Lecture
After the collapse of the Internet technology market in 2000, which led to bankruptcies and massive layoffs across the entire Silicon Valley, Sergey Brin and Larry Page immediately turned to decisive action. Their financially strong and growing young company in this situation only won. Google one of the few in this crisis moment expanded staff.
For IT companies whose shares were traded on the stock exchange, hard times have come. Google did not issue shares and therefore possessed immunity to infection from Wall Street. At that moment, first-class software engineers and mathematicians were at her disposal, finding themselves in a street with a pile of worthless stock options. The company received a unique opportunity to increase its intellectual potential, which it could hardly have done under other circumstances.While most of its major competitors sang finances romances, Google moved to a more spacious office in the town of Mountain View.
The lively atmosphere that reigned in it contrasted sharply with the depression of the Silicon Valley. As noted in one of the messages from Stanford University, lanky programmers, assistants, chewing jelly sweets, and friendly computer users, who in Google appreciated the simplicity, speed of search and high relevance of the results, were integral parts of this atmosphere. Expanding the computer infrastructure - the core of their search engine, Brin and Page spent money extremely economically. But the creation of a culture in the Googleplex, the key elements of which, according to their plan, should have been the dedication of the company and job satisfaction, did not spare the money. The objects of this culture - colorful gymnastic balls, lava-lamps, various devices and gadgets - gave the office a coziness of the campus. Bryn and Paige did not doubt that all these expenses would pay off a hundredfold.
Under the leadership of CEO Larry Page and President Sergey Brin, 85 employees worked late into the night, but they felt they were part of one big family. The company provided them with free lunches, juices and snacks. In addition, Google had its own laundry, hairdresser, dental office, medical center and car wash, which later added a kindergarten, fitness center and massage room. Beach volleyball, American football, scooter races, numerous palm trees, comfortable armchairs and even dogs - all this contributed to the formation of a creative, lively atmosphere in which Google employees, most of whom were young and unmarried, were in a rush . For those of them who traveled to work from San Francisco, the company rented a bus equipped with wireless Internet access devices - so that they could work on interesting ideas on the road.
At the same time, elements of the company's genuine business strategy began to emerge.
Google search engine was the best of its kind, profitable (advertising) and a popular brand, associated not only with excellent quality, but also with pleasure and impartiality. The company had the human and technical resources necessary for growth in all areas - from computer infrastructure to advertising and agency support for new products. At the same time, its founders continued to focus on users and the quality of search results, ignoring the persistent requests of investors to take advantage of the moment and to get rid of as much “green” as possible from advertising. "The Google homepage violates the main advertising rule - on it, the most visited of all the pages of the site, there are no promotional offers at all," the Stanford press release says.Due to the lack of advertising, the main page is, by the way, the most valuable property of the company on the Internet! - loaded literally in a split second. Pages with search results were also loaded very quickly - after all, they were only targeted text ads, and not banners the entire width of the screen.
Not surprisingly, the company did not use flashy advertising to promote its brand. Bryn and Page did not spend money on advertising - they promoted Google in other, less expensive and at the same time more efficient ways: they sent users messages and news, handed out branded sports souvenirs at the matches of the Stanford University football team, opened their online store purchase caps, t-shirts, lava-lamps and other items with the company logo. They did not doubt the superiority of their offspring over its counterparts, and therefore they believed that users satisfied with Google’s work would tell their friends about what a cool search engine they had found. About the capabilities of their computer system, the fact that in the first months of existence, the company had only five specialists, and the number of users reached one million, speaks eloquently. Bryn and Paige then had to keep the office phone in a strict secret: if any of the users recognized him, an avalanche of calls would have fallen on them. They also demonstrated remarkable knowledge of fire brandy - by allowing their users and the media to popularize the company's logo. “Their system is very good, they grew quite naturally,” says Peter Seely, a former marketing director at Coca-Cola.
While Google was spreading its wings, one of its main potential competitors had its wings clipped. In April 2000, Microsoft, which, according to some experts, could well create a search engine and compete with Google, lost an important lawsuit in federal court in the District of Columbia: Judge Thomas Penfield Jackson ruled that because Internet Explorer is an integral part of the operating system Windows, this fact is a violation of US antitrust laws. During the hearings, prosecutors presented Microsoft as a monopolist seeking to crush the entire market. The same opinion about the company has developed among the majority of software market participants. They did not hide their satisfaction from the fact that the Gates monster was finally put in place.
The situation around Microsoft was only in the hands of Google. The programmers, who once dreamed of a career in Microsoft, were now represented by Darth Vader of the software industry, a dark force who did not want to play by the rules.For Google, however, the image of a progressive young company, advocating the principle of “Do no harm!”, Was established, and its founders - the reputation of excellent guys. The home page of her site, which pleased the user's eye with its purity, always functioned smoothly - unlike the Windows shell, with its frequent reboots and frequent reports of a "fatal error." In addition, Google had a high goal: to make all the information in the world accessible to users. All this allowed the company to strengthen its staff with a number of highly qualified specialists, well, Microsoft, which received a negative press, curtailed plans for expansion into new markets. She, of course, appealed the decision of the federal court, but, obviously, she didn’t want the Ministry of Justice, the European Union or other organizations to again accuse her of using unfair competition methods.
