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Google’s Decade

Ten reasons why Google is still number one.
September 12, 2008

David A. Vise is a Pulitzer Prize winner and coauthor of The Google Story: Inside the Hottest Business, Media and Technology Success of Our Time, published by Delacorte Press (Updated edition 2008).

Credit: Technology Review

1998: Yahoo and others pass on the chance to buy new search technology developed at Stanford University for $500,000. Their rationale: “Search doesn’t matter. Portals do.”These rejections forced Sergey Brin and Larry Page to reluctantly take a leave of absence from Stanford (both wanted to become college professors, like their dads) to see if they could turn Google, their new search engine, into a business.

1999: A year later, Google garners $25 million from Sequoia Capital and Kleiner Perkins, even after Brin and Page insist that each venture-capital firm would only be allowed to invest half the money. This “divide and conquer” strategy leaves the denizens of Sand Hill Road to squabble with one another while Brin and Page retain control over their nascent enterprise. It also enables them to frustrate the moneymen by refusing to deface the most valuable piece of real estate on the Internet–the Google home page–by loading it up with ads, and by turning away numerous CEO candidates.

2000: Yahoo chooses Google to power searches on its portal, exposing the search engine to millions of users for the first time. With growth accelerating, Google benefits from the bursting of the technology bubble since this allows it to hire talented engineers for lower wages.

2001: Israeli entrepreneur Yossi Vardi persuades Brin and Page that Google can profit by drawing a thin blue line down the page, putting organic search results on the left, and placing small text-based ads on the right. Brin and Page previously resisted ads, fearing that they would cause people to lose confidence in the integrity of Google’s search results. While at Stanford, they coauthored and delivered a paper called “The Evils of Advertising.”

2002: Google cuts a deal with AOL to power search and syndicate ads, giving it access to 34 million America Online customers, and inks other similar pacts. Revenue increases 500 percent and profits skyrocket to nearly $100 million.

2003: Google launches an automated program to deliver contextually relevant text-based ads to hundreds of thousands of affiliated websites, creating a self-reinforcing network of support for the company and giving Internet publishers an easy way to profit by letting Google display ads on their pages. This strategy makes Google reminiscent of the three major television networks in their glory days: give away the programming for free, and profit from ads displayed on the network of affiliates.

2004/2005: Google raises billions of dollars in an unconventional initial public offering and a successful secondary offering, with Brin and Page retaining absolute control by owning shares with super-voting rights. In the process, they drive Wall Street professionals crazy by forcing investment bankers working on the deal to sign confidentiality agreements at every single meeting, rather than only once. With “Don’t be evil” as the company motto, Brin is anointed as arbiter of good taste, deciding what does, and does not, fit. Beer and cigarette ads are out; wine ads are in.

2006: Google buys YouTube, giving it control of the world’s most popular online video site. Google bets big on the future of video, paying $1.65 billion, even though YouTube has no sales. The view is that Google will capture the eyeballs and mindshare now and figure out how to make money later.

2007: Brin and Page both marry brainiacs at destination weddings, ensuring the pedigrees of their progeny. Brin and Page also reaffirm their private pact to work together for at least another decade atop Google. And with the stock price soaring, the duo breaks into the elite ranks of the top five on the Forbes 400 List of the Wealthiest Americans, with a net worth exceeding $15 billion each.

2008: Google’s 10th birthday coincides with the 10th anniversary of the Justice Department’s antitrust suit against Microsoft, which forced the giant to compete with one hand tied behind its back while Google raced ahead. Now Google is replacing Microsoft in the crosshairs of the Justice Department’s antitrust division, due to the dominance of its online ads and search, and a proposed ad pact with Yahoo, its biggest competitor.

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