Search for Google IPO Is Over

The impending offering also promises to give Google a huge war chest for whatever type of expansion its management sees fit -- investments that could make major changes in the landscape now dominated by Yahoo! (YHOO Quote), Time Warner's (TWX Quote) America Online, Amazon.com (AMZN Quote) and others.

The filing comes as some observers are starting to wonder if the hype about the company and its closely watched sector is taking on a life of its own. But for now, outsiders finally know how much money Google is making, after years of rumor and conjecture.

Google makes its money primarily by selling advertisements that run alongside its search engine. Advertisers bid on the amount they're willing to pay to have their ads linked to specific terms; for example, an online shoe store might bid to have its ad run anytime someone types in "shoes" on Google's search engine, and the amount of the bid would affect how prominently and how often the ad appears.

Google also runs contextually targeted ads unrelated to search, so that same hypothetical shoe store's ads might run, in an online news site, on the same page as a story about the latest fashions from Manolo Blahnik.

Either way, advertisers pay Google only for each time Internet users click on their ads to visit their sites. That's the primary approach taken by Overture Services -- the company, acquired by Yahoo! last fall, which is Google's biggest rival in pay-per-click search-engine advertising.

To put Google's results in comparison, in April of last year, Overture management forecast it would have 2003 revenue of more than $1 billion, earnings before interest, taxes, depreciation and amortization around $100 million, and net income of about $24 million.

Outsider estimates of Google's market capitalization following an IPO fall generally in the range of $20 billion to $25 billion. Yahoo!'s market capitalization is $38 billion; at the time that Yahoo! completed its cash-and-stock purchase of Overture last fall, Overture was effectively valued at $1.8 billion.