Google, a company with a spotless reputation and an excellent image, received another reason to be proud: 99% of users surveyed in the framework of the Internet services market research called it search engine number one. She also established herself in the university environment, which had very positive consequences. On her initiative, a number of universities and faculties have placed a company logo and search box on their websites, and now more and more students, teachers and graduates used its search engine. In an article published in one of the May issues of the weekly magazine The New Yorker, Google was called "a search engine for the leading players in the high-tech world." And Time Digital magazine went even further: “Comparing Google and its competitors is like comparing a laser and a wooden stick.”
While other IT companies were winding down their activities, Bryn and Page implemented more and more new ideas. “If you are standing now, sit on a chair or chair so as not to fall. Google will soon appear in French, German, Italian, Swedish, Finnish, Spanish, Portuguese, Dutch, Norwegian and Danish, they wrote in a regular press release. “Since Google already uses several tens of millions of computer users all over the world, it seems logical for us to single out the linguistic component of the search.” The company translated the site content into other languages and opened offices in other countries in order to reduce the load on its main site and to achieve an even greater user position. In addition, she opened up to them the possibility of a wireless search: now you can “google” using a mobile phone.
The company also stepped up its brand promotion activities among Internet users: it would be naive to rely only on users to find the Google.com home page themselves. She launched a partnership program in which owners of news portals, online stores and other resources were asked to place a Google search box logo and search box on the home page of their site — that is, give visitors access to the search engine and receive money for each search. Such a partnership was beneficial to both Google and site owners. Webmasters (initially in the United States of America, and then beyond), who agreed to include a search in the list of their services, did not incur any expenses, but earned real money. Google adopted this strategy from NBC and Fox, the leading American television networks that have been providing programs for partners throughout the country for several decades. Thanks to the ingenious strategy, the company attracted millions of Internet users to its search engine and established contact with thousands of website owners around the world. It ensured the growth of the brand on the Internet just when Google’s competitors gradually “evaporated” from the Web. “By becoming a member of our program, you can place a Google search box on your site and you will receive 3 cents for each search made from it,” Bryn and Page announced. “So we thank everyone who helps us promote our search engine.”
On June 26, 2000, Google took a giant step toward worldwide recognition: the company entered into an agreement with Yahoo! about providing information search services to portal users, which allowed it to significantly expand its presence on the Web and to acquire millions of new supporters. Yahoo! One of the most well-known and most visited websites was a welcome customer for all Internet companies, and the decision of his management to make Google a backstage search service provider (previously Inktomi acted in this capacity) had great implications for the future development of the young company.According to Yahoo! they chose Google because the company had advanced search technology and sought to provide users with the most complete and relevant results. "Yahoo! chose Google because they, like us, put consumer at the forefront, - explained the president of Yahoo! Jeff Mallett. “Google is gradually covering the entire Network, so it seems to be the ideal partner for our company, which continues to increase its presence in the global market for Internet technologies.”
Sergey Brin called the agreement "an important event in the life of Google and confirmation of the correctness of our business strategy." The symbiosis of the two companies looked natural: their founders knew each other well, all were Stanford doctoral students at one time, and also received financial support from venture capital firm Michael Moritz. For Larry Page, concluding an agreement between Yahoo! and Google was doubly important - his brother, Karl Jr., then led serious negotiations with Yahoo! about making a big deal. And the next day, June 27, Yahoo! announced its intention to acquire for $ 413 million eGroups, an IT company, of which Karl Page was one of the founders. To top it off, Google announced that its search engine is the largest in the world: it has indexed over a billion copies of web pages. This meant that Google now gave in the blink of an eye not only the most relevant, but also the most complete search results. “In less than half a second, our system finds information in a database that, when printed, would represent a pile of paper 70 miles high,” Page said. “I think it's cool.”
In early 2001, Google processed already 100 million requests per day (10 thousand per second!). The verb "to google" becomes part of the vocabulary of Americans. And journalists of the New York Observer newspaper noticed that some New Yorkers are looking for information on Google about the person with whom they are going to spend the evening. The number of users who have typed their own name in the Google search box has increased all the time. This is not surprising, because self-love is an integral part of human nature. The appearance in the list of results of their own names and surnames was regarded by people as confirmation of their personal significance.
For Google, confirmation of its superiority was the opinion of the “search” guru Danny Sullivan. “The most authoritative search engine expert is Danny Sullivan, author of Search Engine Surveys,” wrote Bryn and Page in a January letter. - According to the results of the survey of the readers of his “Report”, Google is named the leading search engine and the most attractive search engine for the webmaster. It’s a great honor for us because you can believe Mr. Sullivan. ”
As for business, with the help of sales director Omid Kordestani, Brin and Page managed to lure Wal-Mart, the largest US retailer, and Asher, a solid automaker, to a new environment for them. They joined the ranks of thousands of small companies that advertised their products on Google. Brin and Page now viewed contextual advertisements as an important part of the information provided to users. “What is the secret of the success of advertising on Google? In a unique approach, Google, they argued. - On the pages with the search results appear only those advertisements that are thematically associated with a word or phrase typed in the query string. And since there are no bright flashing banners that prevent us from perceiving information, text advertisements are carefully read by users. The latter often find them no less useful than the actual search results. ”
How can this strategy make a profit? Brin and Page turned for advice to Yossi Vardi, an Israeli entrepreneur specializing in venture capital investments as well, and to Eric Schmidt, a computer technology specialist, who will soon take the chair of Google’s CEO. Two experienced managers expressed a number of interesting ideas about how the company could significantly increase sales and, accordingly, profit.
