Sep 4, 2020
We are in strange and uncertain times. The technology industry has always managed to respond to strange and uncertain times with incredible innovations that lead to the next round of growth. Growth that often comes with much higher rewards and leaves the world in a state almost unimaginable in previous iterations. The last major inflection point for the Internet, and computing in general, was when the dot come bubble burst.
The companies that survived that time in the history of computing and stayed true to their course sparked the Web 2.0 revolution. And their shareholders were rewarded by going from exits and valuations in the millions in the dot com era, they went into the billions in the Web 2.0 era. None as iconic as Google. They finally solved how to make money at scale on the Internet and in the process validated that search was a place to do so.
Today we can think of Google, or the resulting parent Alphabet, as a multi-headed hydra. The biggest of those heads includes Search, which includes AdWords and AdSense. But Google has long since stopped being a one-trick pony. They also include Google Apps, Google Cloud, Gmail, YouTube, Google Nest, Verily, self-driving cars, mobile operating systems, and one of the more ambitious, Google Fiber. But how did two kids going to Stanford manage to become the third US company to be valued at a trillion dollars?
Let’s go back to 1998. The Big Lebowski, Fear and Loathing in Las Vegas, There’s Something About Mary, The Truman Show, and Saving Private Ryan were in the theaters. Puff Daddy hadn’t transmogrified into P Diddy. And Usher had three songs in the Top 40. Boyz II Men, Backstreet Boys, Shania Twain, and Third Eye Blind couldn’t be avoided on the airwaves. They’re now pretty much relegated to 90s disco nights. But technology offered a bright spot. We got the first MP3 player, the Apple Newton, the Intel Celeron and Xeon, the Apple iMac, MySQL, v.90 Modems, StarCraft, and two Stanford students named Larry Page and Sergey Brin took a research project they started in 1996 with Scott Hassan, and started a company called Google (although Hassan would leave Google before it became a company).
There were search engines before Page and Brin. But most produced search results that just weren’t that great. In fact, most were focused on becoming portals. They took their queue from AOL and other ISPs who had springboarded people onto the web from services that had been walled gardens. As they became interconnected into a truly open Internet, the amount of diverse content began to explode and people just getting online found it hard to actually find things they were interested in. Going from ISPs who had portals to getting on the Internet, many began using a starting page like Archie, LYCOS, Jughead, Veronica, Infoseek, and of course Yahoo!
Yahoo! Had grown fast out of Stanford, having been founded by Jerry Yang and David Filo. By 1998, the Yahoo! Page was full of text. Stock tickers, links to shopping, and even horoscopes. It took a lot of the features from the community builders at AOL. The model to take money was banner ads and that meant keeping people on their pages. Because it wasn’t yet monetized and in fact acted against the banner loading business model, searching for what you really wanted to find on the Internet didn’t get a lot of love. The search engines or portals of the day had pretty crappy search engines compared to what Page and Brin were building.
They initially called the search engine BackRub back in 1996. As academics (and the children of academics) they knew that the more papers that sited another paper, the more valuable the paper was. Applying that same logic allowed them to rank websites based on how many other sites linked into it. This became the foundation of the original PageRank algorithm, which continues to evolve today. The name BackRub came from the concept of weighting based on back links. That concept had come from a tool called RankDex, which was developed by Robin Li who went on to found Baidu.
Keep in mind, it started as a research project. The transition from research project meant finding a good name. Being math nerds they landed on "Google" a play on "googol", or a 1 followed by a hundred zeros.
And within a year they were still running off University of Stanford computers. As their crawlers searched the web they needed more and more computing time. So they went out looking for funding and in 1998 got $100,000 from Sun Microsystems cofounder Andy Bechtolsheim. Jeff Bezos from Amazon, David Cheriton, Ram Shriram and others kicked in some money as well and they got a million dollar round of angel investment. And their algorithm kept getting more and more mature as they were able to catalog more and more sites. By 1999 they went out and raised $25 million from Kleiner Perkins and Sequoia Capital, insisting the two invest equally, which hadn’t been done.
They were frugal with their money, which allowed them to weather the coming storm when the dot com bubble burst. They build computers to process data using off the shelf hardware they got at Fry’s and other computer stores, they brought in some of the best talent in the area as other companies were going bankrupt.
They also used that money to move into offices in Palo Alto and in 2000 started selling ads through a service they called AdWords. It was a simple site and ads were text instead of the banners popular at the time. It was an instant success and I remember being drawn to it after years of looking at that increasingly complicated Yahoo! Landing page. And they successfully inked a deal with Yahoo! to provide organic and paid search, betting the company that they could make lots of money. And they were right. The world was ready for simple interfaces that provided relevant results. And the results were relevant for advertisers who could move to a pay-per-click model and bid on how much they wanted to pay for each click. They could serve ads for nearly any company and with little human interaction because they spent the time and money to build great AI to power the system. You put in a credit card number and they got accurate projections on how successful an ad would be. In fact, ads that were relevant often charged less for clicks than those that weren’t. And it quickly became apparent that they were just printing money on the back of the new ad system.
They brought in Eric Schmidt to run the company, per the agreement they made when they raised the $25 million and by 2002 they were booking $400M in revenue. And they operated at a 60% margin. These are crazy numbers and enabled them to continue aggressively making investments. The dot com bubble may have burst, but Google was a clear beacon of light that the Internet wasn’t done for.
In 2003 Google moved into a space now referred to as the Googleplex, in Mountain View California. In a sign of the times, that was land formerly owned by Silicon Graphics. They saw how the ad model could improved beyond paid placement and banners and acquired is when they launched AdSense. They could afford to with $1.5 billion in revenue.
