PAST, PRESENT, AND FUTURE OF GOOGLE
Prepared for
Shari Weiss
San Francisco, California
Prepared by
Taya Winkle
Senior Business Management Student
San Francisco State University
November 10, 2014
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TABLE OF CONTENTS
EXECUTIVE SUMMARY
INTRODUCTION
BACKGROUND
DISCUSSION
PAST
PRESENT
FUTURE
CONCLUSIONS AND RECOMMENDATIONS
REFERENCES
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EXECUTIVE SUMMARY
Google is one of the most innovative and successful companies in the world. When
examining the past, present, and future of Google, it is critical to take into account that
very few companies have come anywhere close to the level of Googles success. This
report will examine the timeline from the start of Google till the current position the
company is in. Google has become a verb in itself because of the predominant use of
the search engine across all interfaces. Over the years Google has obtained and started
many new endeavors, however, the search engine is still its number one source of profit
by far. This report will analyze Googles incredible business plan form the founding of
the company till now.
Analysis of the data revealed that:
Google actually had two great business plans. In the first one, they had the idea that
their search engine would be the search engine to end all search engines. Right they
were. But then they came up with their second winning business plan. This time, with
the help of some fresh new talent, they saw an opening for tapping into a new revenue
stream: advertising. They then became such a great search engine that they could
auction advertising space at a premium – that meant billions of dollars more in revenues
(The Best Business Plans of all Time).
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INTRODUCTION: EXECUTIVE OFFICERS OF GOOGLE
To understand where Google is currently at, it is critical to understand how it all started.
This introduction will introduce the current executives of Google, and provide the
necessary information to take look at this group of incredibly innovative leaders. All of
the information provided was pulled directly from Googles company website.
Larry Page and Sergey Brin founded Google in September 1998. Since then, the
company has grown to more than 40,000 employees worldwide, with a management
team that represents some of the most experienced technology professionals in the
industry.
Executive Officers
Larry Page CEO and Co-Founder
As Google’s chief executive officer, Larry is responsible for Google’s day-to-dayoperations, as well as leading the company’s product development and technology
strategy. He co-founded Google with Sergey Brin in 1998 while pursuing a Ph.D. at
Stanford University, and was the first CEO until 2001—growing the company to more
than 200 employees and profitability. From 2001 to 2011, Larry was president of
products.
Larry holds a bachelor’s degree in engineering from the University of Michigan, Ann
Arbor and a master’s degree in computer science from Stanford University. He is a
member of the National Advisory Committee (NAC) of the University of Michigan
College of Engineering, and together with co-founder Sergey Brin, Larry was honored
with the Marconi Prize in 2004. He is a trustee on the board of the X PRIZE, and was
elected to the National Academy of Engineering in 2004 (Management Team: Google.)
Eric E. Schmidt Executive Chairman
Since joining Google in 2001, Eric Schmidt has helped grow the company from a Silicon
Valley startup to a global leader in technology. As executive chairman, he is responsible
for the external matters of Google: building partnerships and broader business
relationships, government outreach and technology thought leadership, as well as
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advising the CEO and senior leadership on business and policy issues (Management
Team: Google).
From 2001-2011, Eric served as Google’s chief executive officer, overseeing the
company’s technical and business strategy alongside founders Sergey Brin and Larry
Page. Under his leadership, Google dramatically scaled its infrastructure and diversified
its product offerings while maintaining a strong culture of innovation (Management
Team: Google).
Prior to joining Google, Eric was the chairman and CEO of Novell and chief technology
officer at Sun Microsystems, Inc. Previously, he served on the research staff at Xerox
Palo Alto Research Center (PARC), Bell Laboratories and Zilog. He holds a bachelor’s
degree in electrical engineering from Princeton University as well as a master’s degree
and Ph.D. in computer science from the University of California, Berkeley (Management
Team: Google).
