Recent Comment
Spotlight
Recent Comments
- gaurav: " I am seriously impressed with your knowl ..." [go]
- Ray P.: " Another Me Too! Did what most ..." [go]
- bill: " It still has to be good search. I tried ..." [go]
- nmw: " Please connect these dots: 1. CBS + CNe ..." [go]
- nmw: " AFAIK, Google's focus is on being a prof ..." [go]
- John Battelle: " @Sam: You have a point, but I worry, ALO ..." [go]
- John Battelle: " I am not sure this is only a gimmick. Mo ..." [go]
- Michael Cohn: " No matter who owns the ad server in ques ..." [go]
- stone: " It's a terrible idea, widely criticized ..." [go]
- Adam: " Ok, I've waited for headlines, but all I ..." [go]
- Sam: " See, this guy made some derogatory and v ..." [go]
- Polyester Kabin: " eyvallah saolasın eline sağlık : ) ..." [go]
- John Battelle: " Thanks Sean, good idea. We are pretty mu ..." [go]
- Sean Ammirati: " John, I attended your last event in San ..." [go]
- BuyRosevillePottery.com: " You should DEFINITELY complain. Even if ..." [go]
- JG: " Air travel in the US is starting to f ..." [go]
PERFECT FOR THAT PERSON WITH EVERYTHING
Order 'The Search'
Yup, it makes the perfect gift for that officemate or colleague who you thought had everything....including you! If you order here, I promise to sign it, assuming we can figure out the shipping...
You can also buy the audio version here.
Check my book page for more info.
Blogger's Rights
Top Posts
- The Database of Intentions (or how this all got started)
- From Pull to Point(or the first post where I riff on the "Point-To Economy")
- Google As Builder (or the point at which Google stopped being simply a search engine)
- On Google v. Yahoo
- TV and Search Merge
- On Sell Side Advertising
- Battelle Gets Searchstreams
- Search and Immortality
- Toward the Endemic (on endemic advertising)
More coming soon...
Active Topics
- 26 comments: Twitter. Oh God. (04.30)
- 17 comments: Can Yahoo Get the Search Monkey Off Its Back? (05.15)
- 16 comments: The Future of Search Series (05.08)
- 16 comments: The Music In Magazines (05.07)
- 15 comments: Google. Does. Not Market. Except When It Does. (05.15)
Monthly Archives
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- June 2006
- May 2006
- April 2006
- March 2006
- February 2006
- January 2006
- December 2005
- November 2005
- October 2005
- September 2005
- August 2005
- July 2005
- June 2005
- May 2005
- April 2005
- March 2005
- February 2005
- January 2005
- December 2004
- November 2004
- October 2004
- September 2004
- August 2004
- July 2004
- June 2004
- May 2004
- April 2004
- March 2004
- February 2004
- January 2004
- December 2003
- November 2003
- October 2003
About John Battelle
Searchblog Newsletter
Enter email to subscribe to Searchblog's newsletter:
Calendar
| Su | Mo | Tu | We | Th | Fr | Sa |
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | ||||
| 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| 11 | 12 | 13 | 14 | 15 | 16 | 17 |
| 18 | 19 | 20 | 21 | 22 | 23 | 24 |
| 25 | 26 | 27 | 28 | 29 | 30 | 31 |
Syndicate
Powered by
December 18, 2005 10:31 AM
With AOL Deal, Google May Get to Go Public Again
Consider: AOL and Yahoo made hay when Google went public. Both owned substantial stakes in Google due to earlier traffic deals, and both cashed out major paydays after GOOG's IPO.
Consider also: The success of Ask Jeeves, from the time it tied its revenue fortunes to Google at around $5 a share (July 2002) to the point at which IAC purchased them at nearly six times that. Google did not own a piece of Ask, but given that Ask's fortunes rose as soon as it did a deal with Google, I bet it wished it has asked for some Ask back in 2002...
So now consider this: Google is not going to make the same mistake. Why invest $1 billion in AOL? Well, should AOL go public, Google stands to profit - a lot. The company knows that by guaranteeing its business to AOL for the foreseeable future, it has in essence guaranteed AOL's bottom line, providing a healthy earnings forecast for AOL and Wall St., should Time Warner decide to spin its erstwhile child back out as an independent public company.
Will AOL be taken public? My conversations with AOL execs lead me to believe the answer is yes, as long as the numbers look good. This Google deal takes care of that....and why would Google invest in a subsidiary of Time Warner, unless they were promised some kind of liquidity event?
