Documentary: Download - The True Story of the Internet (part 2) (Search)
Download: The True Story of the Internet is about a revolution — the technological, cultural, commercial and social revolution that has radically changed our lives. And for the first time on television, we hear how it happened from the men and women who made it possible.
From the founders of eBay, Yahoo, Amazon, Netscape, Google and many others, we hear amazing stories of how, in ten short years, the Internet took over our lives. These extraordinary men and women tell us how they went from being geeky, computer obsessed nerds to being 21st-century visionaries in the time it takes most people to get their first promotion. And, how they made untold billions along the way.
The style of the story-telling is up close and personal. With first-hand testimony from the people that matter, we tell a story that has all the excitement of a thriller — full of battles and back-stabbing, moments of genius and moments of sheer hilarity. You will never surf the net in the same way again.
Download is hosted by technology journalist John Heileman. He’s an edgy, combative, hi-energy New Yorker who never takes anything at face value. He’s also a personal friend of most of Silicon Valley’s most important characters and he revels in the craziness of it all. After all, this is a story in which 20-year-olds become overnight billionaires, create, destroy and re-create more wealth in ten years than the human race has ever seen, and still struggle to get a date.
From the founders of eBay, Yahoo, Amazon, Netscape, Google and many others, we hear amazing stories of how, in ten short years, the Internet took over our lives. These extraordinary men and women tell us how they went from being geeky, computer obsessed nerds to being 21st-century visionaries in the time it takes most people to get their first promotion. And, how they made untold billions along the way.
The style of the story-telling is up close and personal. With first-hand testimony from the people that matter, we tell a story that has all the excitement of a thriller — full of battles and back-stabbing, moments of genius and moments of sheer hilarity. You will never surf the net in the same way again.
Download is hosted by technology journalist John Heileman. He’s an edgy, combative, hi-energy New Yorker who never takes anything at face value. He’s also a personal friend of most of Silicon Valley’s most important characters and he revels in the craziness of it all. After all, this is a story in which 20-year-olds become overnight billionaires, create, destroy and re-create more wealth in ten years than the human race has ever seen, and still struggle to get a date.
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TechTranscript
00:00Imagine a world without Google. No, seriously. A world without Google. A world where you
00:09couldn't do detailed reconnaissance on your blind date for tomorrow night. A world where
00:13you couldn't find out with the click of a mouse the GDP of Kazakhstan. A world where
00:18if you're not feeling well, you can't just sit down at your computer and figure out whether
00:22to just pop a couple aspirin or whether you need to call 911. It's amazing, right? Just
00:27ten years ago, there was no Google. And five years before that, there was no way at all
00:31to search the Internet. And that posed a big problem. Because really, what use was the
00:37World Wide Web if you couldn't navigate it and get where you wanted to go? The companies
00:42that took a stab at search included some of the most iconic names in the history of the
00:47net, like Yahoo and Excite. But even though the guys who started those outfits were some
00:53of the brightest young things in the annals of American business, in the end, they found
00:59themselves unable to crack the code. Then a pair of super brainy, super nerdy 20-somethings
01:06solved the search problem. I'm going to tell you how they did it and how they became multibillionaires
01:11in the process. My name is John Heilemann. And as a journalist, I've covered the search
01:15revolution from the start. The story I'm here to tell you is about the high-tech innovations
01:20that underpinned that revolution and about the enormous economic upheaval that it unleashed.
01:25It's an exciting tale full of fierce ambition and ingenuity, full of opportunities seized
01:32and opportunities missed, and secret maneuvers and meetings that have never come to light,
01:37until now, that is. On the Web today, you type my name, John Heilemann, into a search
01:48engine, and boom, in a third of a second, you can find out instantly that I'm a magazine
01:52journalist and peruse a catalog of pretty much everything I've ever written. Given that
01:56there are over 150 million Web sites and billions of Web pages out there, the technology that
02:01makes super-accurate search possible is kind of a miracle. And it's a miracle that most
02:07of us have come to take entirely for granted. We forget that a little more than 10 years
02:11ago, this is what the Web looked like, page after page of plain text, long lists of underlying
02:17sentences. Finding what you were looking for on the Web was damn near impossible. There
02:21was no way to search for anything. All you could do was follow links and hope that luck
02:25would land you somewhere useful. To understand how we've come so far, how the Web search
02:30miracle happened, we have to go back to the time before Google, to the story of the companies
02:35like Yahoo and Excite that paved the way for its existence and became its fiercest rivals,
02:40and to a little place in California that you may have heard something about.