Eric is a member of the President’s Council of Advisors on Science and Technology and
the Prime Minister’s Advisory Council in the U.K. He was elected to the National
Academy of Engineering in 2006 and inducted into the American Academy of Arts and
Sciences as a fellow in 2007. He also chairs the board of the New America Foundation,
and since 2008 has been a trustee of the Institute for Advanced Study in Princeton,
New Jersey. In May 2012, Eric became a member of Khan Academy’s board of
directors and the following year he joined the board of The Economist. In 2013, Eric and
Jared Cohen co-authored The New York Times bestselling book, The New Digital Age:
Transforming Nations, Businesses, and Our Lives. In September 2014, Eric published
his second New York Times best seller, How Google Works, which he and Jonathan
Rosenberg co-authored with Alan Eagle (Management Team: Google).
Sergey Brin Co-Founder
Sergey Brin co-founded Google Inc. in 1998. Today, he directs special projects. From
2001 to 2011, Sergey served as president of technology, where he shared responsibility
for the company’s day-to-day operations with Larry Page and Eric Schmidt
(Management Team: Google.)
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Sergey received a bachelor’s degree with honors in mathematics and computer science
from the University of Maryland at College Park. He is currently on leave from the Ph.D.
program in computer science at Stanford University, where he received his master’s
degree. Sergey is a member of the National Academy of Engineering and a recipient of
a National Science Foundation Graduate Fellowship (Management Team: Google.)
He has published more than a dozen academic papers, including Extracting Patterns
and Relations from the World Wide Web; Dynamic Data Mining: A New Architecture for
Data with High Dimensionality, which he published with Larry Page; Scalable
Techniques for Mining Causal Structures; Dynamic Itemset Counting and Implication
Rules for Market Basket Data; and Beyond Market Baskets: Generalizing Association
Rules to Correlations (Management Team: Google.)
David C. Drummond Senior Vice President, Corporate Development and Chief Legal
Officer
David Drummond joined Google in 2002, and serves as senior vice president, corporate
development and chief legal officer. He leads Google's global teams for legal, public
policy, communications, corporate development/mergers and acquisitions, and product
quality operations. He also serves as chairman of Google's investment arms, Google
Ventures and Google Capital (Management Team: Google)
David was first introduced to Google in 1998 as a partner in the corporate transactions
group at Wilson Sonsini Goodrich and Rosati, one of the nation's leading law firms
representing technology businesses. He served as Google's first outside counsel and
worked with Larry Page and Sergey Brin to incorporate the company and secure its
initial rounds of financing (Management Team: Google.)
David earned his bachelor’s degree in history from Santa Clara University and his J.D.
from Stanford Law School. He serves on the board of directors of Uber Technologies,
Inc. and Rocket Lawyer Inc. (Management Team: Google.)
Patrick Pichette Senior Vice President and Chief Financial Officer
Patrick Pichette is Google’s chief financial officer. He has nearly 20 years of experience
in financial operations and management in the telecommunications sector, including
seven years at Bell Canada, which he joined in 2001 as executive vice president of
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planning and performance management. During his time at Bell Canada, he held
various executive positions, including CFO from 2002 until the end of 2003, and was
instrumental in the management of the most extensive communications network in
Canada and its ongoing migration to a new national IP-based infrastructure. Prior to
joining Bell Canada, Patrick was a partner at McKinsey & Company, where he was a
lead member of McKinsey’s North American Telecom Practice. He also served as vice
president and chief financial officer of Call-Net Enterprises Inc., a Canadian
telecommunications company (Management Team: Google.)
Patrick is a board member of Trudeau Foundation and Bombardier Inc., and serves as
an advisor to Engineers Without Borders, Canada. Patrick earned a bachelor’s degree
in business administration from Université du Québec à Montréal. He holds a master’s
degree in philosophy, politics and economics from Oxford University, where he attended
as a Rhodes Scholar (Management Team: Google.)
BACKGROUND
Beginning
Google began in March 1998 as a research project by Larry Page and Sergey Brin,
Ph.D. students at Stanford University.
In search of a dissertation theme, Page had been considering—among other things—
exploring the mathematical properties of the World Wide Web, understanding its link
structure as a huge graph. His supervisor, Terry Winograd, encouraged him to pick this
idea (which Page later recalled as "the best advice I ever got") and Page focused on the
problem of finding out which web pages link to a given page, based on the
consideration that the number and nature of such backlinks was valuable information for
an analysis of that page (History of Google.)
