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The unraveling of Google

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CIOL Bureau
New Update

Reed Stevenson



SEATTLE: If Google Inc. opens its books this week as many still expect, its rivals will be hoping to unravel one of Silicon Valley's most closely guarded secrets: how much it makes every time someone on the planet Googles.



Larger competitors, such as Yahoo Inc. and Microsoft Corp., are likely to seek clues on Google's profitability and how much the secretive firm is investing in new technology, as they seek to carve out a chunk of the online search market, analysts said.



Smaller competitors said they are expecting Google's financial data to show that it is more profitable than it has suggested in the past, a sign that there is plenty of money to be had for niche players in the Web search market.



Terry Semel, chief executive of Sunnyvale, California-based Yahoo, which has an estimated 5 percent stake in Google, said, "there is plenty of room for Yahoo to thrive and for Google to thrive."



While Yahoo is ramping up its own search service, No. 1 software maker Microsoft has also declared war on Google and has assembled a team at its Redmond, Washington, headquarters to design a better search engine.



At stake is a chunk of the $6.4 billion spent annually on online advertising, as well as the ability to harness search to make computers and software more useful.



Facing a regulatory deadline, Google is expected to file financial disclosures this week that many expect will be the first step toward an initial public offering for the six-year-old firm.



Even if the Mountain View, California-based search company delays an initial public offering, Google is expected to be required to disclose financial data with the Securities and Exchange Commission because of the assumption that it has more than 500 equity holders and at least $10 million in assets.



BIG AND STILL GROWING



Google makes money by displaying advertising alongside search results, but it has also recently started a free online e-mail service that displays advertising alongside e-mail messages.



Lance Podell, who sold a search advertising company to Google and later founded another online advertising company called Kanoodle, said that Google's numbers will prove that smaller players will be able to thrive in the search market.



"It's going to remind people that search is big and that it can keep growing," Podell said.



A key metric that competitors both large and small will be looking for is revenue per search, a key gauge of efficiency and profitability, in addition to overall revenue and search traffic data, said Safa Rashtchy, analyst at U.S. Bancorp Piper Jaffray.



"Revenue per search would be especially interesting," Rashtchy said, "Even Microsoft and Yahoo are envious that Google has been able to hide behind being a private company."



There is no shortage of competitors who think that they can deliver a better way to search and sift through the World Wide Web than Google, something that founders Sergey Brin and Larry Page have said they are keenly aware of.



Page told Reuters last month that he expects search to be a "healthy market with many companies."



Microsoft's Internet unit MSN plans to launch a revamped search service in July, mainly with key changes to the way advertisements are displayed alongside search results.



And despite Google's lead, its competitors are quick to note that an estimated 60 percent of search queries do not yield the results users were after.



Kanoodle, for example, provides a service that displays advertisements more closely matched to the content of search results, a technology that makes it easier for online advertisers to reach their audiences.



Smaller search enterprises have also proven to be attractive for investors, after Mark Cuban, the outspoken Dallas Mavericks owner who made his fortune during the dot-com boom, took a stake last month in tiny Web search company Mamma.com because of its ability to generate cash as a stand-alone entity.



© Reuters

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