02:43Silicon Valley, California. This 30-mile stretch is the place to be for people with a knack
02:53for inventing the future and an appetite for getting enormously rich in the process.
03:00It's the home of legendary tech names like Apple and Intel and Oracle. But the heart
03:04of Silicon Valley, the real wellspring of the high-tech industry, the source of countless
03:08great ideas, isn't any company. It's Stanford University. And it's here at Stanford where
03:13the roots of search can be found.
03:15Now, you might think I'm going to tell you that in a lab around here somewhere, some
03:24straight-A students and their brainy professor were inventing some new mega-fast silicon
03:28chip or some massive supercomputer that was going to take the valley by storm. And there
03:32were. But we're not interested in that.
03:36We're interested in a couple of slackers named Jerry Yang and David Filo who were left
03:40to their own devices when their professor went on a year-long sabbatical.
03:43While Jerry and David were goofing around, they hit on an idea that would become the
03:48basis for one of America's best-known businesses and turn them into billionaires.
03:54Today their company is called Yahoo, and it's among the most trafficked sites on the web.
03:58It all began when Jerry and David were trying to find a sneaky way to use the Internet to
04:08win a Stanford Fantasy Basketball League.
04:12The boys were electrical engineering students, and they had access to the web. They scoured
04:16it laboriously, site by site, looking for up-to-date sports information.
04:20David figured out how to go to all these different places to get all the data from the previous
04:28nights' basketball games. Pulled it all in and crunched data and tried to figure out
04:34what we should change players or trade players or do whatever.
04:38It's hard to imagine a more trivial pursuit than fantasy basketball. But in hunting around
04:46for obscure sports data on this weird, clunky network called the Internet, Jerry and David
04:51were taking the first steps on the road to search.
04:53And, you know, at the time we were competing with other students from other departments.
04:58We were, you know, trying to use technology as an edge, and they were basically reading
05:02the newspaper the next day and, you know, doing stuff on the papers. And I don't think
05:06we... Did we win by much? I don't think we won. We did win, but we didn't win by much.
05:10So I'm not sure the technology helped us by all that much. But it was kind of a fun experiment.
05:14It's not surprising that the web, circa 1994, didn't help Yang and Philo much.
05:22Even to understand what this thing was and what the Internet had to offer, you needed
05:26some kind of guide. You needed some kind of directory to kind of help you kind of navigate
05:31through that.
05:33This was a simple but brilliant thought. A directory that could show virgin web users
05:37how to find cool stuff in this new electronic world. But it was nothing like search today.
05:42It was just a bunch of categories and subcategories that you could hunt and peck around in. It
05:47was incredibly crude, compiled manually by a pair of geeks who spent hours looking at
05:51as many websites as possible, then deciding how to list them. Crude or not, though, what
05:57the guys called Jerry and David's Guide to the World Wide Web was the first thing of
06:00its kind, and it proved immensely popular.
06:04Literally overnight, it was this worldwide thing.
06:07Millions of users from around the globe flocked to the site. The guys soon realized that they
06:11needed a shorter, snappier, punchier name, one that sounded kind of, you know, exciting.
06:19Yahoo was a great idea, but a great idea isn't enough to become a great company. It requires
06:26money and lots of it. But as everyone knows, there's no shortage of cash in Silicon Valley.
06:32Most of it emanates from these buildings along Sand Hill Road, the offices of many of the
06:36Valley's legendary venture capitalists.
06:38I don't know what I expected to see the first time I came to this place. Streets paved with
06:44gold or something. But this is what I found, a bunch of nondescript, low-slung office buildings
06:49in what looks like an alpine village. But behind those doors over there sit the venture
06:53capitalists, the guys who preside over investment funds containing billions and billions of
06:58dollars, the guys who ultimately decide which startups get a chance to live and which never
07:02see the light of day.
07:04One of the most successful VC firms is Sequoia Capital. Its most famous partner, Michael
07:09Moritz, decided to pay Yahoo's young founders a visit in their Stanford trailer.
07:15Inside of it was a scene of total confusion. This was every mother's worst nightmare. Pizza
07:25cartons all over the place, computers and electronic equipment scattered hither and
07:30yonder, the curtain shades drawn, temperature of about 85 degrees. It was a sweltering cesspit.