In his research project, nicknamed "BackRub", Page was soon joined by Brin, who was
supported by a National Science Foundation Graduate Fellowship. Brin was already a
close friend, whom Page had first met in the summer of 1995—Page was part of a
group of potential new students that Brin had volunteered to show around the campus.
Both Brin and Page were working on the Stanford Digital Library Project (SDLP). The
SDLP's goal was “to develop the enabling technologies for a single, integrated and
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universal digital library" and it was funded through the National Science Foundation,
among other federal agencies (History of Google.)
Page's web crawler began exploring the web in March 1996, with Page's own Stanford
home page serving as the only starting point. To convert the backlink data that it
gathered for a given web page into a measure of importance, Brin and Page developed
the PageRank algorithm. While analyzing BackRub's output—which, for a given URL,
consisted of a list of backlinks ranked by importance—the pair realized that a search
engine based on PageRank would produce better results than existing techniques
(History of Google.)
A small search engine called "RankDex" from IDD Information Services (a subsidiary of
Dow Jones) designed by Robin Li was, since 1996, already exploring a similar strategy
for site-scoring and page ranking. The technology in RankDex was patented and used
later when Li founded Baidu in China (History of Google.)
Convinced that the pages with the most links to them from other highly relevant Web
pages must be the most relevant pages associated with the search, Page and Brin
tested their thesis as part of their studies, and laid the foundation for their search engine
(History of Google.)
Late 1990’s
Originally the search engine used Stanford's website with the domain
google.stanford.edu. The domain google.com was registered on September 15, 1997.
They formally incorporated their company, Google, on September 4, 1998 at a friend's
(Susan Wojcicki) garage in Menlo Park, California (History of Google.)
The first patent filed under the name "Google Inc." was filed on August 31, 1999. This
patent, filed by Siu-Leong Iu, Malcom Davis, Hui Luo, Yun-Ting Lin, Guillaume Mercier,
and Kobad Bugwadia, is titled "Watermarking system and methodology for digital
multimedia content" and is the earliest patent filing under the assignee name "Google
Inc." (History of Google.)
Both Brin and Page had been against using advertising pop-ups in a search engine, or
an "advertising funded search engines" model, and they wrote a research paper in 1998
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on the topic while still students. They changed their minds early on and allowed simple
text ads (History of Google.)
Google Home Page September 1998: By the end of 1998, Google had an index of
about 60 million pages.The home page was still marked "BETA", but an article in
Salon.com already argued that Google's search results were better than those of
competitors like Hotbot or Excite.com, and praised it for being more technologically
innovative than the overloaded portal sites (like Yahoo!, Excite.com, Lycos, Netscape's
Netcenter, AOL.com, Go.com and MSN.com) which at that time, during the growing dotcom bubble, were seen as "the future of the Web", especially by stock market investors
(History of Google.)
In March 1999, the company moved into offices at 165 University Avenue in Palo Alto,
home to several other noted Silicon Valley technology startups. After quickly outgrowing
two other sites, the company leased a complex of buildings in Mountain View at 1600
Amphitheatre Parkway from Silicon Graphics (SGI) in 2003.The company has remained
at this location ever since, and the complex has since become known as the Googleplex
(a play on the word googolplex, a number that is equal to 1 followed by a googol of
zeros). In 2006, Google bought the property from SGI for US$319 million (History of
Google.)
2000s
The Google search engine attracted a loyal following among the growing number of
Internet users, who liked its simple design. In 2000, Google began selling
advertisements associated with search keywords. The ads were text-based to maintain
an uncluttered page design and to maximize page loading speed. Keywords were sold
based on a combination of price bid and click-throughs, with bidding starting at $.05 per
click.This model of selling keyword advertising was pioneered by Goto.com (later
renamed Overture Services, before being acquired by Yahoo! and rebranded as Yahoo!
Search Marketing). While many of its dot-com rivals failed in the new Internet
marketplace, Google quietly rose in stature while generating revenue (History of
Google).
Google's declared code of conduct is "Don't be evil", a phrase which they went so far as
to include in their prospectus (aka "S-1") for their 2004 IPO, noting that "We believe
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strongly that in the long term, we will be better served—as shareholders and in all other
ways—by a company that does good things for the world even if we forgo some short
term gains." (History of Google).
