eWEEK at 30: Google Rises From Search Startup to Web Service Behemoth

 
 
By Todd R. Weiss  |  Posted 2013-12-21
 
 
 

eWEEK at 30: Google Rises From Search Startup to Web Service Behemoth


When Google celebrated its 15th birthday in September, it held a media event in the Menlo Park, Calif., garage that was originally rented in 1998 for $1,700 a month as the company's first headquarters. Things have certainly changed for the company in the intervening years since its garage days.

The company's history so far has been marked by a rapid succession of remarkable milestones as noted on Google's corporate timeline. When Google first went live, it was a bare bones search engine startup with a starkly simple home page and two young founders with a dream of building a better way to search the Internet.

Co-founders Larry Page and Sergey Brin met at Stanford University in 1995, and by the following year, they had created a search engine "that used links to determine the importance of individual Web pages," according to the company's Website. That search engine originally was named "BackRub." Later, Page and Brin named it Google, which was a play on the word "googol," the mathematical term for a 1 followed by 100 zeros.

In 2000, a watershed event occurred within the small but rapidly growing company when it introduced Google AdWords, which offered a way for advertisers to create and establish online ad campaigns. AdWords were the start of the revenue growth at Google.

The introduction of Google's free email service, Gmail, happened on April Fools' Day in 2004, which was followed that August by Google's Initial Public Offering, when investors snapped up 19.6 million shares of Class A common stock, which was a strikingly small number of shares, especially by today's IPO standards.

Also in 2004, Google acquired digital mapping company Keyhole, which resulted in the launch of Google Maps and Google Earth in 2005, according to Google. YouTube, the online video sharing site, was acquired in 2006. Then Google launched the Android mobile operating system in 2007 to the eternal fury of Apple and other mobile OS competitors.

Then the open-source Chrome Web browser was unveiled in September 2008, followed by the Google+ social media initiative in June of 2011.

One thing has remained from those first days, however. Even 15 years later, Google still acts like a start-up by innovating, trying offbeat ideas and experimenting using a wide swath of technologies to see what is possible.

It left its early competitors in the dust by turning its search engine into a huge advertising revenue machine that has no peer. It's also built and grown a powerful search infrastructure and is beginning to leverage it to serve as a cloud platform for a growing number of business customers.

It's also a research and development company that has hatched and nurtured some crazy-yet-seemingly-viable ideas such as self-driving cars, Google Glass eyewear-mounted computers and "moonshot" research projects that could someday inspire more new ideas, innovations and even new businesses. They're even working on a project that uses high-altitude balloons to bring high-speed Internet access to remote places.

Inside Google's workplaces, employees are encouraged to collaborate and explore inside a culture that is often described by Google alums as "inspiring." Today, Google, which is based in Mountain View, Calif., has more than 70 offices in more than 40 nations around the world.

eWEEK at 30: Google Rises From Search Startup to Web Service Behemoth


The company's philosophy, defined by the founders early in Google's existence, is based on what Google calls "Ten things we know to be true." Highlighting that list is to "focus on the user and all else will follow," "it's best to do one thing really, really well," "fast is better than slow," and "you can be serious without a suit."

But another crucial factor in Google's phenomenal growth so far is that it hasn't shied away from moving into technology sectors dominated by entrenched competitors.

Google introduced its Chrome Web browser at a time when Microsoft's Internet Explorer was still the browser market leader. Its Android mobile operating system emerged after the Apple iPhone, with the iOS operating system established itself as a big hit. As of the 2013 third quarter, Android accounted for 81 percent of all smartphone shipments, according to research firm IDC.

So what makes Google so successful when other early Internet companies, such as AltaVista, got a head start by introducing popular search engines only to wither from the market after they were overtaken by Google?

Google declined an eWEEK request for an interview with an executive to discuss the company's progress. But industry analysts shared their views on the reasons for the company's rapid growth and success.

Google emerged in the search engine market at a seminal time when new search engines were popping up like flowers in springtime.

"We were changing search engines seemingly every nine months," Jonathan Yarmis, principal analyst with Yarmis Group, told eWEEK. "Yahoo itself, Excite, Lycos, AltaVista, AskJeeves, they all had their moments in the sun as the hot search engine. Along came Google, and we stopped switching."