07:36It was a mess.
07:39There are lots of reasons to be skeptical about making an investment in Yahoo. It was
07:44only two people. The business model was, to be generous, hazy.
07:52What Moritz couldn't ignore was the potential of Yang and Philo's web directory.
07:56It seemed to us fairly straightforward that anybody who was offering a service that acted
08:03as a guide to all this stuff that otherwise was difficult to uncover, with the passage
08:08of time, offered the potential of occupying rather strategic ground.
08:16Moritz invested $2 million in Yang and Philo's website, but it was a gamble based on little
08:21more than a hunch. The large numbers of people who visited the Yahoo site, it wasn't obvious
08:26where profits or even revenue would come from.
08:29We had a company. We had to figure out a way to make money somehow, and up to that
08:33point we had no revenue at all.
08:35Actually, it was worse than that. At the time, no one on planet Earth had figured out how
08:39to make money on the Internet. But Yahoo would change all that, and in doing so, help launch
08:44the gold rush that would soon engulf the web.
08:59In 2007, search companies such as Yahoo and Google generated billions of dollars in revenue
09:05and profits, making them the envy of entrepreneurs everywhere. But at the dawn of the web, no
09:11one used it for business or commerce. The very idea was considered heretical, even evil,
09:16by some.
09:17I vividly remember the debates as the web tried to define its culture.
09:22In the mid-1990s, the center of the web culture wasn't in Silicon Valley. It was here in this
09:26little park on the south edge of San Francisco. Just up the street, Wired magazine and its
09:31online sister, HotWired, were launched. I was working here at the time, and the arguments
09:35around the impending commercialization of the web were fierce, and they boiled down
09:39to just one word, advertising.
09:42Advertising split the early web community. On one side were venture capitalists and other
09:46financial types who figured that the Internet was a new kind of medium, and media had always
09:50been supported by advertising.
09:53You know, there was a hundred years of media history behind it which said, if you can gather
10:00a large audience in one place, you're going to be able to sell them advertising. You did
10:04not have to have much more intelligence than that housed between the ears of a newt to
10:11be able to figure that out.
10:15On the other side were the Internet utopians, people who saw the web as a place that promised
10:19freedom.
10:21It wasn't a commercial environment. People weren't, these weren't businesses. This was
10:26just a bunch, in general, a bunch of university students, research folks that were experimenting
10:30with this new thing.
10:33But Yang and Philo had taken venture capital. They were in the game to build a business.
10:37They had to find a way for Yahoo to make money, anyway.
10:41Jerry and David were very concerned about the ramifications and repercussions of putting
10:46advertising up on their website for fear that this was bad for their users, and the users
10:54would rebel.
10:55For the Yahoo founders, this posed a serious dilemma. Taking advertising risked alienating
11:00their loyal users. But there weren't really any other viable options. What else could
11:04they do?
11:05So to us at that point, advertising seemed like the best choice. But we certainly were
11:11concerned about it.
11:15It was really hard. It was really hard. We had no idea. How will this be perceived? Will
11:21there be a backlash? Will this launch a lot of, you know, cynicism about what commercial
11:27interests are going to do to this kind of utopian information environment?
11:35Late in 1995, Yahoo began taking banner ads, then held their breath and crossed their fingers.
11:43With some trepidation that when we put up our first advertising, there was definitely
11:46sort of, oh my gosh, is this going to work?
11:49The agonizing turned out to have been in vain. Yahoo's users just kept on multiplying. And
11:54more users meant more advertisers paying more money to put their banner ads in front of
11:59the growing number of eyeballs.
12:03For the first time, Yahoo had shown it was possible to make money on the web. It was
12:10a crucial moment in the story, and it meant one thing. The web boom had begun.
12:17It was almost like a starting gun went off in the race.
12:22By 1996, Yahoo faced an assortment of challengers that were gaining ground on it. Infoseek,
12:30AltaVista, Lycos. But Yahoo's most formidable rival was a company called Excite.
12:37Officially, Excite seemed an awful lot like Yahoo. It was another search startup founded
12:41by another bunch of burrito-eating Stanford kids, substituting a ratty suburban house
12:46for a ratty on-campus trailer. But the technology that Excite developed was considerably more
12:51sophisticated than that developed by Yahoo.