Vardi advised to move advertisements from the top of the page to the column on the right, which occupies a third of the page and separated from the search results by a vertical line: this would allow to place on the pages much more advertising.Brin and Paige, after asking about the opinions of specialists and users, followed his advice. True, at first they were afraid that the quality of the search might suffer, but Vardi, the unsinkable shark of business, finance and technology, convinced them that the integrity of the results would not be compromised, because they would be clearly separated from the advertisements.
Eric Schmidt, already being the CEO, somehow inquired about how many requests and orders for advertising come from North America. The answer to this question formed the basis of the “roadmap”, designed to somewhat shift the emphasis in the company's advertising strategy. Whereas 60% of all requests came from other continents, only 5% of orders for advertisements were received from there. The founders of Google focused on expanding the brand’s presence on the Web and the emergence of search engine branches in foreign languages, but at the same time they forgot to establish contacts with overseas advertisers. Schmidt knew what to do. He told Omsid Kordestani, an ASU of the sales department, to go to Europe and not to return without a staffed sales department at the company's European offices, which were supposed to be opened soon. Shmidt half in jest, half seriously noticed that for this Kordestani would have to fly more than one million miles.But he successfully coped with his mission: very soon the company’s offices in London, Hamburg, Tokyo and Toronto began to boil.
Something interesting was constantly happening in the walls of the Googleplex. Then one programmer wrote a program that allowed users to find any phone number on Google (to do this, you had to specify the full name of the person and his zip code in the query line). Then another created a program that caught grammatical errors in words. If one of the words indicated in the search box was typed incorrectly, Google asked: “Did you mean xxx?” Thus, the search engine tried to read the user's thoughts in order to determine which word he wanted to type in the query string.
In the summer of 2001, Google introduced the Image Search service (“Image Search”) on its website, which subsequently revolutionized the Internet. It was based on an index of pictures where millions of photographs and other graphic images were stored. In order to get a picture, you had to type in its name or description in the image search box on Google. Novelty in a short time gained immense popularity. By implementing it, the company has also demonstrated its unlimited potential. Initially, it indexed 250 million images and in terms of volume it was not equal. “If a picture is worth a thousand words, then how about a million pictures? More precisely, two hundred and fifty million pictures? ”- wrote Brin and Page in a letter to“ friends of Google ”, which informed about the launch of the new service. They warned that along with the desired pictures on the page images from the category of “for adults” may appear. “You should also be aware that the image search results may contain photos from the category“ for adults ”. When determining the degree of compliance of a particular image with your request, Google takes into account a number of factors. But since these methods are not absolutely perfect, among the images produced by the machine, there may be some that do not suit you. ” After the introduction of this service, people who had a meeting with a stranger could easily find, using Google, not only information about him, but also his photo.
September 11, 2001, when terrorists attacked the United States of America, the load on Google increased dramatically.“Going to the main news sites that day was unreal: they were overloaded, and people wanted to get the latest information,” Bryn and Paige recall. - This need was satisfied by Google: we placed cached copies of the main newsletters on our main page. We still maintain contacts with the world's leading news agencies. ” No matter what happens, Google is always inseparable from American and world culture, taking into account that the company had by then opened sixty-six websites in different languages.
After reviewing the main indicators of the financial activities of their company over the past year, Brin and Page made sure that their business strategy brings dividends. The company, which had been working on the market for the fourth year, was already quite confident on its feet - unlike most of its colleagues. The emphasis on innovation and the formation of a positive corporate culture yielded a result: a number of new products were developed and the main directions of growth were determined. The number of daily queries has steadily increased. Yes, and advertisements began to generate income - though while it was a little stream.
Michael Moritz, a Google investor and board member, did not hide his joy. He knew that the company had the best equipment for finding information and first-class programmers and engineers, the rest would come with time. “It all starts small, especially profit,” he says. “It's like rain: at first a few drops will fall, then more and more of them will fall, and then it will begin to rain.”
Larry Page joked that Google really wanted to become a profitable company because Sergei wanted to impress the girls. The presidents of bankrupt companies are of no interest to anyone. “In Palo Alto in 2000, almost every second was the president of a loss-making IT company, so the relationship with the girls was not good,” says Page.“And Sergey thought:“ If I were the president of a successful company, everything would be different. ” In 2001, the founders' dream came true. The trickle of ad placement allowed Google to end the year at a profit for the first time. Its amount was $ 7 million.
One of the days of December 2000, Eric Schmidt entered the Google office to meet with Sergey Brin and Larry Page. The first thing that caught his eye was his biography on the wall. “M-yes ... - he thought. “They really don't have everything at home.”
He tried his best to avoid this meeting, but John Derr of Kleiner Perkins, the largest investment authority, asked him at every opportunity to meet with the founders of Google to discuss with them his possible appointment as director. Schmidt respected Derr very much and appreciated their friendship. If Derr had not been a Google investor and a member of the company's board of directors, Schmidt would hardly have listened to his requests. True, he was already putting off the meeting as much as he could. They had another conversation on this topic with Derr in early October, at a fundraising event for a local congressman.