Google went public in 2004, with revenues of $3.2 billion. Underwritten by Morgan Stanley and Credit Suisse, who took half the standard fees for leading the IPO, Google sold nearly 20 million shares. By then they were basically printing money. By then the company had a market cap of $23 billion, just below that of Yahoo. That’s the year they acquired Where 2 Technologies to convert their mapping technology into Google Maps, which was launched in 2005. They also bought Keyhole in 2004, which the CIA had invested in, and that was released as Google Earth in 2005. That technology then became critical for turn by turn directions and the directions were enriched using another 2004 acquisition, ZipDash, to get real-time traffic information. At this point, Google wasn’t just responding to queries about content on the web, but were able to respond to queries about the world at large. They also released Gmail and Google Books in 2004.
By the end of 2005 they were up to $6.1 billion in revenue and they continued to invest money back into the company aggressively, looking not only to point users to pages but get into content. That’s when they bought Android in 2005, allowing them to answer queries using their own mobile operating system rather than just on the web. On the back of $10.6 billion in revenue they bought YouTube in 2006 for $1.65 billion in Google stock. This is also when they brought Gmail into Google Apps for Your Domain, now simply known as G Suite - and when they acquired Upstartle to get what we now call Google Docs.
At $16.6 billion in revenues, they bought DoubleClick in 2007 for $3.1 billion to get the relationships DoubleClick had with the ad agencies.
They also acquired Tonic Systems in 2007, which would become Google Slides. Thus completing a suite of apps that could compete with Microsoft Office. By then they were at $16.6 billion in revenues.
The first Android release came in 2008 on the back of $21.8 billion revenue. They also released Chrome that year, a project that came out of hiring a number of Mozilla Firefox developers, even after Eric Schmidt had stonewalled doing so for six years. The project had been managed by up and coming Sundar Pichai. That year they also released Google App Engine, to compete with Amazon’s EC2.
They bought On2, reCAPTCHA, AdMob, VOIP company Gizmo5, Teracent, and AppJet in 2009 on $23.7 Billion in revenue and Aardvark, reMail, Picnic, DocVerse, Episodic, Plink, Agnilux, LabPixies, BumpTop, Global IP Solutions, Simplify Media, Ruba.com, Invite Media, Metaweb, Zetawire, Instantiations, Slide.com, Jambool, Like.com, Angstro, SocialDeck, QuickSee, Plannr, BlindType, Phonetic Arts, and Widevine Technologies in 2010 on 29.3 billion in revenue.
In 2011, Google bought Motorola Mobility for $12.5 billion to get access to patents for mobile phones, along with another almost two dozen companies. This was on the back of nearly $38 billion in revenue.
The battle with Apple intensified when Apple removed Google Maps from iOS 6 in 2012. But on $50 billion in revenue, Google wasn’t worried. They released the Chromebook in 2012 as well as announcing Google Fiber to be rolled out in Kansas City.
They launched Google Drive They bought Waze for just shy of a billion dollars in 2013 to get crowdsourced data that could help bolster what Google Maps was doing. That was on 55 and a half billion in revenue.
In 2014, at $65 billion in revenue, they bought Nest, getting thermostats and cameras in the portfolio.
Pichai, who had worked in product on Drive, Gmail, Maps, and Chromebook took over Android and by 2015 was named the next CEO of Google when Google restructured with Alphabet being created as the parent of the various companies that made up the portfolio. By then they were up to 74 and a half billion in revenue. And they needed a new structure, given the size and scale of what they were doing.
In 2016 they launched Google Home, which has now brought AI into 52 million homes. They also bought nearly 20 other companies that year, including Apigee, to get an API management platform. By then they were up to nearly $90 billion in revenue.
2017 saw revenues rise to $110 billion and 2018 saw them reach $136 billion.
In 2019, Pichai became the CEO of Alphabet, now presiding over a company with over $160 billion in revenues. One that has bought over 200 companies and employs over 123,000 humans. Google’s mission is “to organize the world's information and make it universally accessible and useful” and it’s easy to connect most of the acquisitions with that goal.
I have a lot of friends in and out of IT that think Google is evil. Despite their desire not to do evil, any organization that grows at such a mind-boggling pace is bound to rub people wrong here and there. I’ve always gladly using their free services even knowing that when you aren’t paying for a product, you are the product. We have a lot to be thankful of Google for on this birthday. As Netscape was the symbol of the dot com era, they were the symbol of Web 2.0. They took the mantle for free mail from Hotmail after Microsoft screwed the pooch with that.
They applied math to everything, revolutionizing marketing and helping people connect with information they were most interested in. They cobbled together a mapping solution and changed the way we navigate through cities. They made Google Apps and evolved the way we use documents, making us more collaborative and forcing the competition, namely Microsoft Office to adapt as well. They dominated the mobility market, capturing over 90% of devices. They innovated cloud stacks. And here’s the crazy thing, from the beginning, they didn’t make up a lot. They borrowed the foundational principals of that original algorithm from RankDex, Gmail was a new and innovative approach to Hotmail, Google Maps was a better Encarta, their cloud offerings were structured similar to those of Amazon. And the list of acquisitions that helped them get patents or talent or ideas to launch innovative services is just astounding.
Chances are that today you do something that touches on Google. Whether it’s the original search, controlling the lights in your house with Nest, using a web service hosted in their cloud, sending or receiving email through Gmail or one of the other hundreds of services. The team at Google has left an impact on each of the types of services they enable. They have innovated business and reaped the rewards. And on their 22nd birthday, we all owe them a certain level of thanks for everything they’ve given us.
So until next time, think about all the services you interact with. And think about how you can improve on them. And thank you, for tuning in to this episode of the history of computing podcast.