Users had a chance to try all of these search engines and after a while they started gravitating toward Google as a default search engine, Yarmis explained. Google ultimately hung around because it was "good enough" for most users, Yarmis said.

"More important than being good enough, Google was brilliant enough and/or lucky enough to figure out the monetization angle. To this day, their real business all stems from that original idea of selling [ad] space alongside their organic listings. There are few things more valuable on the Internet than selling the space next to the organic listings," Yarmis said.

Once Google caught on, users became resistant to trying the next new thing or even consistently using the other search engines they were once eager to try out, he noticed.

But there is much more to Google's success than just a good search engine.

"They have one of the most sophisticated, complicated and ultimately profitable business models that I've ever seen," Scott Strawn, an IT analyst covering Google and Amazon, told eWEEK.

"Google is unique with its search capabilities and what they've built on top of that with digital advertising. It's a uniquely possible business model, with a lot of it tying into the cloud and a lot built on a platform that has massive in-house computing capabilities to analyze the data that is the nature of this business."

eWEEK at 30: Google Rises From Search Startup to Web Service Behemoth


And though he also watches Amazon's business closely, Strawn says that Google's business is in a league of its own. "It is truly impressive what they've done. They'll continue to amaze us going forward. Google is truly unique with the talent available to them."

Other big IT competitors, such as Microsoft, certainly aren't out of the picture, Strawn said, but they have very different products and are built on different technology ecosystems compared to Google. "Microsoft still holds, among other things, two very, very important platforms for the tech world, Windows and Office," Strawn said. "And despite what we see with the decline in the number of PCs sold and the rise of mobile, Microsoft is still a very powerful revenue-generation engine, and it is still very relevant."

On the other hand, he said, "Google's business is unique. It doesn't sell software. It sells advertising. [The two companies] have incentives that don't align."

Google certainly faces its own competitive challenges. Amazon, for example, has beaten Google to the punch by giving enterprises and the public access to comprehensive cloud infrastructure, Strawn said. "Amazon is really the company that came out with a public cloud early on, in a meaningful way," he said. "Google has only released its Infrastructure-as-a-Service (IaaS) platform to the public recently. In many ways, they are late to the game."

Amazon and Google got to the point of offering their cloud infrastructure capabilities in different ways, he noted. For Amazon's e-commerce business, it had to build out a complex and expensive infrastructure of its own to run its business. Then it realized that it could rent out excess capacity to generate revenue and pay for the infrastructure.

Now Google is beginning to really go after that same opportunity, which is growing rapidly, according to Strawn. Ultimately, though, while Google is heading into this IaaS area that had been dominated by Amazon, "it doesn't really align with their core business, which is generating revenue based on advertising."

For Google, though, the move into the infrastructure business actually closes a circle, Strawn said. "Almost everything that they are involved in, even self-driving cars, can be tied back to digital advertising, to the process of gathering data and then using that data to display ads," he said.

In that light, getting involved in the infrastructure business makes sense because, like Amazon, Google already has a massive and complex IT infrastructure so it basically has everything it needs to be competitive in the market, he added. "Just due to the nature of their business, they have the data centers and infrastructure ready to offer this up to the rest of the world."

So will Google overtake Amazon as the leader in the IaaS marketplace? Will IaaS be a large part of the company's revenue stream five years from now?

Probably not, Strawn said. "I don't think so because their ad revenue business is so powerful and it will continue to grow," far exceeding anything that the company will bring in from its cloud business.

eWEEK at 30: Google Rises From Search Startup to Web Service Behemoth


As Google follows through on some of its projects to provide Internet access to more people around the world through initiatives such as the floating balloon Internet trials, the company is working to expand the reach of its online ads to more users. If these initiatives are successful, it will only increase its ad revenues even more, he said.

"They have a lot of room to run to grow their core business," Strawn said. "So it's hard to see in a best-case scenario how the profits from a cloud business would compare to their core business of ad revenue. It's just not in the DNA."

Another IT analyst, Dan Maycock of OneAccord Digital, told eWEEK that ultimately Google has been changing the way IT works since it arrived on the scene in the early exhilarating days of the Internet's explosive growth.