“Go to Google,” Derr asked.
“But who needs this search engine?” Schmidt growled.
- Just meet them. You see, this is an uncut diamond waiting for a good jeweler.
In the world of finance and IT, where everyone knows each other, Derr had the most impressive track record. Therefore, it was highly desirable for Schmidt to maintain a good relationship with him - even if the meeting with Brin and Page would be a waste of time. Schmidt, at that time CEO of Novell, which produces software, has not yet looked for a new job. Although he knew that there was a merger of his company with a major software maker, and he would have to think about his future career. But even if he was ready to change jobs right now, he certainly would not have chosen Google. So what if Derr is delighted with her? Google is just a search engine, and in Silicon Valley more and more inclined to believe that search engines have no prospects and what to do on universal Internet portals. Schmidt also believed that users would gradually focus on large portals that allow you to simultaneously read news, make purchases and view mail.
He still could not understand why Derr speaks of Google only in excellent colors. Maybe he fears that he will not return the money invested in the company, and hopes that he, Schmidt, with his wise management, will soften the blow to his finances and reputation? Anyway, Schmidt reluctantly entered the office to finally meet with two young entrepreneurs, and then with a sense of accomplishment, to return to the Novell office.
Sergey and Larry needed this meeting no more than Schmidt. For them, he was another candidate for the position of director, for whom they spend time only to appease investors. Friends were going to send Schmidt to where he came from, just like they did to other candidates. They still didn’t want anyone to run Google through their heads, and already in whom, and they definitely didn’t need a manager. The introduction of corporate governance mechanisms can stifle innovation and slow down development, they believed. In addition, reports will be sent to Kleiner Perkins and Sequoia Capital on how stupidly Googlers spend money. Some clerical rat would never understand the culture of an enterprise created by them in the image and likeness of a university campus and not at all like the company that is going to enter the stock exchange, which is what the venture capitalists expect so much.
Sergey and Larry were proud of their independence. Investors who have invested $ 25 million in Google have received nothing in return, except frustration, headache, and irregular reports from the founders, doing everything possible to maintain full control over their company. However, Derr and Moritz insisted on hiring an experienced manager who knows his business and may become the face of the company when it enters Wall Street.
Brin and Page bent their line. Friends tried to push the two firms together, using the tactics of poker players. They bet and bluff in order to get all the chips in the end - no matter what situation they had. Both Sergey, an expert on psychology, and Larry, who learned a lot from his older brother's business experience, understood that there was nothing worse for an investor than to learn that the company, which he had once refused to cooperate with, caused a stir on the stock exchange. That is why Derr and Moritz are now unlikely to risk leaving the game.
When Eric Schmidt crossed the threshold of the Google office, he did not know that John Derr had been searching for a man for the position of general director for almost a year and a half. Although the founders pledged to put an experienced manager at Google’s head, Derr had the feeling that whoever he suggested would not get the “good” from them. They will be satisfied only by a person who would ideally combine high intelligence and the ability to leave his “I” at the entrance to the office. Therefore, they rejected one candidate after another. Friends believed that they should be at the head of Google, and not a person from the side, imposed on them by Derr. From their point of view, everything was great at Google. It is not surprising that they did everything to discourage the candidates sent by Derr from working with them.
So, Schmidt entered the office where a tray of snacks and a biography were waiting for him on the wall. Previously, this office was owned by Sun Microsystems. Prior to Novell, Schmidt worked at Sun as a chief engineer. He didn’t have time to sit down, as Sergei said that the strategy pursued by Schmidt at Novell does not make sense. “I objected that this was not the case,” recalls Eric. “We argued for an hour and a half, or even more.” They discussed various aspects of Schmidt’s activities, did not agree with each other, discussed - in general, conducted an intellectual duel. Schmidt was leaving with the feeling that he had already prepared the ground for the development of his career, that their paths with Google would necessarily cross.Eric did not leave the thought that this was the best of all disputes in which he had the opportunity to participate over the past few years.
Brin and Paige Schmidt liked more than all previous candidates. They were more and more insistently asked to finally hire a specialist who would deal with management issues. Moritz even threatened that he would require Google to return $ 12.5 million if Bryn and Page did not fulfill their verbal promise to put a first-class top manager at the head of the company.The threat is serious, but it didn’t work on the founders of Google, they still bent their line. “By their behavior they resembled two teenagers who did not want to listen to their parents. Yes, they would not hesitate to question the prescriptions from the Lord God himself! ”Exclaims Moritz.
Realizing the magnitude of the problem, Derr decided to shift the emphasis somewhat. He organized a series of meetings for Brin and Page with leading and respected experts in the high-tech world, including Andy Grove, Chairman of the Board of Intel Corporation. Derr hoped that two young and freedom-loving entrepreneurs would eventually understand that in the light of a long-term perspective, they would benefit if they handed over the reins to an intelligent manager, while they themselves would concentrate on developing interesting ideas. Such an approach, he believed, would bring the expected effect more quickly than the persistent requests to fulfill an oral promise, to which they, in principle, did not attach much importance. True, Jeff Bezos, CEO of Amazon.com, talking to Brin and Page, said: “Some people think that they can swim across the Atlantic Ocean on an inflatable raft. They see no problem with this. The question here is whether you are going to put up with it. ”
Nevertheless, Derr believed that Brin and Page would eventually agree with him, and believed that Schmidt was the ideal candidate because he possessed the necessary combination of personality and professional training. The founders of Google were impressed that Schmidt not only had experience as a general director, but also received a degree in software engineering. Like the Google programmers, Eric Schmidt had a university education and a craving for research. He holds a doctorate in computer technology from the University of California, and a bachelor’s degree in electrical engineering from Princeton University. Schmidt conducted research at the Xerox research center in Palo Alto and at Bell Labs. He was not afraid to express his opinion and did not shake his head during their first meeting. In addition, he was a frequenter of "The Burning Man". In a word, Schmidt matched all criteria.
