Ethos and motto of the company
Google is not a conventional company. We do not intend to become one. Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge, which has helped us provide unbiased, accurate and free access to information for those who rely on us around the world.
Users and customers
Sergey and I founded Google because we believed we could provide an important service to the world-instantly delivering relevant information on virtually any topic. Serving our end users is at the heart of what we do and remains our number one priority.
Information goal
When Sergey and I founded Google, we hoped, but did not expect, it would reach its current size and in fluence. Our intense and enduring interest was to objectively help people fi nd information e fficiently. We also believed that searching and organizing all the world’s information was an unusually important task that should be carried out by a company that is trustworthy and interested in the public good. We believe a well functioning society should have abundant, free and unbiased access to high quality information. Google therefore has a responsibility to the world.
Users
Google users trust our systems to help them with important decisions: medical, fi nancial and many others. Our search results are the best we know how to produce. They are unbiased and objective, and we do not accept payment for them or for inclusion or more frequent updating. We also display advertising, which we work hard to make relevant, and we label it clearly. This is similar to a well-run newspaper, where the advertisements are clear and the articles are not in fluenced by the advertisers’ payments.
Responsibilities
We aspire to make Google an institution that makes the world a better place. In pursuing this goal, we will always be mindful of our responsibilities to our shareholders, employees, customers and business partners. With our products, Google connects people and information all around the world for free. We are adding other powerful services such as Gmail, which provides an effi cient one gigabyte Gmail account for free.
Why keeping independence is important
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. We are con dent that, in the long run, this will benefi t Google and its shareholders, old and new.
Revenue
Advertising is our principal source of revenue, and the ads we provide are relevant and useful rather than intrusive and annoying. We strive to provide users with great commercial information.
Dual class voting structure
In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or infl uence Google. This structure will also make it easier for our management team to follow the long term, innovative approach emphasized earlier. This structure, called a dual class voting structure, is described elsewhere in this prospectus. The Class A common stock we are o ffering has one vote per share, while the Class B common stock held by many current shareholders has 10 votes per share.
Investor influence
After the IPO, Sergey, Eric and I will control 37.6% of the voting power of Google, and the executive management team and directors as a group will control 61.4% of the voting power. New investors will fully share in Google’s long term economic future but will have little ability to infl uence its strategic decisions through their voting rights.
Focus on long term interests
Media observers have pointed out that dual class ownership has allowed these companies to concentrate on their core, long term interest in serious news coverage, despite fluctuations in quarterly results. Berkshire Hathaway has implemented a dual class structure for similar reasons.
Acknowledgement on the dual class shares
Some academic studies have shown that from a purely economic point of view, dual class structures have not harmed the share price of companies. Other studies have concluded that dual class structures have negatively a ffected share prices, and we cannot assure you that this will not be the case with Google.
Quarterly earnings
As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifi ce long term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.” In Warren Bu ffett’s words, “We won’t ‘smooth’ quarterly or annual results: If earnings fi gures are lumpy when they reach headquarters, they will be lumpy when they reach you.”
1/2 years for progress, 3-5 years for decisions
You might ask how long is long term? Usually we expect projects to have some realized benefi t or progress within a year or two. But, we are trying to look forward as far as we can. Despite the quickly changing business and technology landscape, we try to look at three to five year scenarios in order to decide what to do now.
Smaller predictable earnings or larger less predictable returns?
Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, predictable earnings rather than larger and less predictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.
No earnings guidance
We will make business decisions with the long term welfare of our company and shareholders in mind and not based on accounting considerations. Although we may discuss long term trends in our business, we do not plan to give earnings guidance in the traditional sense. We are not able to predict our business within a narrow range for each quarter.
Declining predictions
We would prefer not to be asked to make such predictions, and if asked we will respectfully decline. A management team distracted by a series of short term targets is as pointless as a dieter stepping on a scale every half hour.
High-risk, high-reward
We will not shy away from high-risk, high-reward projects because of short term earnings pressure. Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long term success, we will continue to seek them out.
We want Google to become an important and signfi cant institution. That takes time, stability and independence. We bridge the media and technology industries, both of which have experienced considerable consolidation and attempted hostile takeovers.
Trio team
We run Google as a triumvirate. Sergey and I have worked closely together for the last eight years, five at Google. Eric, our CEO, joined Google three years ago. The three of us run the company collaboratively with Sergey and me as Presidents. The structure is unconventional, but we have worked successfully in this way.
Differences with high trust
Decisions are often made by one of us, with the others being briefed later. This works because we have tremendous trust and respect for each other and we generally think alike. Because of our intense long term working relationship, we can often predict di fferences of opinion among the three of us.
Legal, management, sales, engineering and business
Eric has the legal responsibilities of the CEO and focuses on management of our vice presidents and the sales organization. Sergey focuses on engineering and business deals. I focus on engineering and product management.
Share price
Our goal is to have a share price that refl ects an effi cient market valuation of Google that moves rationally based on changes in our business and the stock market.
Auction-based IPO
As in the stock market, if people bid for more shares than are available and bid at high prices, the IPO price will be higher. Of course, the IPO price will be lower if there are not enough bidders or if people bid lower prices. This is a simplifi cation, but it captures the basic issues. Our goal is to have the price of our shares at the IPO and in the aftermarket re flect an effi cient market price-in other words, a price set by rational and informed buyers and sellers. We seek to achieve a relatively stable price in the days following the IPO and that buyers and sellers receive an e fficient market price at the IPO.
Recruit talent
Google is organized around the ability to attract and leverage the talent of exceptional technologists and business people. We have been lucky to recruit many creative, principled and hard working stars. We hope to recruit many more in the future. We will reward and treat them well.
Employee benefits
Expect us to add bene fits rather than pare them down over time. We believe it is easy to be penny wise and pound foolish with respect to bene fits that can save employees considerable time and improve their health and productivity.