"It's really not just the story of Google, but it's the story of data," Maycock said. "It's been a birth of data science and the fact that everyone now is talking about how they can use their data, how they can do reports and how they can do data analysis," he said. Google has done nothing less than bring "about the next Information Age," which means not just having information, but showing people how to use it, Maycock said.

For Google, it was just a matter of being in the right place at the right time, Maycock said, compared to competitors who faltered and never reached the pinnacle of the company's success. "What they did—and other companies didn't do—is that they leveraged data to sell advertising," Maycock said. "Others had done it before, but not as well as they did."

One other important move for Google has been its willingness to take risks, Maycock said. "They haven't let the cost of doing something deter them from trying it," Maycock said. "From self-driving cars, to fiber optic Internet, they're not intimidated at large-scale endeavors."

They have gotten to this position because the company concentrated on business fundamentals. "They've focused on doing a couple things extremely well and kept both their customers and advertisers happy in the process. This has meant a growing cash flow, increased profitability and valuation and the ability to fund and succeed at other projects."

Another important factor is that Google succeeded in "creating a brand that attracts the best and brightest talent around, and built a process that puts information and engineering at the forefront of their business," he said. "This has given them a tremendous amount of talent, geared around breaking new ground and being the best at what they do."

By excelling in online ad revenue generation, Google has empowered itself "to shoot for the rest of their targets," Maycock said. "They will no doubt have struggles, though, like any publicly traded company, and only time will tell how successful they remain in the future. But for now they're doing pretty great and seem to be warding off a lot of the naysayers surrounding their business model."

But that doesn't mean that the company hasn't made mistakes or generated plenty of controversy for its business practices, some of which stem from complaints and allegations around the world about Google's use of private user data and antitrust challenges from competitors.

eWEEK at 30: Google Rises From Search Startup to Web Service Behemoth


In November, Google agreed to pay a $17 million settlement to 37 U.S. states to resolve allegations that the company violated consumer privacy by using tracking cookies to capture the searching habits of Apple Safari Web browser users from 2011 to 2012.

Another user privacy case is still pending against Google involving the then-undisclosed collection of unsecured wireless personal user data during Street View imaging projects around the nation. In September, Google lost its latest court appeal in the matter.

In a similar case in Europe in April, Google was hit with an $189,167 fine in Germany for Street View data collection that occurred there without disclosure to affected residents as Street View vehicles combed German streets collecting information for its maps from 2007 to 2010. The Street View program came under scrutiny both in the United States and in Europe after it was learned that Google was gathering the information street by street.

Google continues to be under investigation in Europe regarding its search engine, which holds more than 60 percent of the search market, with Microsoft's Bing being a distant second. Competitors claim that Google tunes its search algorithms to favor its own products and results over those of others, giving it an unfair advantage in search and Web advertising.

Those challenges, however, have apparently not dulled Google's overall luster in the marketplace.

Google is a market giant with an estimated $50 billion in cash that it can invest in new ideas, new businesses and technologies, along with the leadership and corporate philosophy that makes almost anything possible.

It's a combination producing staggering success, all ultimately due to the simple concept of Google Ad Words, said analyst Rob Enderle of Enderle Research.

"Basically Google figured out how to monetize the Web while most others assumed that if you'd do something that folks liked that the money would eventually magically show up," Enderle said. "It wasn't about search, which is where Microsoft and Yahoo thought the market battle would play out. It was about turning the Web into a business and figuring out how to make it pay."

Ironically, Google appeared in the marketplace just two years before the dot-com crash in 2000, Enderle said, yet it was able to survive and ultimately become a global success story.

"This was likely helped because they came to market during the rise and painful fall of the dot-coms and that drove home the critical need for a revenue plan," he said. "They actually over-executed and now own the majority of ad revenue in the U.S. and much of the rest of the world."

Yet there is still one symbol of the company's success that people hardly even seem to notice anymore—Google as a business even inspired a new phrase in our lexicon—"Go Google it."

The phrase "Google it" has been heard over and over again in movies, in private and public conversations and it's been repeated often in posts and stories on the Internet.

That's certainly a symbolic cultural milestone for Google at 15. If you don't believe it, well, you can certainly Google it.

That in itself is no small achievement for a business that began with a dream and a $10,000 investment inside a small Menlo Park garage.

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