He also had a negative experience, which others considered a disadvantage, and Bryn and Page - an advantage. While serving as chief engineer for Sun Microsystems, he challenged Microsoft itself by initiating the development of a platform-independent Java programming language, and also developed the company's online strategy. And even if his efforts were not crowned with success, he showed that he was not afraid to shake Microsoft’s monopoly on its Windows by proposing a new software product. This required inner freedom, so valued by Brin and Paige. For the founders of Google, the big advantage was that, by working on an alternative software product, they could analyze the strategic and tactical mistakes made by Schmidt and Sun.
After the first meeting, the final decision was not made, but mutual sympathy was born.
So, Schmidt seemed to Larry and Sergey the most suitable candidate for the position of CEO. But they were not going to give him stock options, not convinced of his commitment to Google. Friends wanted to get confirmation that he was really ready to invest a part of himself and his money in their offspring.
A few days later, Larry and Sergey called him to discuss the main points.
- So, in what role do you see yourself? - They asked Schmidt.
“Now I'm busy selling the company,” Schmidt reminded them. He was not going to leave Novell until he brought the process of selling the company to its logical conclusion. - To begin with, I would like to become the chairman of the board of directors, - he added, thinking as this post assumed a free schedule, - and in due course to take the post of general director.
“We don’t need you at the moment,” Larry said, “but we will probably need you in the future.”
“I also think that with the growth of the company, my experience can be useful,” said Eric.
The parties hung up the tubes and took a deep breath. Derr, in his turn, pushed Bryn with Page and Schmidt towards finding a way that would allow them to come to a common denominator. His instinct told him that Schmidt was exactly what Google needed. “John’s role is hard to overestimate,” recalls Schmidt. “If you had a closer look at Google then it would be clear to you that Larry and Sergey devote little time to serious questions, getting high from communicating with their wonderful employees. Mike and John brought a bit of seriousness to the company. ”
The next step was to discuss the salary of Schmidt. Larry and Sergey convinced him that he should invest his money in Google. Eric, in turn, insisted that he, as a potential chairman of the board of directors of the company, and subsequently the general director, is entitled to stock options - the main currency of Silicon Valley. Schmidt knew that the company lacked finance, not ideas, and therefore did not insist on a large salary. Especially since he still makes good money selling Novell. But, switching to Google and thereby questioning the majority’s judgment about the futility of Internet search, he put on the map something more - his reputation.
It all came down to stock options - the very shares that Larry and Sergey generously handed out to their friends from Stanford and the company's employees even when this idea seemed even more risky. Schmidt stood his ground: he will become chairman of the board of directors and CEO of Google only on the condition that he will receive options, which can then be converted into millions of shares of the company.
Contributed to the speedy signing of the contract for two points. First, Schmidt agreed to pay $ 1 million of personal savings for preferred shares of Google. He did this at the beginning of 2001, when the company ran out of money, and therefore his million came at an opportune time. Second, Bryn and Page realized that Derr has a means of manipulating them. More than a year has passed since the moment when Moritz and he invested $ 25 million in Google, and they had every reason to say that its founders did not fulfill their promise to put an experienced manager at the head of the company.Accordingly, their venture capital firms could demand a refund, which would have extremely negative consequences for Google, both financially and with respect to business reputation.
The fundamental agreement on the main issues Schmidt and the founders of Google reached in January 2001, and the personal employment contract was signed two months later, in March, after the parties agreed on all financial and legal issues. From March to July, Schmidt was both Chairman of the Board of Directors of Google and the CEO of Novell at the same time, but he still spent most of his work day at the office. “The CEO of the company cannot but appear in her office,” he noted. When the merger process ended in mid-July, Schmidt became CEO of Google. “I was not only the chairman of the board of directors and the general director, but also an investor,” recalls Schmidt. “The company felt financial hunger back then, and the founders wanted to make sure of my trustworthiness.”
This is what Google was about. IT company, but the head of which, three years after its founding, was still programmers who devoted a lot of time to employees, products and users and almost ignored internal management. Schmidt was given a three-by-four office next to the office of a couple of founders, cluttered with equipment and filled with people. "Zoo", - stated Schmidt.
He knew what steps he should take, but he still had to convince Sergey and Larry that it was necessary to create an appropriate corporate infrastructure. For example, for accounting and payroll accounting, Quicken was used, with which the income tax is usually calculated or controlled by a small business. “It was good for a start-up company, but not for a company with two hundred employees and a 20 million annual income,” says Schmidt.