Financing and initial public offering: The first funding for Google as a company was
secured in August 1998 in the form of a US$100,000 contribution from Andy
Bechtolsheim, co-founder of Sun Microsystems, given to a corporation which did not yet
exist (History of Google.)
On June 7, 1999, a round of equity funding totalling $25 million was announced;the
major investors being rival venture capital firms Kleiner Perkins Caufield & Byers and
Sequoia Capital. While Google still needed more funding for their further expansion,
Brin and Page were hesitant to take the company public, despite their financial issues.
They were not ready to give up control over Google (History of Google.)
Following the closing of the $25 million financing round, Sequoia encouraged Brin and
Page to hire a CEO. Brin and Page ultimately acquiesced and hired Eric Schmidt as
Google’s first CEO in March 2001 (History of Google).
In October 2003, while discussing a possible initial public offering of shares (IPO),
Microsoft approached the company about a possible partnership or merger. The deal
never materialized. In January 2004, Google announced the hiring of Morgan Stanley
and Goldman Sachs Group to arrange an IPO. The IPO was projected to raise as much
as $4 billion (History of Google.)
Google's initial public offering took place on August 19, 2004. A total of 19,605,052
shares were offered at a price of $85 per share. Of that, 14,142,135 (another
mathematical reference as √2 ≈ 1.4142135) were floated by Google and 5,462,917 by
selling stockholders. The sale raised US$1.67 billion, and gave Google a market
capitalization of more than $23 billion. Many of Google's employees became instant
paper millionaires. Yahoo!, a competitor of Google, also benefited from the IPO
because it owns 2.7 million shares of Google (History of Google.)
The company is listed on the NASDAQ stock exchange under the ticker symbol GOOG.
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After reporting earnings on the 17th of October 2013, the stock price of GOOG closed
above $1,000.00 for the first time in its history of trading on the NASDAQ (History of
Google.)
Growth
The first iteration of Google production servers was built with inexpensive hardware and
was designed to be very fault-tolerant
2003
In February 2003, Google acquired Pyra Labs, owner of Blogger, a pioneering and
leading web log hosting website. The acquisition secured the company's competitive
ability to use information gleaned from blog postings to improve the speed and
relevance of articles contained in a companion product to the search engine Google
News (History of Google.)
2004
At its peak in early 2004, Google handled upwards of 84.7% of all search requests on
the World Wide Web through its website and through its partnerships with other Internet
clients like Yahoo!, AOL, and CNN. In February 2004, Yahoo! dropped its partnership
with Google, providing an independent search engine of its own. This cost Google some
market share, yet Yahoo!'s move highlighted Google's own distinctiveness, and today
the verb "to google" has entered a number of languages (first as a slang verb and now
as a standard word), meaning "to perform a web search" (a possible indication of
"Google" becoming a generalized trademark) (History of Google.)
After the IPO, Google's stock market capitalization rose greatly and the stock price more
than quadrupled. On August 19, 2004 the number of shares outstanding was 172.85
million while the "free float" was 19.60 million (which makes 89% held by insiders). In
January 2005 the number of shares outstanding was up 100 million to 273.42 million,
53% of that was held by insiders, which made the float 127.70 million (up 110 million
shares from the first trading day). The two founders are said to hold almost 30% of the
outstanding shares. The actual voting power of the insiders is much higher, as Google
has a dual class stock structure in which each Class B share gets ten votes compared
to each Class A share getting one. Page says in the prospectus that Google has "a dual
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class structure that is biased toward stability and independence and that requires
investors to bet on the team, especially Sergey and me." The company has not reported
any treasury stock holdings as of the Q3 2004 report (History of Google.)
2005
On June 1, 2005, Google shares gained nearly four percent after Credit Suisse First
Boston raised its price target on the stock to $350. On that same day, rumors circulated
in the financial community that Google would soon be included in the S&P 500. When
companies are first listed on the S&P 500 they typically experience a bump in share
price due to rapid accumulation of the stock within index funds that track the S&P 500.
Google was not added to the S&P 500 until 2006. Nevertheless, on June 7, 2005,
Google was valued at nearly $52 billion, making it one of the world's biggest media
companies by stock market value (History of Google.)
On August 18, 2005 (one year after the initial IPO), Google announced that it would sell
14,159,265 (another mathematical reference as π ≈ 3.14159265) more shares of its
stock to raise money. The move would double Google's cash stockpile to $7 billion.
Google said it would use the money for "acquisitions of complementary businesses,
technologies or other assets" (History of Google.)
On September 28, 2005, Google announced a long-term research partnership with
NASA which would involve Google building a 1,000,000-square-foot (93,000 m2) R&D
center at NASA's Ames Research Center, and on December 31, 2005 Time Warner's
AOL unit and Google unveiled an expanded partnership—see Partnerships below.
Additionally in 2005, Google formed a partnership with Sun Microsystems to help share
and distribute each other's technologies. As part of the partnership Google will hire
employees to help in the open source office program OpenOffice.org (History of
Google.)
With Google's increased size came more competition from large mainstream technology
companies. One such example is the rivalry between Microsoft and Google. Microsoft
had been touting its Bing search engine to counter Google's competitive position.
Furthermore, the two companies are increasingly offering overlapping services, such as
webmail (Gmail vs. Hotmail), search (both online and local desktop searching), and
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other applications (for example, Microsoft's Windows Live Local competes with Google
Earth). In addition to an Internet Explorer replacement Google designed its own Linuxbased operating system called Chrome OS to directly compete with Microsoft Windows.
There were also rumors of a Google web browser, fueled much by the fact that Google
is the owner of the domain name "gbrowser.com". These were later proven when
Google released Google Chrome. This corporate feud is most directly expressed in
hiring offers and defections. Many Microsoft employees who worked on Internet
Explorer had left to work for Google. This feud boiled over into the courts when Kai-Fu
Lee, a former vice-president of Microsoft, quit Microsoft to work for Google. Microsoft
sued to stop his move by citing Lee's non-compete contract (he had access to much
sensitive information regarding Microsoft's plans in China) (History of Google.)
Google and Microsoft reached a settlement out of court on December 22, 2005, the
terms of which are confidential.
Click fraud has also become a growing problem for Google's business strategy.
Google's CFO George Reyes said in a December 2004 investor conference that
"something has to be done about this really, really quickly, because I think, potentially, it
threatens our business model." Some have suggested that Google is not doing enough
to combat click fraud (History of Google.)
2006
While the company's primary market is in the web content arena, Google has also
recently began to experiment with other markets, such as radio and print publications.
On January 17, 2006, Google announced that it had purchased the radio advertising
company dMarc, which provides an automated system that allows companies to
advertise on the radio. This will allow Google to combine two advertising media—the
Internet and radio—with Google's ability to laser-focus on the tastes of consumers.
Google has also begun an experiment in selling advertisements from its advertisers in
offline newspapers and magazines, with select advertisements in the Chicago SunTimes. They have been filling unsold space in the newspaper that would have normally
been used for in-house advertisements (History of Google.)
During the third quarter 2005 Google Conference Call, Eric Schmidt said, "We don't do
the same thing as everyone else does. And so if you try to predict our product strategy
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by simply saying well so and so has this and Google will do the same thing, it's almost
always the wrong answer. We look at markets as they exist and we assume they are
pretty well served by their existing players. We try to see new problems and new
markets using the technology that others use and we build." (History of Google.)
After months of speculation, Google was added to the Standard & Poor's 500 index
(S&P 500) on March 31, 2006. Google replaced Burlington Resources, a major oil
producer based in Houston that had been acquired by ConocoPhillips.The day after the
announcement Google's share price rose by 7% (History of Google.)
Current Growth
As of current, Google operates 70 offices in more than 40 countries. Headquarters was
moved to Mountain View, California—better known as the Googleplex—in 2004.
Below is Google’s most up to date financial statement which tells its current revenues:
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REFERENCES
History of Google. (2014, September 11). Retrieved November 11, 2014.
Management Team: Google. (n.d.). Retrieved November 11, 2014, from
https://www.google.com/about/company/facts/management/
The Best Business Plans of all Time. (n.d.). Retrieved November 11, 2014, from
http://www.busplan.com/files/17613486.pdf
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