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Google's Cheap Ways. The real story of Google's IPO filing is not that it reported sales of $962 million last year. No, the real story is how the company's "cheap ways" produced operating profits of $346.7 million, writes Rich Karlgaard, publisher of Forbes magazine, in a Wall Street Journal essay. That's about $100 million more than most folks expected. To top it off, Google "pumped an additional $204 million of cash in the first quarter of 2004." Indeed, when it filed, the company "had a half billion dollars in the bank." In other words, Google is as profitable as eBay and moreso than Yahoo! Thing is, Yahoo has 5,700 employees and eBay, 5,700. Google employs just 1,900.
"Google," explains Rich, "does not spend." It never has, apparently. When Sergey Brin and Larry Page founded Google way back in 1998 (two years after Reveries, dammit :-) they shunned venture capital and instead "slapped down their plastic and risked personal bankruptcy. That fact," observes Rich, "changed the way they thought about capital outlays." So, for example, when Larry and Sergey built their backroom technology plant, they did so with cheap PCs "that cost about $2,000 apiece." With no money to spend, the co-founders "stretched, bargained and bootstrapped." As a result, Google saves "90 cents on a typical information-technology dollar," according to Mike Nevins, an ex-McKinsey guy.
Google's spendthrift culture, says Rich, puts the company at the forefront of what he calls the "Cheap Revolution." He says it's a revolution in "full swing." Among its footsoldiers are Mass General Hospital, which emails MRIs to India for inexpensive analysis, and eTrade, which replaced 50 Sun Microsystems servers (costing $230,000 each) with 80 IBM servers ($4,000 each). On a smaller scale, you might check out www.elance.com, a site where you can find someone in Sri Lanka, or wherever, to format your next PowerPoint presentation for about fifty bucks. "Gripe all you want about outsourcing," writes Rich, "but nothing short of draconian capital controls will turn back the Cheap Revolution." In fact, he suggests that the declining cost of technologies and "Internet price transparency" will only accelerate the trend. He concludes: "We are all Googlers now."
Tim Manners, editor
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©2004 reveries.com |
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