Because of this, the real battle unfolded between him and the founders. Schmidt insisted that it was necessary to acquire the Oracle accounting system, without it he could not work. And Larry and Sergey believed that there was no need for a new system. In a word, prevented Eric from doing the work for which, in fact, was invited. “It was a serious fight,” recalls Schmidt. “They could not understand why you need to spend money on the Oracle system if they already have Quicken.”
Despite the contradictions that occasionally arose between them, Schmidt still managed to pick up the key to Larry and Sergey. He knew when to insist on his own, when to retreat, and when contradictions can be ignored. He was impressed by the corporate culture created by them and the spirit of the mission that was in the company's office. Friends drew an ideal picture, he also needed to place it in some frames in order to get a tangible financial result. “They had the structure, strategy, and culture they needed,” Schmidt notes. “In the first year or two, I was building up a management structure around the mission — figuratively speaking, I cut the diamond mined by Larry and Sergey.”
Everything seems simple in words, but it was much more difficult to implement, since Schmidt understood that he should not do what could change the structure of the company or provoke a conflict with the founders. Schmidt, not only a programmer and an experienced manager, but also an avid pilot, had the feeling that he was carrying out a major overhaul of the aircraft during the flight, unable to land even for refueling. However, over time, all three still started working as a team - not without the help of Intuit's CEO Bill Campbell, who was invited by Derr as an independent consultant. Schmidt already knew when he should defend his point of view, where he should listen to the opinion of the other side, how to build trust and introduce the natural division of labor. It turned out that Sergey was a master at negotiating and making deals, Larry was strong as an engineer, and Eric was fully focused on managing the company.
But the love for the jokes of the guys is not lost. They almost daily played Schmidt in order to test his strength, knock him off his feet, slightly knock off his arrogance, or simply indicate to him his place. “When I got there,” says Schmidt, “the company issued credit cards to its employees, from which it was impossible to withdraw money. Larry and Sergey handed out them just like that. I first canceled all these cards, except for one - the one that was issued for a couple of founders. They gave it to other employees to borrow, to buy something — just to annoy me. And somehow, having come to work, I found a telephone booth in my office. I asked: “Who brought the phone booth here?” We conducted a small investigation and went to one company, which received money from their credit card. Then these massage chairs appeared in my office. Who bought them? I dont know. Someone here likes jokes a lot. ”
As time has shown, John Derr did the right thing by insisting on Schmidt’s candidacy. He was not mistaken even when he invited Bill Campbell to work as an external consultant and coach: he helped Google executives to establish teamwork.Larry and Sergey received from Derr and his company not only money, but also valuable recommendations on how to manage a growing company professionally, while maintaining the spirit of innovation and enterprise. They finally accepted the fact that the company was run by three people.
True, the CEO soon discovered that his opinion was not always heeded.
That turned out Google
In 2002, Google reached new financial heights, and it became clear that its potential as a commercial enterprise is quite comparable to the power of its search engine. On May 1, America Online (AOL), which at that time provided Internet access to 34 million subscribers, entered into an agreement with Google, according to which the latter became the official AOL search engine. On each page of the company's website, a Google Search window was placed. Thanks to this deal, the breadth of Google has expanded significantly. Enter into Google then a similar agreement with any other Internet company, it could not so significantly increase the audience. Cooperation with AOL became possible primarily because Sergey Brin and Larry Page put the interests of users above all, focusing on providing the most relevant results as quickly as possible. It also meant that Google won a battle with a competitor, Overture, which attracted advertisements to AOL.
The idea to put a Google search box on AOL was owned by Steve Case, one of the founders of America Online.Although Case was a dedicated user of AOL.com, he increasingly turned to Google for the information he needed. Steve explained his choice to the fact that she quickly responds to his requests. Well, since he often uses Google, then other AOL subscribers should have this opportunity. At that time, Case was no longer involved in corporate governance issues, and therefore suggested that top managers make Google an official search engine.
However, to achieve the location of the corporation and convince it to abandon the services of the official search engine Inktomi and advertising agent Overture was more difficult than to find the location of one user. The only possible option for Google, as it became clear after long and hard negotiations, was to provide AOL with a financial guarantee in the amount of several million dollars. Only by receiving such a guarantee, America Online will make Google the official search engine and entrust the company with advertising on pages with search results, while Google will have to deduct a part of its income to it.In addition to the financial guarantee, AOL also wanted stock options.
Bryn and Page, eager to develop their offspring, were willing to pay any price to get access to AOL subscribers, but CEO Eric Schmidt feared that by giving America Online a multi-million dollar guarantee, Google could go bankrupt. After all, quite recently Google had a sum of $ 9 million and had debts for the same $ 9 million. At any moment, circumstances may change for the worse, and therefore the company must have a financial reserve at its disposal. There was a heated argument between the leaders: Schmidt considered the AOL requirements unacceptable, and the founders called for signing the contract. Realizing the importance of the proposed partnership, Schmidt offered to enlist the support of private investors so that the company would not have financial difficulties after concluding an agreement with America Online. “I was scared for Google,” recalls Schmidt. - We, Larry and Sergey, argued themselves hoarse. As a manager, I understood that if a company runs out of money, her song will be sung. They insisted on taking the risk. As time has shown, they were right. "
The alliance with AOL for Google also meant an intensification of rivalry with Microsoft. For several years, the latter had threatened to destroy AOL, investing huge amounts of money in promoting its counterpart, MSN, and offering users free mailboxes on Hotmall.com, the site of its subsidiary. AOL, which previously acquired Netscape, which went bankrupt after Microsoft released the free Internet Explorer browser, filed a lawsuit against the latter, accusing it of unfair competition.Microsoft also commissioned Overture to provide it with advertisements. In a battle with each other, sometimes undisguised, sometimes secret, both Google and Microsoft did their best to get ahead of the competitor. Meanwhile, Sun Microsystems, where Eric Schmidt once worked as a chief engineer, filed a lawsuit against Microsoft for violating antitrust laws. The accusations of using dishonest methods of struggle had a negative impact on Microsoft’s image, while Google’s image improved due to the conclusion of a number of partnership agreements.
