Book Excerpt: Expanding Beyond Search

The recent news from Google on Talk, Maps, Earth, Desktop, et al reminded me of a couple of pivot points in the company’s history. For this week’s excerpt (I’m just back from time off, and digging out…) I’m going to post excerpts from two. First is the purchase of the assets of Deja and the move into new markets in 2001, next is AdSense in 2003. This is culled from two separate chapters so it may not flow perfectly…. Net net: the idea of Google expanding beyond search is not new – it’s been happening for years.

The book stuff is really starting to heat up. I did my first reading/talk at the Bunch of Grapes in Vineyard Haven, MA last Friday, and the first reviews are in as well, for more, see the Amazon page. Yikes…..

(And by the way, thanks to your pre-orders, the book is first on the list of “Popular Pre-orders” for Business on Amazon. THANK YOU!)

By the time Schmidt joined, Google was handling more than 100 million searches a day. Early in the year, the company began a raft of significant improvements to its search service, starting with the purchase of DejaNews, a failed attempt at making money from Usenet, a public messaging system composed of more than 500 mil- lion discrete postings on nearly every subject imaginable. While the acquisition of such a data-rich asset went largely unnoticed, the move marked a significant departure for the company. By acquiring Usenet and adding it to the index, Google was actively seeking out new information, as opposed to passively spidering the Web.

The move was consistent with what would become the company’s new mission statement: “To organize the world’s information and make it universally accessible and useful.” Google would continue this trend through 2003 and 2004 with the acquisition of Blogger, Picasa (a photo-sharing service), and Keyhole (a massive satellite imaging company), and the launch of Google Print.

But it was during 2001 that Google’s appetite for data began in earnest. The service added public phone-book information to its index as well asa new image search tool, complete with 250 million images. By the end of the year, Google’s burgeoning index comprised more than 3 billion documents. At the same time, the company aggressively expanded internationally—by early 2002, it was serving search queries in more than forty languages. And 2001 saw Google’s aggressive entry into the mobile market through partnerships with major players like Cingular, AT&T, and Handspring.

Clearly, Google was metastatizing—everywhere there was op- portunity, it seemed the company was expanding. Google soon had more than one hundred engineers in the company, but no focused approach to managing how their time was spent. Unsure of the best way to handle such growth, the triumvirate set up a traditional management structure based on hierarchy—teams of engineers reporting to more than a dozen engineering managers, who in turn reported to Brin and Page. But the approach began to feel top-heavy and bureaucratic—it was slowing down innovation. In September 2001, Brin and Page gathered all the engineering managers together at a companywide meeting—then informed them they were out of a job. Most got jobs in other places in the company, but the founders had made a declaration—not only were they in charge, but things would be done differently at Google.

———–

By the end of 2002, Google stopped publicly discussing its key internal metrics, claiming that it had “more than 1,000”employees and “more than 10,000” computers in its vaunted infrastructure. The company did still boast about the size of its Web index, which passed 4 billion documents in December 2002. But it guarded its revenue numbers jealously— perhaps because they were so good: in 2002, the company made nearly $100 million on gross revenues of about $440 million. That’s some serious cash, and the longer people like Bill Gates stayed in the dark about it, the longer Google could remain free from additional competition.

As compared with Google the service, it has always been difficult to extract information from Google the company—clearly this trait was inherited from its founders, Page in particular. But in late 2002 and early 2003, it seemed the company was circling its wagons even more, perhaps for competitive advantage, but perhaps also in preparation for a possible IPO.

In December 2002, the company launched Froogle, an e-commerce search engine. To most, it was increasingly clear that Google planned to play, and big, in the world of e-commerce. Through the next year, the company continued its aggressive expansion and its rather disingenuous practice of avoiding hard numbers. In mid-2003, the company announced it served “more than 250 million queries a day,” and as of early 2005, it has not updated the figure. In early 2003, Google acquired Blogger, the wildly popular weblog hosting company, prompting many to speculate that Google was becoming a portal along the lines of Yahoo or AOL. But Google for the most part left Blogger alone.

Why? The answer most likely lies in the company’s next major innovation, a new advertising program called AdSense. Launched in March 2003 and rolled out to the world that June, Google’s AdSense program marked a departure in the company’s business model—this was not a pure search business; it was something else. AdSense allowed third-party publishers large and small to access Google’s massive network of advertisers on a self-serve basis—in minutes, publishers could sign up for AdSense, and AdSense would then scan the publishers’ Web sites and place contextually relevant ads next to the content, much as AdWords did for Google’s own site. But there was a significant difference to AdSense—it was driven not by the intent-based queries of consumers, as search is, but rather by the content of a site. The presumption was that if a reader was visiting a site written about, say, flowers, advertisements about flowers from Google’s networks would be a good fit.

By nearly any measure AdSense was a hit—thousands of publishers signed up for the service, most of them tiny sites that previously had no way to monetize the small amount of traffic they had garnered. This was particularly true for blogs—the connection to Blogger now became obvious. For many, AdSense was the equivalent of magic—they added a few lines of code to their sites, and in a month or so checks from Google started showing up in the mail.

But while AdSense as a revenue stream has grown steadily—by Early 2005 it accounted for an estimated 15 percent of Google’s over- all revenues—many advertisers complained that AdSense didn’t work nearly as well as AdWords. Potential customers are in a very dif- ferent frame of mind when they are reading about flowers from when they are typing “flowers” into a search engine. Google acquiesced to advertiser feedback and in 2004, allowed them to opt out of the Ad- Sense network. Regardless, AdSense was a major new distribution Network for what can be considered Google’s second most impressive asset, after its core infrastructure: its network of advertisers.