The Google Story

By David A Wise & Mark Malseed

Bantam Dell Publishing 2005

This book is about how Google was born and how it has grown. It provides a fascinating
account of how great, brilliant minds work. In this case we are referring to the minds of
Google founders, Sergey Brin and Larry Page. It also gives insights into the Silicon Valley
culture, how venture capitalists and lawyers work and how the university system
nurtures talent and innovation.

Introduction

Google, the popular search engine, has empowered individuals and transformed the
way we access information in a manner that would have been unthinkable ten years ago.
People Google e e da . Life toda fo ost people, espe iall ou gste s, ould e
u i agi a le ithout Google. Google’s appeal extends across cultures and countries.
The sea h e gi e’s u i e sal popularity is the result of word-of-mouth, not high profile
advertising.

This book is about how Google was born and how it has grown. It provides a fascinating
account of how great, brilliant minds work. In this case we are referring to the minds of
Google founders, Sergey Brin and Larry Page. It also gives insights into the Silicon Valley
culture, how venture capitalists and lawyers work and how the university system
nurtures talent and innovation.

Google’s est kept se et is its e pe tise i ha dli g o pute ha d a e. Google’s

employees assemble and customize all the PCs that the company uses to carry out
searches. Google turns inexpensive PCs into computing powerhouses by integrating and
stringing them together with patented software and wiring. These customized
computers rapidly carry out searches by breaking queries down into tiny parts. These
parts are processed simultaneously by comparing them to copies of the Internet that
have been indexed and organized in advance. In short, there is no comparable computer
network or database in the public or private sector, anywhere in the world.

Developing a search engine

Brin and Page had early exposure to computers thanks to their highly educated parents,
who were comfortable with computers and sophisticated mathematics. As the authors
e tio , “ hola ship as ot just e tio ed i thei ho es, it as t easu ed.
Education in Montessori schools and proximity of their homes to major universities
played a crucial role in shaping the careers of Brin and Page.
 2

The two met in Stanford where they registered for a PhD. Encouraged by their advisor,
Rajeev Motwani, a young 30 year old professor, the two became excited about finding
ways to locate and extract information from large amounts of data. Locating something
on the emerging disorganized Internet in the mid-1990s, was not easy.

While studying Alta Vista, a popular search engine of the times, Page noticed that the
search result included something called links. Page decided to dig into links and see how
they might be used further. He had a hunch that the number of links pointing to a
website was a way of ranking that popularity. But all links were not created equal. The
sites with most links pointing to them were clearly the most important. This led to the
concept of Page Rank. While other search engines relied on matching words in queries
with words on web pages, Page Rank provided an extra dimension. It put search results
in a logical order for users.

When, the search engine was made available to students, faculty and administrators in
Stanford, its clean uncluttered look received a lot of appreciation. As the database and
number of users grew, Brin and Page needed new computers. With little cash with them,
they bought parts, built their own machines and moved around the loading dock in
Stanford, looking for unclaimed computers. The duo’s PhD ad iso s p o ided the
$ , f o the “ta fo d Digital li a ies p oje t. Page’s do oo effe tively
became a data centre.

The Google search engine took more factors into account than any other search engine
on the market. It did not just count words or links and deliver results. It combined
information about words and links with other variables in new and interesting ways that
produced better search results. The search engine was sufficiently intelligent to realize
that it did matter whether words or phrases on web pages were close together or far
apart, what their font size was, whether they were capitalized or in lower case type.

Google’s founders also realized that their search engine needed greater computing
power than that of any other search engine then available. Both hardware and software
were important and had to be carefully intertwined and optimized. Brin and Page
focused on the right mathematical equations and multiple personal computers to create
a modern assemble line to gather, index and present information. Page explained to a
group the modus ope a di, We a l the e hi h ea s we go out and download
the entire web. We download roughly 100 pages per second. This is fairly complicated
to do reliably. We actually store all the web pages we download because it is very good
for research. We have the web on disks across the hall. It promises to be very useful to
ha e esea h to ha e this a ou d.