“The last two weeks at Googleplex are saying that they are talking about a strategic partnership with America Online,” wrote Bryn and Page in a letter to “friends of Google.” Bob Pitman, the new CEO of AOL Time Warner, said in this connection: “Google is the leader in finding information on the Internet. We intend to continue to provide AOL subscribers and Internet users with only the best services and content, and we are very pleased that our users have access to the Google search engine. ” When it became known that Overture lost to Google the battle for AOL, its stock exchange price fell by almost a third. “This is an important confirmation of the correctness of our advertising strategy and the importance of our company as a partner,” noted Schmidt. “It seems to me that excellent prospects await us, and we will only win from cooperation with AOL.”
Searching expert Danny Sullivan, looking at how Google bypasses Inktomi and Oveture, admired its development: “This is a big victory for Google,” he said. “AOL got it all in one.”
In addition to the AOL deal, Google entered into an agreement to provide information retrieval services to users of the EarthLink internet provider, as well as a $ 100 million contract with the Ask Jeeves search resource, according to which it will place text ads on it for three years. . Jeeves will continue to search on its own, but the fact of cooperation with a competitor said that Google is growing up. In the spring of 2002, the company introduced a new strategy of relations with advertisers: now it collected money from them only if they clicked on their advertisements. She did this so that advertisers can track their advertising costs. At the same time, Overture, stung by the loss of two important sources of income, filed a copyright infringement lawsuit, accusing Google of using advertising technology developed and patented by Overture. Google stated that the lawsuit was weakly reasoned, but Overture decided to go all the way. Meanwhile, the thesis that Google’s role in public life has increased significantly has received real confirmation: in one of the episodes of a popular TV show on NBC, one of the characters suggested to his colleague to search for information on Google. Unlike some other companies, Google paid nothing for mentioning in the rating program.
“The history of Google is the history of the product,” says Steve Case. - Among its counterparts, it is the best. The company skillfully popularized him, claiming he was better. People use it because it’s better, and they tell others that it’s better. Since it is stunning, new and not like the others, Google has managed to attract first-class software engineers. This is the best tool for finding information on the web. This is the main driving force behind the company. ”
Many processes related to the placement of advertising elude users. And everything happens like this. The company operates a 24-hour auction in which thousands of different words and phrases, entered daily in the Google search box, are bought and sold, like products and services. A phrase like “pet food” can bring 30 cents, while more “monetary” phrases — say, “investment advice” (“investment advice”) - can cost as much as three dollars. It is worth taking a separate phrase as much as one or another advertiser is willing to pay for his ad to appear on the search results page. Now it’s clear how Google converts ad clicks into revenue.
The company receives money every time a user clicks on an advertisement. However, the cost of placing a text advertising offer on the pages of Google or its partners is not set in advance, but is determined during the round-the-clock online auction. This provides a competitive price for each of the millions of advertisements appearing on its pages every day, making Google earn more money than if the rates were fixed.
Many companies hire specialists whose task is to take part in the auction throughout the day. Some companies use certain programs for this purpose, others resort to the help of marketers specializing in such auctions. This whole process remains invisible to Google users. They see on the site only advertisements of the winning bidders.
Antonella Pisani, a top manager for Gateway, Inc., a manufacturer of computer and electronic equipment, participated in the online auction auction Google every day. She considers herself an investment management specialist, but she specializes not in stocks and bonds, but in words and phrases entered into the search box. Antonella seeks to increase its advertising budget for online advertising. Pisani took part in the auction, for example, and the phrase "digital camera", and the phrase "digital cameras." The cost of one click for the first averaged 75 cents, and for the second - $ 1.08. This difference, she said, was due to the fact that consumers who pick up an option in the query in the plural, more often buy the product. Knowledge of such nuances - and it comes with time - and distinguishes the winning bidders from the other participants. At the same time, the auction rules are extremely simple, and therefore any company can take part in the auction.
The concept of online auction is not developed by Google. This was done by Overture, a search engine acquired by Yahoo! rival google.
But while the lawsuit about the similarity of systems filed by Overture was considered in court instances, Google’s virtual auction site attracted more and more new participants, bringing more and more profits to the company.
As part of this electronic auction, various companies take part in the auction, spending hundreds to millions of dollars every quarter. It is the auction participants who determine the cost of placing an advertisement for a specific word or phrase.Google does not set fixed rates for advertising, as do TV channels and newspapers. Since the system operates on the principle of self-service, and starting prices for words (phrases) are minimal, even small firms can participate in the bidding. A family-owned business initially has the same chance to make itself known to millions of users, like the 500 largest companies in the Fortune magazine list.