Consider: The strike price for Googe's investment is $20 billion. Google owns 5% of that, or $1 billion. So let's do the math (again, watch out here, check my figures...). Google is on track to do more than $6 billion in high growth revenues this year, and it has a market cap of $130 billion. AOL will have far more revenue this year (it did $2 billion this past quarter and more than $8.5 billion last year), but due to the subscription/access business, it is not growing nearly as quickly. But a market cap of $20 billion? On revenues of more than $8 billion? That's less than 3x revenues!
If AOL goes public and is seen by by Wall Street and others as the equivalent of a cheap ticket to Google revenue, it may well pop into Yahoo like valuations - to $50 or 60 billion in market cap or more. If that happens, Google's makes a cool $2 billion on its 5% stake - close to what it made when it first went public. And this time, they don't even have to do a road show....
- Posted by John Battelle on December 18, 2005 10:31 AM
TrackBack
Listed below are links to weblogs that reference With AOL Deal, Google May Get to Go Public Again:
» Dave Winer on three investing philosophies for Web 2.0 from Jim Moore's Journal: Reporting on systems evolving
Interesting post by Dave Winer on Web 2.0, two models of how to pursue it. [Read More]
- Tracked on December 22, 2005 11:29 AM
Comments
Interesting thought process. And not far fetched, IMHO. I guess they could still get "bought" vs. an IPO, but the question is "by whom?" The GOOG relationship diminishes the value for any other obvious buyer (e.g. YHOO conceivably cut out from installing Overture, likewise MSN with their Search). Maybe IACI would take a run if they were willing to forego Ask powering AOL search (a reasonable assumption, certainly now, for them to get any deal done). An IPO would almost certainly be at much higher multiples, but in any case GOOG wins.
Not a bad bet, John.
- Stuart
John,
You're spot on. I made the point that we very well could be seeing an AOL IPO, Part Deux in the offing. While I don't think GOOG had an AOL IPO in mind [or at least not as a driving factor in the AOL stake], I DO think Time Warner had the $20 billion post-money valuation in mind when they agreed to the $1 billion from Google in exchange for 5%.
You may have seen my post directly or on tech.meme, but if not...
http://woodrow.typepad.com/the_ponderings_of_woodrow/2005/12/aol_ipo_part_de.html
AOL 60 billion post-IPO !!! Good grief !
I would base the value of AOL on 2 facts. Current earnings and the expected growth in earnings over the next 2 years. Is this data too confidential to be blogged.
60 billion? You are crazy. ;-) As Rajesh says we need to know the earnings an expected growth in earnings to value AOL. With actual earnings of 1-2 billion $ and an annual earnings growth of 20% I could accept 60 billion $.
John - I agree with your post for the most part, but there are two other reasons why Google would invest: to protect revenue and keep Microsoft at bay. Both of those are just as important as the value of the investment increasing at this point.
@ Jojo ... i see it like you with the costs and i think, thats google need some invoices... it goes against end of year.
in future it is interesting and important for microsoft to do better work if they not want that the users goes from msn to the new bigOne ;)
I doubt Google's looking for much of a financial return, *if* the deal even happens. Damian has it right, Google keeps some revenues and blocks Microsoft.
Clever thinking but I still can't help thinking that AOL's poor reputation will do more damage than Google will wind up recouping in an AOL IPO. Will people really want to own a piece of tired old AOL when they can invest in bright and shiny new companies with infinite potential?
Just because Google paid $1B for 1/20 of AOL doesn't mean that AOL is worth $20B. Google may well have overpaid in order to shut out Microsoft. Two possibilities: (a) winner's curse in an auction - whoever paid the most by definition paid more than anybody else wanted to pay, or (b) it was a good deal for Google because they got something extra beyond a share of AOL (i.e., delaying Microsoft's growth in search - something that has no value to anybody else except Yahoo).
Whether (a) or (b) is true, it follows that all of AOL is worth less than 20x this deal, because nobody else would overpay by as much.
As dialup goes away, AOL is losing its one unique advantage: the large number of loyal customers who used it because it's the easiest way to get online through a modem. (This includes myself: I still have an AOL account to use when dialing in from some obscure locations where they have access numbers and nobody else offers access. Such places are getting fewer by the year.)
Yes, maybe AOL can offer content and services on the open (non-dialup) Internet that can compete with Yahoo and best-of-breed sites, but it's not a sure thing, and likely to be very expensive.
It's true that AOL has been (and to a great extent still is) a dial-up ISP. However, it's interesting that in Canada -- where their ISP business never amounted to much for a bunch of reasons -- as a "Hail Mary" they opened the door to much of their content. Guess what? They are now the number two portal roll-up (public web) in the Country. By saying "let's face it, we are not an ISP up here" they have created some very valuable advertising real estate, and likely assured their future. I would be surprised if AOL US hasn't taken notice.
- Stuart
Great reading, keep up the great posts.
Peace, JiggaDigga
Leave a comment