As they scaled up operations, funding became crucial. The first break for Brin and Page
came when angel investor Andy Bechtolsheim wrote a cheque for $100,000 after
aki g a e a k: This is the single best idea I have heard in years. I want to be part of
this. B i a d Page de ided to take a lea e of a se e f o the PhD p og a to fo us
 3

on the business full time. The $100,000 cheque signaled the credibility of the project.
Thanks to contributions from close friends, the kitty swelled quickly to $ 1,000,000.

On June 7, 1999, less than one year after they took leave from Stanford, Brin and Page
announced that two leading Silicon Valley venture capitalists, Kleiner Perkins and
Sequoia capital had, as equal partners, together agreed to invest $25 million in Google.
The founders had successfully structured the deal without giving away control and
power.

Gradually, the vision of Google crystallized. Brin and Page challenged the prevailing
conventional wisdom that all purpose websites would be the preferred gateway to the
Internet. As specialization increased, Google’s fou de s felt these sites ould fail to
meet particular or specialized needs. The two were convinced that search was the most
important long term problem to be addressed. They had complete clarity about
becoming dominant in search, just at the time when others were abandoning it and
calling it a commodity.

Managing talent

Page and Brin realized the need to attract talent. They sold Google to prospective
recruits on the basis of cool technology, stock options, free snacks and drinks. The
o pa ’s isio of de elopi g software that would make an impact on millions of
people, was also very appealing.

During the dotcom crash of 2000, Google went on a hiring spree even as other
companies retrenched heavily. Google found it had access to outstanding software
engineers and mathematicians who suddenly found themselves unemployed, holding on
to a pile of worthless stock options. Even as competitors struggled, Google moved to a
larger headquarters in Mountain View.

Google continued its efforts to maintain a congenial environment where talent could
flourish. Employees enjoyed free meals, juices, snacks, on site laundry, hair styling
dental and medical care, car wash, fitness facilities with personal trainers and even a
professional masseuse. Buses in which employees commuted between home and office
were equipped with wireless Internet access. This ensured that employees, worked on
their way to office and reached office without tension/frustration.

Revenue model

By the end of 1999, Google was averaging 7 million searches per day but its revenues
were small. Google depended mostly on licensing deals. Advertisements were a
potential source of revenue but Page and Brin realized that ad funded search engines
invariably became biased towards advertisers. They decided to follow a new revenue
 4

model. While search results would remain free, Google would make money by selling
unobtrusive, targeted advertising to businesses on the results pages.

Google decided to maintain a clear distinction between search results and ads. The
company also decided to keep the home page free of ads. To maintain a high quality of
user experience, Google decided against any pop ups or graphics. The ads would be
brief, look identical, just a headline, a link and a short description. Advertisers could sign
up online themselves. Instead of displaying an ad from the vendor willing to pay the
most, Google renewed its ads based on a formula that took into account both how
much someone offered to pay and how frequently computer users clicked on the ad. In
short, Google trusted users to rank the ads. Consumer pull rather than business push
determined where ads appeared.

Google’s popularity continued to expand due to word of mouth. It became available in

various languages. Google persuaded other websites to add a Google search box. On
June 26, 2000, Google signed an agreement with Yahoo to provide the portal with
Google generated sea h esults. This ag ee e t sig ifi a tl e pa ded Google’s
presence on the web.

I Ju e , Google a ou ed it had e o e the o ld’s la gest sea h e gi e ith

more than one billion pages in its index of websites. Performing 100 million searches per
day, its activities continued to expand. One engineer found a way for searchers to find a
pho e u e o Google si ple e te i g so eo e’s a e a d zip ode i to the
search box. Another came with a way to take care of spelling errors. If a person typed in
o e of the o ds i o e tl , the sea h e gi e auto ati all asked, Did ou ea
? Google also launched Image Search, a service that included millions of
photographs and other graphics. This facility showed that the Google search model had
major expansion opportunities. As the business expanded, for the first time in its history,
Google earned an annual profit of $7 million.