Most companies spent on advertising twice as much money as they needed, because they could not determine which “half” of the expenditure item was superfluous. Google, having introduced its “smart” technology, solved this problem. Since during the bidding process, the cost of placing an ad for one click is formed, the firm can determine the degree of effectiveness of its advertising campaign by calculating how many of the users who clicked on its ad purchased the product.(A user’s advertising link usually enters a web page where a product can be ordered.) If advertisements are transformed into real orders, a company can increase the maximum amount for a particular word (phrase) or enter into bidding for other words (word combinations); if advertisements do not attract users, they can be shifted to lower positions in the column or removed altogether.
At Google’s 24-hour online auction, the starting price for a word (phrase) entered in the query string is 5 cents. During the bidding process, the price rises or falls - depending on which companies are participating in the bidding at a particular moment, trying to achieve a higher position for their ad in the column on the results pages. One of the most expensive words was “mesothelioma” (“mesothelioma”) - a cancerous tumor resulting from prolonged contact with asbestos dust. The price for this word sometimes exceeded $ 30 per click - such offers came from lawyers who expected Google to acquire wealthy clients.
However, winning the auction is not yet a guarantee that the advertisement will appear in the first position in the “Sponsored Links” column. This is one of the many differences between the approaches to advertising Google and Overture.Google ranks text advertisements based on two factors: the amount the company is willing to pay, and the frequency of user transitions. Thus, even if the company wins the bidding for a specific word (phrase), but consumers do not respond to its promotional offer, it will be moved lower. But Yahoo! unlike Google, guarantees the winners of the first position in the list of "Sponsored Links". "Yahoo! a purely capitalist approach is preaching: pay more and you will be the first, ”said Dana Todd, a top manager of an interactive advertising agency. “Google is practicing a socialist approach, giving users the right to choose.”
Advertising on Google has proven to be an extremely effective way to make yourself known. The search server offered advertising only to interested people, and not to everyone, advertising offers were placed only where they were really in demand, and not on all pages of the website. The sales volume in the online auction has been steadily growing - top managers of small, medium and large enterprises all over the world have been convinced of the effectiveness of advertisements placed on pages with search results. “This is a very effective marketing strategy. Advertising is provided to users precisely when they are interested in it, ”says Pisani. People spend more and more time on the Internet, and it is not surprising that the volume of advertising on the World Wide Web is increasing. The key to Google’s financial success was that its executives had a clear idea of how to make advertising on the Internet effective, both for businesses and for ordinary users.
Over time, Google has curbed restrictions on advertising offers on partner websites, giving the green light to ads with pictures and photos. She also provided major advertisers with the ability to track where their ads appear and where they don’t.And at the same time, it still ranks advertising offers according to the degree of popularity and the amount that the company is ready to pay. On the pages of Google.com place only text ads in the column to the right.
Despite all the money and effort left to organize an electronic auction, on the pages of Google, as before, the search prevailed, and free. Studies have shown that users first take a look at the left, wider column - with search results. The search engine optimizers industry has gradually grown - software tools that put websites to higher positions in the lists. However, it was more difficult to keep your site in the top ten for a long time than to become one of the winners of online trading.
Whatever way Google used to penetrate - through search or advertisements - all companies sought to occupy the highest positions. Frederick Markini, CEO of Internet marketing, iProspect, remarked: “Research confirms: if your website’s address isn’t on the first three pages of search results (that is, in the first thirty), you’ve set your billboard in the forest. Nobody will see him. ”
At Google, which collaborated with Yahoo! AOL, EarthLink and Ask Jeeves, started a partnership with most of the largest and most famous Internet companies. The number of users and the brand awareness of the company also grew thanks to its World Wide Web partners, on whose pages the Google search box was located. Over time, this network, bringing its members real income, has grown to 25 thousand sites.
The Internet revolution has fundamentally changed the nature of advertising and promotion of products and services, and Google was preparing to extract the maximum benefit from it. She helped a number of small companies reach new, more profitable positions before the leaders of the Fortune 500 giants realized that there were changes in the market. Now companies had the opportunity to target their ads directly to potential buyers interested in it. Users could search the Internet for information of interest to them and inquire about products, and then click on advertisements - if they are interested in them.Clicking on the advertising link, the user gets to the advertiser's site, where he can place an order for the goods in a couple of minutes. In order to purchase something, you do not need to go to the store - just fill in the order form on the corresponding web page.
Google has finally become successful financially: in 2002, its sales amounted to $ 440 million, and its net profit — $ 100 million (although this information was not made public, since Google was still closed joint-stock company). The main source of income was text advertising offers that adorned pages with search results on Google.com, as well as pages of sites of numerous partners of the company. Since information on Google’s financial progress was kept secret, Brin, Page and Schmidt could continue to develop the company as aggressively as possible without looking at the competition. They did not spread about its financial results, because they did not want other players of the Internet technologies market - in particular, Microsoft and Yahoo! - Learned about what profits it brings such a system of advertising. This would encourage competitors to invest a lot of money in the development of new search engines or to purchase existing ones.
Having received such a solid advantage at the start, Google will grow rapidly in the future - after all, advertisers are gradually transferring billions in advertising budgets from television, radio, newspapers and magazines to the Internet. The company, which once specialized in information search alone, has now taken a central place in the online advertising market.
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History of computer technology and IT technology
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