12:54Rather than a list of sites compiled and sorted into categories by human beings, Excite was
12:59pure software. When you type in your query, the service would crawl the web, finding pages
13:04that contained the term you'd entered. It was, that is, a rudimentary version of what
13:09we think of as search today.
13:12When we launched, we were 17th place in a 17-horse race. And we knew that one year from
13:22then, we were either going to be number one or number two, or we were going to be dead.
13:28Avarice takes over. Ambition, eagerness is in the air.
13:33By 1997, the internet was exploding, as millions of people flocked online to see what all the
13:38excitement was about. Companies like Yahoo, Excite, and the other search engines were
13:42busy turning themselves into what were known as portals. One-stop destinations jam-packed
13:47with diversions, from stock tickers to email to chat rooms. They were online carnivals,
13:53filled with an array of glittery enticements and trinkets and baubles, designed to turn
13:56users into a captive audience for the benefit of advertisers.
14:02It caused people to engage in really extreme innovation, extreme competition, and a very
14:09extreme and unsustainable way to live.
14:11There was definitely a tip for tap going on. You know, we would launch personalization,
14:16Yahoo would launch personalization, Yahoo would launch email, we would launch email.
14:20I'm using Yahoo search to write a book on finger snapping.
14:23So it was a bit of a blur in the first few years. Nobody knew how big this could get.
14:38But although the search companies were having great success, they were also turning into
14:41something quite different from what they started out to be. By focusing on the flashy-flashy,
14:46they'd lost sight of what it was that brought users to them in the first place, the need
14:50to find things on the ever-expanding web. In other words, the search engine companies
14:55stopped caring about search.
14:56From Silicon Valley to the streets of San Francisco, the Bay Area was now awash with
15:16ambitious techies pursuing every conceivable web-related opportunity, tackling every conceivable
15:21web-related problem. Right? No. In fact, the biggest opportunity was still out there, staring
15:27the search companies squarely in the face, for they were too blinded by their own success
15:31to see it.
15:32The problem was, to put it bluntly, that when it came to actually locating relevant information
15:37on the web, Yahoo, Excite, and the rest of the so-called search companies, frankly, stunk.
15:44You could spend all day typing in various combinations of words to find what you were
15:48looking for, and still come up empty. Most of the results you'd receive were links to
15:52sites trying to sell you something you didn't want, and all too often, smut.
15:57In short, the world was hungry for a radically better way of searching the web. Sure enough,
16:02it came from the exact same institution that had already produced Yahoo and Excite, Stanford.
16:08Once again, the name of the company was unrepentantly goofy, Google. A twist on the word Googol,
16:15a mathematical term for ten to the hundredth power. And once again, the founders were a
16:20pair of barely socialized young geeks, Larry Page and Sergey Brin.
16:25The guys first met in the spring of 1996, on a guided tour of San Francisco for prospective
16:30graduate students at Stanford. Leading the tour was Sergey, a good-looking Russian-American
16:35kid with a bit of an attitude.
16:38I think he was like 19 years old, which is very, very young, one of our youngest PhD students.
16:44I remember him as being pretty curt. He's the kind of person who has very quick answers
16:48to things, and sort of sees a certain way.
16:51Larry was one of the incoming grad students on the tour that day, a doughy-faced Midwesterner,
16:55the son of an academic. His greatest claim to fame to that point was building an inkjet
16:59printer out of Legos.
17:01He's a very unassuming guy, very quiet. He's not the kind of person who when you meet him,
17:05you say, whoa. I mean, you meet him, and you say, here's a nice guy.
17:09It was Nice Guy Larry who had the genius insight that turned search into something magical,
17:14and launched Google. Given the far-reaching consequences of this insight, social, cultural,
17:20and certainly financial, you might think that it's incredibly complex. But in fact, in its
17:24basic form, it's pretty simple.
17:27His insight started with the notion that the web was running a continual popularity contest
17:31on its own content, and that the number of times a given web page was linked to by other
17:35sites might be a measure of how useful or how relevant it was.
17:41Page believed that a link from one web site to another is a kind of recommendation. And
17:46he and Brin built Google's infant search engine around that conviction. As they put it in
17:51a now-famous academic paper in 1998, quote, in essence, Google interprets a link from
17:58page A to page B as a vote by page A for page B. