Reporters Consider History and Hype Surrounding Google Share Price Record

By Kevin Sweeney
November 22, 2005 03:25 PM

It may seem like just yesterday that Google issued its initial public offering. But its opening share price from that day is a clear afterthought.

The online search giant's share price cruised past $400 a share last week -- nearly five times what it started trading at in August 2004 ($85). While some analysts are already predicting a run to $500/share, business reporters are keeping the hype in perspective.

These journalists are speaking to analysts on both ends of the Google debate and are explaining how certain business initiatives are helping drive the search engine's success.

"It was important to include some skepticism," says Verne Kopytoff, a business reporter who covers Internet companies for the San Francisco Chronicle. "I spoke with one analyst who said investors were getting a little carried away."

Other analysts Kopytoff spoke with indicated they had "buy" ratings on the stock and anticipated its price would continue to rise.

Kopytoff also pointed out Google's strength in online advertising, which is taking dollars away from traditional print and broadcast media.

A report in the Los Angeles Times included news of a new Google product that would rival other online databases.

"The company unveiled Google Base, an online database that could pose serious competition for rivals who operate online listings of classified advertising and job openings," Times staff writer Jesus Sanchez reports.

A common method used by reporters to communicate the valuation of a company is to compare it to that of its competitors within an industry. Google presents a unique case because of its sheer strength among its online counterparts.

To illustrate this, Kopytoff reported that Google's market capitalization ($112.7 billion) is equal to that of Yahoo and eBay combined. "It does put into perspective how big Google has become," he says.

History is also a part of the Google share price story, given the technology bust that sent so many Silicon Valley stock prices plummeting at the turn of this century.

"It helps to put an historical context on a $400 share price," says Matt Krantz, a stock market reporter with USA Today. "It brings the reader in a time machine."

In his story, Krantz characterized the Google mark as notable because the Internet is a "source of bad memories." To compare the search giant to that time frame, he recalled a well-publicized predication that failed to come to fruition.

"The Internet craze hit a feverish pitch in December 1998 when Wall Street analyst Henry Blodget predicted shares of online bookseller Amazon.com, trading at $242.75 at the time, would hit $400. The stock rocketed on the prediction but quickly fell and now trades 30% below $400 on a split-adjusted basis," Krantz writes.

Kopytoff points to profitability as one major difference between Google now and the likes of Amazon.com then. Google has it. Most of the tech companies around that time didn't.

Share prices have continued to trend upward this week, with mid-day shares Tuesday trading at $416.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism