- December 12, 2021
- Posted by: Robert Brown
- Category: Investing
The story behind a success always makes for good reading. And, if such a story is presented like a drama, interspersed with audacious ambition, envy, struggle for control, rivalry, lawsuits, accusations, counter-accusations, and some humour, it would most likely make for some very engrossing reading. To top it all, this is not a work of fiction – in fact, it is not even a dramatization of reality. It is a chronicle of events that happened behind the scenes of what in the words of the author is the ‘hottest business, media and technology success of our time’.
The book starts with describing a scene in 2003, where the founders of Google, Larry Page and Sergey Brin, address a high school in Israel. They explain how Google was born.
Page and Brin were PhD students at Stanford University. The idea of Google was born when Page conceived of downloading the entire web on to his computer to try and devise a search program for it. It was an audacious idea. While he had planned to finish the exercise in a week, he could manage only a portion of it even after a year. “So, optimism is important,” Page told his audience, “One must have a healthy disregard for the impossible.”
It was this optimism that helped Page persist with his plan. He kept downloading the web on to his machine, and Brin helped him mine the data and make sense of it. According to the duo, it took a lot of effort, a lot of night-outs, and a lot of working through holidays.
After this brief prelude-like beginning, the story goes back to the beginning – when Page met Brin.
Page and Brin were both PhD students at Stanford, and they had a lot in common. They were both from families which placed great value on scholarship and academic excellence. They both had fathers who were professors, and mothers whose jobs revolved around computers and technology. Computers, mathematics, and intellectual debates and discussions were part of their genetic codes as well as their day-to-day lives. It was only natural, then, that they got along with each other quite well, and started working together.
They also had an environment that was very conducive to innovation, experimentation and ideation. Stanford is known for churning out several successful technology ventures, including HP and Sun (Sun stands for Stanford University Network). People in Stanford are firm in their belief that sometimes, making a business out of a technological innovation delivers a much greater effect than writing a paper on it.
Also, at the time the two were together, there was a major IT revolution happening. The likes of Netscape were creating waves outside with unprecedentedly huge IPO’s, and the Internet was touted to be the next big thing. As a result, venture capitals were skewed heavily towards funding technological start-ups. These circumstances created a setting ripe for research and innovation relating to the Internet, and Page and Brin believed that a robust search application was the one thing that Internet users most needed.
Search engines prevalent at that time provided service that was far from satisfactory. There were many in operation – the likes of Lycos, Webcrawler, Excite and a few others. All of them fell short. They would only display a slew of results that made little sense to the searcher.
At that time, another duo from Stanford was running a company which they had named ‘Yahoo’. They devised a better search algorithm, by creating an alphabetized directory of Web Pages. Also, another new search engine called AltaVista came up. Its search algorithm was based, like other search engines, on the number of times the key word figured in the web page, but it displayed results using the now popular concept of web links. A link, essentially, is a kind of a pointer to another web page.
The idea of using links for a search engine excited Brin and Page. They started thinking of it on an entirely new dimension.
Coming from families that treasured academic research, Page and Brin looked at links as something akin to citations in academic research. In academia, a paper was considered good if it had citations. The more the citations, the better the paper. Also, not all citations were equal. Citations from quality sources enhanced the paper’s value.
Using the analogy, the pair developed their search algorithm, called PageRank. It depended, among other things, the number of links that pointed to the web page. The more the links, the higher the rank. Also, links from the more renowned websites, such as Yahoo, would carry more weight than a link from a lesser known website.
Initially, the Google Guys named their search engine ‘BackRub’, as it was based on the links pointing backward to the site. However, they eventually decided that they had to come up with a new name. Because it dealt with vast amounts of data, they decided to name it ‘Google’. Googol is a very large number – 1 followed by 100 zeros. ‘Google’, is actually a misspelling of ‘Googol’, something which many people do not know.
Google was first released internally in Stanford. From the beginning, it has maintained a clean and simple homepage, free from flashy animations and the like. It was an instant hit in the Stanford network.
As their database grew, Brin and Page needed more hardware. As they were short of cash, they bought inexpensive parts and assembled them themselves. They also tried all they could to get their hands on unclaimed machines. They did everything they could to keep their hardware cost at a minimum.
Initially, the duo attempted to sell Google to other major web companies like Yahoo and AltaVista. However, both companies could not accept Google, because, among other reasons, they did not believe that search was a vital part of the Web experience.
In the initial days, the Google guys were not sure of the business model. They did not know just how Google could make money. The motto of the company was ‘Don’t be evil’. They believed that advertisements on web pages were evil, and hence wanted to avoid having ads on their webpages. They were hopeful that in the future, other websites would want to use their search engine, and they could profit by charge these websites. They were also relying purely on word-of-mouth for their marketing. They did not advertise at all.
Google’s database kept growing, and they started buying more hardware and recruiting more people. Initially, Google was funded by a $1 million investment by an angel investor named Andy Bechtolsheim. Eventually, though, they ran out of it, and needed more money.
They did not want to go public and raise money like many other companies did, for they had no intentions of letting their information go public, and they also wanted to have full control over the company. The only option, then, seemed to be to approach venture capitalists. The duo was convinced that they could get VC’s to fund them, and at the same time continue to retain their control over the company.
They approached two VC companies, Sequoia and Kleiner Perkins. Both companies were impressed with the idea, and were ready to fund Google. However, because they did not want to give up control, the Google guys demanded that both companies invest jointly in Google.
In Wall Street, two major VC companies would hardly consent to a joint investment in a fledgling firm owned by a couple of unrelenting youngsters. However, due to the inherent attractiveness and workability of their idea, and through help from some of their contacts, the Google guys pulled off a coup that was unheard of. They got the two companies to invest $25 million each, and they still retained full control of Google. The only condition that the two VC’s placed was to hire an experienced industry person to manage their business. The Google guys agreed, hoping that they could push such an appointment to as late a date as possible.
As Google progressed, several improvements came up. The now famous Google Doodle – an image that appears in the Google homepage to signify an important event or to honour a person – started out as a signal to employees that Brin and Page were away. When Brin and Page went to a party called Burning Man, they left an image of a burning man in the homepage to signal to employees that they were away. After this, they experimented with replacing the two O’s of Google with Halloween pumpkins, to signify the festival of Halloween. It was an instant hit with Google’s users. Since then, the logo is often decorated with a doodle to signify or honour important occasions/landmarks/persons.
Google started recruiting people for specific roles. There was an employee dedicated to making doodles, and another to polishing and improving user design. Significantly, they recruited Dr.Jim Reese of Harvard to manage operations. His responsibility was to ensure that Google’s burgeoning hardware requirements were consistently met. Since Google saves a lot of money by buying cheap computers and assembling them themselves, it was important that they be maintained, monitored and managed properly. To ensure reliability, Dr.Reeves spread data over several computers, managed them all from a central system, and used redundancy to insure the company against system crashes. By minimizing hardware costs, and using free to use Linux based operating systems over expensive ones like Windows, Google had earned for itself a major cost advantage.
Google got more and more popular. It won the support and admiration of Danny Sullivan, editor of an influential newsletter focused on Internet search. It had built for itself a very loyal user base that gave feedback on even the slightest of modifications to the site. However, it had yet to come up with a way of making money.
At that time, a company called Overture caught Brin’s attention. Overture was the company that provided the search results that accompanied searches of Yahoo and AOL, among others. The Google guys liked the idea of having ads based on search, rather than flashy and distracting banner ads. However, there was one practice of Overture’s that they did not approve of – Overture guaranteed that if a company paid a certain amount of money, it would find a place among the advertisements. It went directly against their motto of ‘Don’t be evil’.
They decided, therefore, to go it alone. They developed an algorithm for search-based advertising on their own. True to their motto, they ensured that there was a clear demarcation between the actual search results and the advertisements. Like the search results, the advertisements, too, would be ranked. The ranking of the advertisements would be based not only on the amount of money paid, but also on the number of times it is clicked. Hence, popular ads would appear more prominently.
Prices for Google’s ads were fixed through a nonstop auctioning process. Auctions were done for every search phrase. A phrase like ‘investment advice’ would cost a lot more than a phrase like ‘pet food’. Companies started having dedicated employees to carry out Google auctions. There were several subtleties involved. For instance, ‘digital cameras’ would be auctioned for a higher rate than ‘digital camera’, because a user googling ‘digital cameras’ is more likely to buy one.
