Google's Big Project

By Larry Dignan Print this article Print

The Internet darling gets 95% of its revenue from ads. So what's one risk, according to its filing for its stock offering? Outsourcing the company's billing to a third party.

Search provider Google's highly anticipated initial public offering filing featured a folksy letter to shareholders, stellar financials and plans to allow small investors to purchase shares. But it also listed a technology project as a key risk to its business.

Google says it is migrating its worldwide billing, collection and credit evaluation functions to a "third-party service provider," which will track and automate the company's AdSense revenue-sharing agreements whenever ads appear on search results.

"If this transition is not successful, our business and operations could be disrupted and our operating results would be harmed," says Google in its regulatory filings. Google isn't kidding—95% of its 2003 revenue is advertising-based.

Where the implementation stands is unclear, but it bears watching as the search giant, with $962 million in 2003 revenue and $106 million in profits, matures. "We have no experience managing and implementing this type of large-scale, cross-functional, international infrastructure project," says Google.

Google wouldn't comment on the project, and leading providers of billing services say they aren't involved in the implementation. Amdocs, based in Chesterfield, Mo., notes that Google isn't a customer. Convergys, based in Cincinnati, counts Yahoo as a customer but not Google. Another possible supplier, Portal Software of Cupertino, Calif., says it is not involved with Google.

Among other projects, Google noted that in 2002 its auditor urged the company to bolster internal controls— such as restricting employee access to its advertising system—and automate financial processes. The lax controls could hurt the company's ability to report its financial data. Google says it spent "significant resources" in 2003 to improve its internal controls.

This article was originally published on 2004-05-04
Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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