Google Faces Challenges as it Expands Beyond Core Search Engine Competency, Says S&P Equity Research Services in Google Pre-IPO Report Nationwide Survey Shows Google's Users are Among the Internet's Most Experienced, Active and Demanding NEW YORK, June 7 /PRNewswire/ -- Google dominates the minds and desktops of Internet users, with Yahoo a distant second, according to a nationwide consumer survey on search engines whose results were released today by Standard & Poor's Equity Research Services. The survey's findings indicate that 48% of search engine users say they use Google most overall, compared to 20% for Yahoo, 14% for MSN and 7% for AOL. However, Google could face challenges as it expands beyond search into offerings such as comparative shopping, social networking, and e-mail services, according to Part 1 of a pre-IPO report on Google also released today by Standard & Poor's Equity Research Services. According to the survey, which was commissioned by Standard & Poor's, a leading provider of independent investment research, ratings and indices, and conducted by InsightExpress, an online market research firm, search engine user satisfaction is quite high, with most users (83%) saying they are extremely pleased with the search engines they use, and two-thirds of users (67%) have been using their search engines of choice for more than two years. Google is the most widely used search engine, primarily because of the relevance and accuracy of its results. However, more than six out of 10 Google users (63%) indicated they would switch search engines if a better service came along. Importantly for Google's free e-mail service called Gmail, less than one out every four search engine users would be very likely (8%) or somewhat likely (15%) to sign up for and regularly use a new personal e-mail service if it offered unlimited storage and the capacity to search old e-mails, and would search e-mails to target advertising to users. Scott Kessler, Internet Software & Services Equity Analyst and author of the report, notes that Google is the Internet search leader, whose appealing offerings and opportunities are offset somewhat by notable challenges. "For 2004, we project Google's net revenues will nearly double, but its margins will narrow somewhat due to increased investment by the company," says Scott Kessler, Internet Software & Services Equity Analyst, Standard & Poor's Equity Research Services. "At the same time, we believe Google and its shares will also face risks relating to commoditization of the company's offerings, difficulties related to its introduction of new products and services, and competition from the likes of Yahoo and Microsoft. Google also has a limited operating history, expects to invest heavily in new initiatives, is employing a largely untested price to process and distribute its shares. Based on comparisons to what we consider the company's closest peer, our preliminary estimate for Google's market value is $33 billion to $40 billion." Part 2 of Standard & Poor's Equity Research Services' pre-IPO report on Google, which will address the anticipated Dutch auction process, as well as valuation in greater detail, is expected by August. About the Standard & Poor's/InsightExpress Survey Standard & Poor's Equity Research Services surveyed 1,000 individuals nationwide regarding their usage, attitudes and behaviors concerning search engines. Respondents are evenly distributed across all age groups, ranging from 18 to 55 years or older. InsightExpress is a leading market research firm with access to over 100 million online individuals. The S&P/InsightExpress survey was conducted April 14-19, 2004. The margin of error is approximately +3%. About Standard & Poor's STock Appreciation Ranking System (STARS) Standard & Poor's STock Appreciation Ranking System (STARS), which was first introduced on December 31, 1986, reflects the opinions of Standard & Poor's equity analysts on the price appreciation potential of 1,250 U.S. stocks for the next 12-month period. Rankings range from five-STARS ("Buy") to one-STARS ("Sell"). About Standard & Poor's Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 5,000 employees located in 20 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/. The analyst referenced above is a Standard & Poor's equity analyst. He has no affiliation nor ownership interest nor in any company referenced above. Affiliates of Standard & Poor's Securities, Inc. received non-investment banking compensation from Microsoft and Yahoo during the past 12 months. The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are prepared separately from any other analytic activity of Standard & Poor's. In this regard, Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade for its own account. DATASOURCE: Standard & Poor's CONTACT: John J. Piecuch Communications Manager +1-212-438-1102 Web site: http://www.standardandpoors.com/

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