Googling Google

It is clear that Google’s rise is remarkable, and an interesting story. As graduate students at Stanford, Page and Brin became interested in creating a search engine that could scale upwards along with the growth of the world wide web. This meant abandoning human editors–which is how the early web searches were compiled–and replacing them with automation. They devised a system in which automated spider programs would copy pages from the Internet, which would then be indexed. Results are determined by a ranking system based on a complex algorithm.

Page and Brin left Stanford in 1998 and incorporated their search engine into a company called Google. (“BackRub,” “Googol,” and “The Whatbox” were the other names under consideration; the last would have been the most descriptive.) From the start, people were excited about the business. They had $1 million in seed money from four investors at the outset and were given another $25 million in venture capital less than a year later. This despite the fact that neither Brin nor Page had any idea how they might eventually make money with their product.

After three years of losing money, Google came up with the idea to sell little text ads on its search-results page. The ads a user was shown depended on what they had searched for, making them particularly attractive to advertisers. Adding to the enticement was that Google only charged advertisers if a user clicked on their ad. It was a revolutionary idea which turned into gushers of money for Google. The year before they began serving up these ads the company had revenues of $86 million. The next year (2002) revenues jumped to $400 million. The year after that they stood at $1.5 billion, and they’ve continued to increase at a phenomenal pace ever since.

Google’s wealth is difficult to comprehend. On the day that the company went public 900 employees became millionaires. Four employees and three outside directors became billionaires. Even the in-house masseuse became so wealthy that she retired and established a private philanthropic foundation. And in the intervening years, Google has used its wealth to spread outwards from the search business into a formidable number of other businesses: web video, TV advertising, e-commerce, cloud-computing, and mobile phones, to name just a few.

In Googled Auletta ascribes the company’s success to Page and Brin’s genius and the uniqueness of the corporate culture they’ve built. Google centers itself around rank-and-file engineers, not managers or sales staffs. Neither of the founders employs a secretary. The company is famously generous with employees, providing free massages and meals and giving them 20 percent of their work time to pursue individual projects of their choosing. And the founders have made plain that they view Google’s mission as not to make money but to improve the world.

In the prospectus they released before their IPO, Page and Brin said eight times in a six-page stretch that they wanted to make “the world a better place.” As in: “[L]arge, successful corporations .  .  . have an obligation to apply some of those resources to at least try to solve or ameliorate a number of the world’s problems and ultimately to make the world a better place.”

But the mythology of Google is somewhat different from reality. Outside of its core search/advertising business, Google has had few successes. Its home-grown products, such as Orkut, Knols, Lively, and Google Checkout (knockoffs of Facebook, Wikipedia, Second Life, and PayPal, respectively), have been failures. Google’s biggest successes have come from acquisitions. For instance, Google bought YouTube after its own attempt at video on the web, Google Video, crashed and burned. And did the same with Blogger after its blog platform, Pyra Labs, failed. Even the “successful” acquisitions Google has made–Google Earth, Google Maps, Google Docs, and Blogger were all purchases, too–have taken up resources without creating significant revenue.

As for its search business, Page and Brin did build what is, for now, the world’s best search engine–no mean feat. Yet search wasn’t the company’s big innovation; advertising was. According to legend, Google was the first company to realize that simple text ads based on search queries, which only charged the advertiser on a per-click basis, could be enormously, staggeringly profitable.

Only they weren’t. Bill Gross, who founded Overture, came up with that idea and in 1999 approached Google about merging the companies. Page and Brin said no, that they would never mix paid ads with search results. Which is now the only profitable thing Google does. (Overture sued Google only to have the suit withdrawn because the company’s corporate parent, Yahoo, owned some old warrants for Google stock, which it cashed in after the IPO, a form of pseudo-settlement.)

Google’s only real business is advertising, yet even here they’ve had mixed results. Those text ads are dynamite, but Google couldn’t master the banner ad business and eventually resorted to simply buying DoubleClick, the industry leader. Eager to extend their tentacles into other ad mediums, Google started selling print ads, TV ads, and radio ads. The print and audio divisions performed so badly that they’ve already been shut down. The TV division is still limping along lamely.

Google’s one big success has been so big and successful that it papers over all of their other failures. Microsoft was like that once, too.

Page and Brin really do seem to believe in Google’s ability to change the world around them. Page once told a class of Stanford students that “if you solve search, that means you can answer any question. Which means you can do basically anything.” It’s a progressive mirage, but it’s nothing new in business. Tycoons from Henry Ford to Jerry Yang have imagined that their businesses were actually civilizing missions for mankind. Google is a large, successful company, but despite Auletta’s contention, there’s very little new about it.

That said, Googled is not entirely uncritical. Surveying Google’s vast empire of money-losing divisions, Irwin Gotlieb, CEO of the advertising giant GroupM, quips, “They can buy anything they want, or lose money on anything they choose to. I can only do things that are rational to do for my business.” Auletta sketches a picture of Page and Brin’s relationship with Al Gore that is particularly unflattering. Gore is close to the duo and a member of Google’s board, but they view him not as a canny operator or political confederate/celebrity but as a public intellectual on the level of Stephen Hawking.

For all that, the only time Auletta pushes back against Page and Brin is when they apply their engineering insights to his own work. During the course of one interview, Brin tells Auletta that “people don’t buy books” anymore and that he might as well put his book online for free.

“You might make more money if you put it online,” Brin says. “More people will read it and get excited about it.” Auletta then patiently explains that, without an advance, he couldn’t have reported the book. Without a publishing house, the book couldn’t be edited and fact-checked and vetted by lawyers. And, incidentally, that Stephen King tried exactly such a system in 2000 by publishing The Plant over the Internet, releasing the novel in serial, for a one-dollar fee using the honor system. “Sales” (of the paying variety, that is) were so slow that King abandoned the project without finishing the story.

Jonathan V. Last is a staff writer at THE WEEKLY STANDARD.