Google advertising policy was not without its share of problems. Once, an insurance company named Geico filed a lawsuit against Google, on the grounds that it had allowed other companies to bid for its name. A user searching for ‘Geico’ would see in his results all insurance companies that had made a winning bid for it. Geico claimed that Google did not have a right to let Geico’s competition take advantage of searches on its name. Google’s defense was that Geico’s understanding of consumer behavior on the Internet was incorrect. A user googling ‘Geico’ is not necessarily looking only at Geico’s website. Besides, Google was not the publisher of the ads, and it also had systems in place to protect trademarks. It did not allow ads to contain trademarks in their heading or text. Google ended up winning the case.
It has also been alleged that Google’s naming of the advertisement section ‘Sponsored Links’ misleads many users. Many users confuse ads with actual results, and click on them without even knowing they are ads. The ethicality of this lack of clear distinction has often come under question.
With the business model set straight, innovation and new ideas flourished at Google’s expanded office, called the Googleplex. One employee came up with the idea of retrieving a person’s phone number if his name and zip code are entered. Another came up with the idea of auto-correcting spelling mistakes. If, for instance, you misspell a celebrity’s name, Google would automatically correct it and display search results for the corrected name. If a less obvious mistake is made, Google comes up with a “Did you mean…?” link at the top of the page.
Google also launched its Google Image Search, which again was revolutionary. Millions of images are stored in Google’s database and can be retrieved at the click of a mouse.
The Google guys created an infrastructure and a culture inside the Googleplex that would make employees want to stay there for most part of the day – and night. Mean as they were with spending on computer hardware, they spent unrestrainedly when it came to creating the right environment for their employees. There were free meals, unlimited snacks, toys, roller hockey, scooter races, and lots more. Even the buses were equipped with Wi-Fi Internet connectivity, so that employees could be productive even while they commuted.
External happenings also helped Google. The dotcom crash of 2000 left several extremely talented software developers unemployed, giving Google access to a vast talent pool. Also, around that time, Microsoft was facing a legal dispute regarding its anti-competitive practices. This made the image of Microsoft take a beating. Google, with its ‘Don’t be evil’ motto, suddenly overtook Microsoft as the ultimate place for a software developer to be in. The creme-de-la-crème of the software profession started preferring to work in Google.
Google also actively encouraged and fostered innovation inside the Googleplex. Employees were free to spend 20% of their time on innovative tasks that interested him. They did not have to worry about whether it could be made profitable, or have any fear about its acceptance or workability. They could so just work on anything that was of interest to them. Ideas were often discussed in bulletin boards and over lunch. As an idea grew, it would get bigger and bigger. Google also provided the resources to carry out innovation. Out of this culture were born several ideas. An avid reader of news came up with an idea of providing users with multiple sources of news clustered together, to help them analyze and understand news better. Thus was born Google news. Interestingly, unlike Google search results, the Google news results are cramped close together. This denseness is intended to give the user as much news as possible. Ranking is based on relevance, and also the source. Another innovation was Froogle, later renamed Google Product search, which helped users search for retail products to shop.
Google soon became a verb in several languages, including English, German, and Japanese. A lot of debates about Google were triggered. With information on people only a Google search away, there were issues related to online stalking of individuals. Google’s advertisements, despite the company’s checks, included certain obscene websites. In academia, the use of Google by students in preference to the classically used specialized databases was looked at, on one hand, as increasingly easy and wide access to information, and on the other hand, looked down as a shortcut method that fostered laziness.
For all its popularity, Google hardly spent on advertising. Marketing happened only through word-of-mouth. Google kept its homepage clean and free of ads, foregoing millions of dollars of revenue. It avoided a graphics-heavy homepage which would slow down retrieving search results. It focused on getting users fast results, unlike other sites which wanted users to stay on their respective pages for as long as possible. It did not have a user lock-in – there was no need to register to be able to use Google search. By offering a superior product aimed primarily at satisfying the user, Google had eliminated any need for advertising. The only promotion it did was through selling caps and T-shirts with the Google logo.
Google launched a new program, to be able to pull users towards Google rather than just wait for them to find Google. Under this program, any website could register to use the Google search box in its page. Called the affiliate program, it promised to pay websites 3 cents for every search that they added to Google. Google, would, of course, earn from ad revenue.
Ever since they had got funded by the two VC firms, the Google guys had been under constantly increasing pressure to hire a CEO who would manage the business aspects of the company. Google had crossed the threshold beyond which a company was required to go public, and the VC firms were particular about having an experienced business professional as the public face of the company before it went public. Several candidates were sent to Brin and Page by the Venture Capitalists, but none of them managed to please the Google guys.
