscape has changed drastically since Google made its market debut 10 years ago. Google's IPO and its co-founders had a big hand in that evolution.
Ten years ago, Google co-founders Larry Page and Sergey Brin introduced the world to the search engine's now-famous mantra: Don't be evil.
The three-word vow is a promise to "do good things for the world" -- and was introduced in an unusual 4,000-word treatise Page and Brin wrote to would-be investors in their 2004 founders' letter before the initial public offering. The message was clear: Yes, we're joining the businesses on Wall Street, but this is not business as usual.
"Google is not a conventional company. We do not intend to become one," Page wrote in the opening line of the letter, citing billionaire investor Warren Buffett as a source of inspiration. "But the standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google's past success and that we consider most fundamental for its future. Therefore, we have implemented a corporate structure that is designed to protect Google's ability to innovate and retain its most distinctive characteristics."
Tuesday marks a decade since Google went public. Its path has charted the course for the myriad tech companies that have come after it.
The search engine made its debut on the Nasdaq stock exchange, raising $1.2 billion. The amount seems almost paltry compared to Facebook's $16 billion offering in 2012, and the Chinese e-commerce giant Alibaba's forthcoming IPO, expected to fetch about $20 billion.
But the world was a very different place in August 2004. Facebook was only a few months old. Apple was still about three years away from releasing the iPhone. And Google was known for search -- and not much more. (Gmail was still in its infancy, launched in April of that year. Google would buy Keyhole, which would become the basis of Google Maps, two months after its IPO.)
Google's IPO changed all that. The company still rules the search world, but now it's also known for its Android mobile software, online video site YouTube, and ambitious, game-changing projects like driverless cars and Wi-Fi equipped balloons. Projected revenue in 2014 is $67 billion (it was $3.18 billion in 2004), and Google's market capitalization is just shy of $400 billion. The stock, which was priced at $85 at its opening and closed at $100.34 that day, traded at $582.16 end of day on Monday.
Google's influence has grown so vast since then that it's run into criticism over its market might. The company clashed with regulators in the United States and Europe over competition issues, and has been the target of privacy advocates who fear Google's power over users' data. (The "Don't be evil" philosophy has been a favorite go-to for critics to cite while protesting Google's policies.)
While it set the stage for the next 10 years, the IPO didn't go off as smoothly as Page and Brin might have liked. At the last minute, the offering price dropped to $85, from the expected range of $108 to $135. And an interview that Page and Brin gave to Playboy drew ire from the Securities and Exchange Commission, who thought the piece put the company in violation of the commission's IPO rules.
All market debuts are seminal moments for the companies, but Google's IPO caused reverberations that would affect not only tech IPOs from there on out, but the landscape of the entire tech world as well. To get a sense of perspective, CNET chatted with Lise Buyer, founder of the IPO strategist Class V Group. Buyer was Google's director of business optimization until 2006 and part of the team that took the company through its IPO. Buyer said she was the most skeptical team member when Page and Brin came up with "weird" ideas for the IPO, but that in the end, she was a believer.
Here are four ways Google's IPO changed the way tech companies take on an IPO and how they run as public firms. Google wouldn't make any of its executives available for this story, but instead pointed to Page and Brin's letter from the's IPO prospectus.
1. Warren's playbook.
Page and Brin called their message to investors an "Owner's Manual," taking their cue and the name of their letter from Buffett, founder of Berkshire Hathaway, who often wrote essays and letters to his shareholders. Google's version was written mostly by Page.
The practice is more commonplace now. Facebook CEO Mark Zuckerberg used his founders' letter to tell potential investors that "Facebook was not originally created to be a company." When Alibaba filed for its IPO in May, it was more of a surprise that the filing did not include a letter from co-founder Jack Ma.
But things were different in 2004, and reading a manifesto that said the company would do no evil and take a long-term approach "even if we forgo some short term gains" was novel, to say the least. "People howled at how ridiculous the idea was," says Buyer.
2. Going Dutch.
Google took an unorthodox approach to its offering. It rounded up investors using a "Dutch" Internet auction where the IPO price is based on bids by investors, making the stock available to a larger pool of people. The degree of success Google had with the Dutch method is debatable. Buyer admits "it wasn't the perfect deal," but argues it was the right choice for the company at the time.
The IPO didn't set off a trend of Dutch offerings, but was emblematic of one thing. It was Page and Brin's attempt at taking a process that was always done one way, and seeing if it could be done in another, more efficient way, said Buyer. It's the same audacious thinking Google has applied to projects since. An example: Google is trying to cut the inefficiencies out of driving with software-powered cars.
"The process was unusual," says Buyer. "But it was a big old clue to the investors that the company would be unusual."
3. In control.
The company also rewrote the rules for tech founders. It created a corporate structure based on "dual-class" stock, which gives the founders outsize voting power. The structure was uncommon for a tech company at the time, but more common for media companies where there's concern over the business side influencing editorial content. In the letter, Page even names The New York Times Company as having a similar structure.
Page and Brin wanted the same principle to apply to Google: not having to worry about investors meddling if they made decisions that favored long-term plans over short-term profits.
Other high-profile tech companies have followed suit. Facebook and LinkedIn -- which went public in May 2011 -- both use dual-class stock.
4. Android makers, moon shot takers.
The IPO paved the way for some of Google's most important projects beyond search. Yes, it brought them cash. Lots of cash. But as important, Page and Brin, feeling less pressure from investors partly due to the dual-class, could devote their time on efforts and experiments that took Google into areas outside of the cash cow search business.
Almost exactly a year after the IPO, Google acquired mobile software maker Android, which now powers the majority of the world's smartphones. "I felt guilty about working on Android when it was starting. It was a little startup we bought," Page said in March. "It wasn't really what we were working on."
"That was stupid, he said. "That was the future." Google has since parleyed Android into the most popular mobile operating system in the world with more than 80 percent market share, according to research firm IDC.
The same idea goes for the company's so-called "moon shots," audacious attempts at technological leaps like driverless cars or the connected headset Glass. "You don't want the company to not have the ability to not make a big investment that might not pay off for awhile," said Buyer.
As for whether Google has lived up to its pledge to don't do evil, that depends on whom you ask. "The idea was that we don't quite know what evil is, but if we have a rule that says 'don't be evil,' then employees can say, I think that's evil," Eric Schmidt, Google's chairman, told NPR last May.
For the founders though, one thing about the idea was simple: Change the world in the best way possible. There's no denying they've delivered change.