Google attained new financial heights in 2002. America online accepted Google as its
search engine of choice on May 1. Winning the AOL business against Inktomi, which
provided search results, and Overture which provided search related ads had not been
easy for Google. Google provided a large financial guarantee running to millions of
dollars to swing the deal in its own favour. Here Brin and Page had their say and were
more willing to take more risk than CEO Eric Schmidt.

Google made money every time a computer user clicked on one of the ads it displayed.
But instead of fixing in advance, the cost of running an ad, on Google and its affiliated
sites, was determined in a nonstop online auction. Google operated a sophisticated 24
hour market place where thousands of words and phrases that people searched for
everyday were bought and sold like goods and services.
 5

In 2002, Google generated sales of $440 million and profits of $100 million. Virtually, all
the profits were generated from people clicking ads on the right side of the search
results pages and the pages of partners and affiliates. Google fully leveraged the
et o k effect. The more computer users who clicked on the Google ads, the more
money website owners made. The more money they made, the more other sites were
willing and eager to add Google search and ad technology to their offerings. The bigger
the network grew, the harder it became for everyone to challenge it. In short, Google
rapidly emerged as the #1 destination for displaying ads online.

The Google IPO

The Google IPO became a story by itself. Google’s fou de s relished their autonomy and
independent thinking and put off the idea of an IPO for as long as they could. But by
early 2004, the pressure for an IPO was mounting. For many Silicon valley entrepreneurs,
an IPO was the ultimate dream. But for Brin and Page, it was just the opposite. They
loved the privacy and the freedom and did not want to disclose more than what was
necessary to analysts.

But realizing that the IPO was inevitable, they decided to do it in a typical Google way.
They placed their trust more in mathematical equations, software and technology than
they did in Wall Street advisors. In its statement filed with SEC, Google outlined an
entirely different method of distributing stock to the people, based on Dutch auctions.
Google decided to sell its stock based on bids received online from potential investors.
Anyone who made a bid at a level at or above the clearing price set by the company,
was allotted stock. Google decided to set a maximum and minimum price and invite
people to bid within that range. Novices and ordinary investors who were prepared to
buy even 5 shares, were eligible to participate.

The founders decided to compensate Wall Street at less than half the usual fees. Wall
Street firms who wanted to handle the IPO had to sign confidentiality arguments at
every meeting. The company revealed as little about its financials and operations as
possible to investment bankers. Google decided not to do road shows to meet people
behind closed doors – the institutional investors and heavyweights of Wall Street.
Google’s fou de s did not want to give these big guns any special advantage compared
to ordinary investors. So they decided to give everyone access to the same additional
data about Google by posting it on the Internet.

A letter from Brin and Page accompanying the disclosure of the co pa ’s fi a ial a d
ope atio al details ega , Google is ot a o e tio al o pa . We do ot i te d to
e o e o e. The fou de s a ted to o e that Google had pe so alit a d a ted
to aptu e the o ld’s atte tio ega di g the o pa ’s ultu e and work environment.
They described their otto as: Do ’t e e il. The fou de s also hoped that the
o pa ’s p ospe it a d i ge uit ould e applied to sol i g ajo o ld p o le s.
 6

The IPO got into a tangle when Geico, an automobile insurer filed a lawsuit against the
search engine for trademark infringement. The “EC lau hed a p o e i to Google’s
internal procedures. Google appeared to have issued enormous quantities of stock and
options without registering the shares or revealing its financial results to its private
employee shareholders. Apparently, Brin and Page did not want employees to know
a out the o pa ’s fi a ials fo fea that it ight leak out to o petito s. “oo a
analysts wanted Google to postpone its IPO. But Page and Brin found the IPO process to
be enormously time consuming and a wasteful distraction from the search engine. The
sooner it was over, the sooner things would return to normal.

Fortunately, all these problems were resolved and the Google IPO went out at $85 per
share on NASDAQ on August 19, 2004. When trading began, the stock jumped with the
price crossing $100. The IPO raised $1.67 billion for Google.