As pressure mounted and time kept running out, Eric Schmidt, CEO of the software company Novell, stepped into the Googleplex to meet Brin and Page. He had consented to see them only because of the insistence of top people from one of the VC firms, a good relationship with whom he knew was important. He had no interest in the meeting at all. The Google guys were equally uninterested in meeting him. They were expecting another of the dull and boring kind of which they had already seen many.
When Schmidt entered, his biography was projected against the wall, and his strategy at Novell was openly criticized. Schmidt argued back vehemently, and there started a heated debate that went on for a long time. After he left, Schmidt realized that he had not had an intellectual debate of that kind in a long time. Brin and Page, too, found Schmidt to be refreshingly different from the rest of the candidates they had interviewed. The Venture Capital people knew that Schmidt could do the deft balancing act of giving a business structure and direction to the company, while at the same time ensuring that the freedom that Brin and Page so wanted remained unaffected.
Soon, Eric Schmidt was made CEO of Google. He put all his experience into play and acted most maturely. He knew when to push, when to agree, when to back off, and when to argue. He still gave the Google guys a lot of leeway. He realized that they had created in Google a culture of innovation which it would be unwise to tamper with. All he intended to do was to build a business and management structure around the strategy and the culture that Brin and Page had so meticulously built.
There were, of course, points of disagreement between Schmidt and the Google guys. It took a lot of convincing from Schmidt to persuade Brin and Page into appreciating that the payroll system of the company, which was based on free software, needed an overhaul. Schmidt wanted to purchase packaged software of Oracle, which he believed was a necessity, given Google’s size and rate of expansion. Brin and Page, however, did not see any merit in paying thousands to Oracle when free software was available.
There were also cases when Brin and Page had their way stubbornly. There was once a violent bidding war going on between Google and Overture over AOL’s search business. Google eventually won it by offering AOL guarantees amounting to millions of dollars. Schmidt was worried about this, as the company’s cash balance was fast shrinking. Brin and Page, however, went on with the deal, as they firmly believed that search and search-related advertising with a company like AOL was well worth the risk. Eventually, it turned out to be the right decision.
This apart, Google also inked a deal with Yahoo to provide its search results. It also signed a $100 million deal with AskJeeves.com, a competitor, to provide it with search-based advertising. It showed maturity and confidence on Google’s part to get into deals with competitors.
In April 2004, Google promised to launch an email service which it promised would be markedly superior to existing email services. Brin and Page knew that, with the abundance of email service providers already functioning, a new email service had to be significantly superior to be able to succeed. Google Mail, or Gmail, they believed, was significantly superior.
Gmail’s unique features included easy retrievability through a Google-like search of emails, 1 GB of free storage, which was several times the storage space of existing email service providers, and a unique way of representing a series of emails, resembling a conversation. Gmail was first given to 1000 opinion leaders for testing. They could then give Gmail to a limited number of people on an Invite basis. This gave Gmail a kind of exclusivity which made it a much desired item.
However, just as all seemed to be going well, Gmail ran into troubles. Google had planned to have ads in Gmail similar to those in Google. The ads would be context-specific, based on the content of the email. This announcement led to a hue and cry among privacy groups. Law suits were threatened and there were calls to close down Gmail. The issue was with the scanning of emails. It was felt that by reading every email, Google was infringing on the privacy of individuals. It was also feared that security issues might arise because of the huge storage space and the subsequent long retention period of emails.
Google’s clean reputation till then took a beating for the first time. The timing could not have been worse, as Google was soon to go public. Brin and Page, who were expecting positive reception for what they believed was a superior product, were taken aback. They hoped that the protests were only a passing cloud, and that things would settle down soon. They clarified that the scanning of emails was automated, and that they would not be informed about the content. They explained that every email service provider scanned emails for displaying emails itself, and for detecting viruses.
As time passed and more and more users started using Gmail, they started finding the experience highly satisfying. The bad publicity started dying down slowly, and Gmail eventually became a big hit.
When the time came for Google to go public, Brin and Page wanted to play it their way, again. A typical IPO in USA is done with the help of big investment banks. These banks do the publicity with the help of what is called a road show, help price the stock, and guarantee a minimum amount to the issuing company. However, there was a conflict in the goals of the investment bank and the issuing company. While the investment bank would want the stock to be underpriced, so that it rises in value and favoured investors gain. The company, on the other hand, would want the price to be as high as possible, so as to raise the maximum possible amount.
