Premium Essay

Adios

In: Business and Management

Submitted By tornike33
Words 15389
Pages 62
os t 9-806-105

REV: NOVEMBER 9, 2006

THOMAS R. EISENMANN

rP

KERRY HERMAN

Google Inc.

Google’s mission is to organize the world’s information and make it universally accessible and useful.
— Google’s mission statement

yo

In December 2005, Google paid $1 billion for a 5% stake in Time Warner’s America Online (AOL) unit. The implied $20 billion valuation for AOL came as a surprise; JPMorgan had recently valued the unit at $13.7 billion.1 However, the partnership was important to Google, which had signed a fiveyear deal to continue providing web search results and search-based advertising to AOL, as it had done since 2002. Google was expected to earn about $600 million in gross advertising revenue from
AOL searches in 2005.2 The share of ad revenue that Google would pay to AOL was not disclosed, but seemed likely to exceed the 85-90% estimated for the prior deal.3

No tC op

In addition to its $1 billion equity investment, Google would provide a $300 million credit for ads on Google promoting Time Warner products and would showcase Time Warner content in a special box on some Google search results pages. Critics complained about reports that Google would provide Time Warner with information about its search algorithms in order to help its partner’s pages secure higher positions in search results. Commenting on Google’s accommodations to AOL, author John Battelle said: “Each of them represents a step closer to a slippery slope. What they are giving away is the perception in the market place that Google isn’t for sale.”4
Google, based in Mountain View, California, had gross revenues of $6.1 billion in 2005 and an operating income of $2.0 billion. As of year-end 2005, the company had 5,680 employees and cash and equivalents of $8.0 billion. (See Exhibit 1 for Google financials 1999-2005.) Founded in 1999, the
company...

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