Lessons from Google's First Fifteen Years
Today marks 15 years since Google’s IPO: Happy birthday, Google (GOOG, GOOGL)! Or should we be singing the Happy Birthday song to the public company now called Alphabet? When it comes to Google, not even wishing it a happy birthday is simple.
There are, however, some simple lessons to be learned from the growth of the company.
They first started working on a search engine in 1996, but their initial project, named BackRub, failed. Then, in 1998, their new project, Google, received some favorable press early on and began its rapid, exponential growth. By the end of the next year, they had hired several workers and moved out of the garage where it all began. That contains a couple of lessons about entrepreneurship. First, entrepreneurs should never be put off by failure. If failure weren’t so common, the rewards for success wouldn’t be so great. Second, no matter how smart the founders of a company are or how good their idea is, there is always an element of luck. If PC magazine hadn’t found and liked Google in that first year, would it have gone the way of BackRub? It is not just potential entrepreneurs who can learn from Google’s history, though. There are lots of lessons for investors, too. First off, always trust the numbers over the image and reputation of a company. Most people think of Google as a company that has pursued growth over all else, and when they look at the success they have had, they assume that "growth first" is a good model for others. But when you look at the post-IPO numbers, there is one thing that they have always prioritized over even growth: profit. Google had positive EPS in its first earnings report as a public company nearly fifteen years ago and has done so ever since. That is an important lesson for the dynamic young companies of today. Growth is great, but ultimately, cash is still king. What Google did was prioritize growth, not over profitability, but over dividends. They have never` paid a dividend, preferring to return value to shareholders by buying back stock or reinvesting their profits. And, as I pointed out a couple of years ago in this piece, the long-term chart for their stock suggests that there is no reason to change that strategy: