Not since Federal Express burst on the scene in the 1970s has a company had the good fortune to become a verb. Today you’d be hard-pressed to find a sentient being who hasn’t Googled something, probably within the hour. So ubiquitous is the company that if you Google “Google” you get more than 600 million hits. Flush with $1.7 billion from its 2004 initial public offering, Google has embarked on a sweeping series of acquisitions and product-development efforts encompassing everything from consumer and office applications to a landmark effort to create a digital library of every book ever published. Sometimes accused of profligate spending, Google has relied on CFO George Reyes to instill financial discipline since well before its coffers filled and it became the envy of Silicon Valley. Reyes sat down with CFO recently to discuss the delicate art of not acting spoiled.
You had never taken a company public before and yet you played a key role in what is certainly the most high-profile IPO this side of the dot-com bust. What was that like?
It was a very special opportunity, and it was exhilarating. Despite all the attention on the proceeds, my memories are mostly of all the meetings that led up to the IPO — and a very large celebration at Nasdaq headquarters the day of. I was fortunate to be here for two years before the IPO, which really helped me get a complete understanding of an ad-driven Internet business.
Google raised about $1.6 billion in its IPO and later spent nearly the same amount to acquire online video juggernaut YouTube. How involved were you in setting the purchase price?
As the CFO, you can’t not be involved in a transaction of that size. We saw that as a one-of-a-kind asset that was highly coveted by a number of major media companies. Video clips are all the rage on the Internet, and we decided we wanted YouTube, so we put our money where our mouth was.
In making such an acquisition, Google can obviously live large, considering its financial strength. Do you face a challenge as CFO in being part of the strategic team but also a corporate steward?
I can tell you straight out that I don’t feel I compromised my integrity in any way [regarding the YouTube price]. We feel we can do a lot with this asset going forward. We’re actually pretty darn judicious in how we run the company. The ROIs we generate on clickstreams and related ad businesses are outrageously high. We have a lot of rigor around forecasting and financial planning and strategic decisions like the YouTube acquisition. We’ve been absolutely bulletproof through three years of Sarbox, and our planning-and-analysis tool sets are very robust. We really have a very good understanding of what’s happening in every area of our business globally.
Google remains heavily reliant on advertising for its revenues. Are you concerned that you won’t broaden your offerings in time to cope with slower growth in ad revenues?
We see online advertising as still being in its early stages, with far more opportunity ahead, so for now we love the concentration on advertising. But that’s not to say that over time we won’t moderate that focus in different ways.