Google did not want investment banks to call the shots. They were ready to pay only half the price investment banks usually demanded, and they wanted to dictate terms in the IPO. They wanted the IPO to be egalitarian – anyone could invest. The minimum number of shares was only 5. Pricing would be based on an auction, just like Google ads. They felt that the road shows unfairly divulged information only to a select few. To make things fair, they released all relevant information on the Internet, for everyone to see.
Also, to retain control, they issued two classes of shares – Class A and Class B. Class A shares were for regular investors, carrying one vote each. Class B shares were for themselves, carrying ten votes each, and giving them absolute control.
As the date of stock issue neared, skepticism started arising regarding Google’s stock. The price band – $110-$135, about 150 times its per share earnings, started being seen as too high. It was feared that after the stock issue, employees of Google would exercise their stock options and leave the company. To make things worse, Playboy magazine released an informal and very casual interview of Brin and Page. It was an interview taken a lot earlier, but was timed to cash in on all the publicity surrounding Google. Besides being a violation of SEC rules, it also sowed seeds of doubt in potential investors’ mind about the seriousness of the guys at the top of Google’s hierarchy.
Google’s venture capitalists, who had a lot at stake, had to step in. It was decided that the Playboy article would be attached as appendix to Google’s registration documents, to circumvent the violation of the quiet period. Also, the venture capitalists decided to hold back all Google stock they had planned to sell – a signal that they expected the stock price to increase. Finally, Google’s IPO was completed and the stock went out at $85 per share. It currently trades at $530 per share.
Google kept going from strength to strength. It won AOL’s European business almost from under Yahoo’s nose, buy offering AOL million dollar guarantees after Yahoo had nearly consummated a deal with AOL. The deal was made by Sergey Brin. Sergey Brin’s responsibilities mainly involved making deals, cutting costs, and handling issues relating to culture and motivation. Larry Page, on the other hand, was involved more in hands-on work. He also supervised hiring of employees, and identified innovative projects that showed most potential. Eric Schmidt, the CEO, for his part, took care of operations. He ensured that projects were on schedule, and that deadlines were met. He also looked after the finance, accounting, and other systems.
Innovations kept coming. Google Suggest guessed what you wanted to search. Google desktop gave a comprehensive search solution for your PC. Google video search and Google satellite map came up. Google Scholar was introduced to help search for scholarly articles. The list just kept getting longer.
In between all this, Google started out on an ambitious project to digitize all books in leading libraries and make them available to Google users. Starting with the University of Michigan, a few libraries were selected. Books were scanned using technology that was gentle on the books, and did not affect them. After scanning, these books would be made available in a form which would not allow copying. For books still in copyright, users would be able to view only snippets of pages.
To win the support of publishers, Google came up with a compelling value proposition. It would cover the costs of scanning and indexing books in return for the right to be able to show them in its search results. It would then present them in a form which would not allow copying. It would also provide direct links to booksellers, from whom the book could be bought. Thus, Google was, in effect, giving the user a flavor of the book’s content and enticing him to purchase it. It eventually got support from publishers. The project was named Google Books.
In the future, we might see Google use its massive computing power to help research in the field of genetics. Already, Google has downloaded a map of the human genome, and is exploring possibilities with biologists. Millions of genes, combined with loads of biological and scientific data form a combination which only a system of Google’s power, processing capacity, and storage space can execute.
The book is exceedingly well written. From the beginning, and till the end, the author makes sure that the reader is kept interested and enthralled. And he does so by using no dramatization whatsoever. By just sequencing events logically, occasionally switching focus to ancillary characters, and by simply describing articulately how the Google phenomenon unfolded, the author gives the reader every reason to keep reading the book. The characters of Larry Page and Sergey Brin are sketched beautifully. The book is written like a novel, so the reader never gets bored. The author should also be given credit for his neutrality. While he is generous in his praise for Google in general and its founders in particular, he is also critical of them on occasions, such as their unseemly interview to Playboy.
On the flip side, the author sometimes goes to a level of detail that tests the reader’s patience, such as the detailed description of the Burning Man Festival. Also, certain characters, such as Charlie Ayers, the chef, are given undue importance. While it is understandable that the chef’s stay at Google created an entirely new food culture and helped motivate employees, dedicating an entire chapter to him and including one of his recipes in it are neither necessary nor justified.
On the whole, the Google story takes you on a journey – a journey in time of the biggest Internet success story till date. It is a journey that will keep you engrossed, and it is one you will enjoy.