Branding the Google IPO (Teaching Case)

Abstract

This Case Study discusses the branding impact of the Google IPO. In a longer, Article-length version of this paper which appears in volume 104 of the Michigan Law Review, I argue that branding is an unappreciated element of contract design. Corporate finance scholars generally assume that consumers focus on product attributes like price, quality, durability, and resale value. But consumers choose brands, not just attributes. The legal infrastructure of deals sometimes affects the brand image of the company.

This Case Study explores the link between deal structure and brand image in one specific but noteworthy deal, the Google IPO. It is an extreme example of the branding impact of deal structure, but one that helpfully demonstrates the branding implications that exist, to a lesser degree, in other deals. The primary goal of structuring an IPO is to lower the cost of capital by managing the information asymmetry between the issuer and investors. From this perspective, the success of the Google deal is questionable. Few would call the deal elegant or efficient. But the auction structure allowed Google to do more than raise money. Google also reinforced its image as an innovative, egalitarian, playful, trustworthy company.

Keywords: Google, IPO, auctions, marketing, brands, corporate governance, executive compensation