It as ot just du i g the IPO that Google’s fou de s displa ed thei deal aki g skills.
Flying to Spain in the fall of 2004, Brin and Page heard that Yahoo had beaten Google in
a o petitio to e the e lusi e p o ide of ads fo AOL’s Eu opea I te et se i e.
Yahoo had offered more money and better terms. Brin and Page sprang into action and
diverted the private jet to London. They decided to make a revised offer that AOL could
not refuse. In winning the deal, the two demonstrated that they could be hands – on
managers and aggressive businessmen.

A culture of innovation

Google software engineers spent at least 20% of their time working on whatever
projects interested them. This helped Google to come up with breakthrough ideas.
Google News enabled people to access news items effortlessly. Google Alerts was
developed as an automatic way for people to track specific topics of interest by email.
Alerts helped people to keep track of a particular company, issue, individual or a subject
in the news.

Another service, Froogle enabled people to locate items they wanted to purchase and
collect information about comparative products and prices. Rhyming with Google,
Froogle conveyed the keen desire of consumers to hunt for value.

Page and Brin wanted to make a big splash with their email service Gmail. The founders
realized it had to be radically better than the email services already on offer. They
de ided to gi e a a o e f ee giga te of sto age o Google’s o et o k ith ea h
Gmail account. Gmail also enabled people to find emails instantly, without having to
think about storing or sorting them. A Gmail search was as fast and accurate as Google
search. Unlike the search engine, Gmail was designed to make money even during the
test phase. Page and Brin hit upon the idea of putting small ads on the right side of
Gmail that were contextually relevant, i.e., triggered by words contained in the emails.
 7

Initially, politicians and privacy groups attacked the company and its plans. Gradually,
the uproar subsided.

In October 2004, Google launched desktop search, a fast, free, easy way for people to
find information of all kinds stored in their own computers as quickly as they could
search the Internet. This innovation closed the gap between the accuracy and speed of
search on the Internet and that o PCs. Google des i ed Desktop as a photog aphi
e o fo ou o pute . Google Desktop embarrassed Microsoft by enabling
millions of computer users to find misplaced files sto ed usi g Mi osoft’s p og a s.
There was also no need to store files into folders and directories. Google also launched a
product Mini that could search up to 100,000 internal documents. Mini was meant for
small and medium businesses.

Google also released satellite mapping and navigation services, ways for users to save
personal search histories, Google Suggest was a way for the search engine to propose
search topics. Google Scholar, a new product helped to locate scientific and academic
articles. Google also released quick new ways for computer users to search for stock
quotes, taxis and weather conditions. Google Earth enabled computer users to visually
fly to any place on the earth with 3 D views along the way. Google also added a way to
explore the surface of the moon through moon.google.com.

An ambitious project

A new project, digitization of books in major libraries, as lea l Google’s ost

ambitious project. Page and Brin announced they were prepared to devote significant
amounts of money and resources to digitizing millions of books that were gathering dust
or growing old and brittle in famous libraries all over the world. Five big names,
University of Michigan, Stanford, Harvard, Oxford and New York Public library signed up.
Google won over the publishers arguing that they would find new opportunities to sell
books. Google would cover the costs of scanning and indexing books for the right to
display them as part of search results. Google would display only the few selected pages
o s ippets of te t that elated to the use ’s ue a d i a fo that ould ot e
copied or printed. Google believed all this could give readers a taste of the book and
entice them into purchasing a copy. Most of the major publishers signed on to Google
Print. Google hoped to have 50 million complete books in its database when the
scanning was finished, in about a decade. In comparison when it was launched in 1998,
Google had an index of 25 million web pages.

New Challenges

Google generated billions of dollars annually from click based advertising. Ironically,
li k f aud e ai ed the ost sig ifi a t th eat to Google’s usi ess odel. Cli k f aud
manifested itself in two ways; businesses clicking away on the text ads of competitors in
order to raise their marketing costs or e site pu lishe s ho e e pa t of Google’s
 8

affiliate network repeatedly clicking on ads served to their own sites in order to pocket
more revenue. Click fraud involved automated or manual clicks that did not generate
business leads. It cost advertisers money and exposed a ul e a ilit i Google’s ost
per click advertising model. Google continued its efforts to develop software that
filtered out fraudulent clicks before advertisers got billed for them. But the market
perception seemed to be that Google was less customer responsive than Yahoo in
dealing with the problem. Also, with its bargaining power and dependence on these
revenues, Google, in spite of having the data, did not seem to have the incentive to fight
click fraud. Google’s sele tio of pa t e s also a e for criticism. The search engine
allowed new websites to sign up in a few minutes online whereas Yahoo reviewed each
new site manually. So Google seemed to be lacking in necessary controls to prevent
websites from signing up merely to generate ad revenue through self clicking.

Many analysts worried that Google earned all of its money from a single source, i.e.,
Internet advertising tied to sea hes. But “ h idt told a al sts i ea l 5, We ha e
a wonderfully diverse set of advertisers. We are not reliant on any particular category or
ad e tise to so e o e hel i g ega d. Pa t of it is e ause of this o ept alled the
lo g tail. What Schmidt meant was that the most popular books, made up a
surprisingly modest portion of sales for retailers like Amazon. The rest came from a long
tail of obscure favorites that the Internet had made easier to find. Schmidt mentioned:
The surprising thing about the long tail is how long the long part of the tail really is and
ho a s all usi esses the e a e that ha e ot had a ess to the ass a ket.
“ h idt e ai ed o fide t that Google’s usi ess odel had ple t of oo fo
growth.

The road ahead

Can Google overthrow Microsoft and emerge as the leading software company in the
world? Google is still small compared to Microsoft but the company seems to have the
wind behind it. Gates had ad itted o e i a i te ie : Google is i te esti g ot just
because of web search but because they are going to try to take that and use it to get
i to othe pa ts of soft a e. If all the e as sea h, ou eall should ’t a e so u h
about it. It is because they are a software company. In that sense, they are more like us
tha a o e else e ha e e e o peted ith. Whe Gates sa o the Google
website, similar job openings as in Microsoft, he realized it might be going far beyond a
search war. An email from Gates to his senior executives reflected this apprehension:
We ha e to at h these gu s. It looks like the a e uildi g so ethi g to o pete ith
us.

Meanwhile, the s ala ilit of Google’s usi ess odel continues to look promising. The
company can sign up new advertisers almost entirely through self service over the
Internet. This cuts costs, increases revenue and expands opportunities for everyone
involved. Google also has an extraordinary brand awareness. No other company has
 9

achieved this kind of global recognition without spending heavily on advertising and
marketing.

Meanwhile, Wall Street analysts are pe ple ed the o pa ’s u o e tio al

methods. The company has shrouded itself in secrecy and does not believe in giving
analysts any guidance about future products and quarterly profit. The Google founders
remain adamant about not giving out any information that can offer competitors clues
about its future strategy.

Even as Google addresses these challenges, new vistas continue to open up. Google has
set its eyes on fields like biology and ge eti s. Google’s stated goal is to help illio s of
people gain access to information that will lead to healthier and smarter living through
the p e e tio a d u e of a ide a ge of diseases. As B i e tio s,: Too fe people
in computer science are aware of some of the informational challenges in biology and
their implications for the world. We can store an incredible amount of data very
heapl . Google a ts to a ele ate the e e ge e of pe so alized edi i e i hi h
u de sta di g a i di idual’s p ecise genetic make up can enable physicians to offer
tailored health treatment. Google has plans to build a genetic database, analyse it and
find meaningful correlations for individuals and populations.

Google is also experimenting with various artificial intelligence techniques and new
methods of language translation. Google would also like to do more for
entrepreneurship, self-reliance and philanthropy, Google would like to contribute to the
production of clean, affordable fuel that does not harm the environment. Nothing
see s to e out of Google’s ea h as B i ’s e a k at the e d of the ook ould see
to suggest: Pe haps i the futu e, e a atta h a little e sio of Google that ou just
plug i to ou ai .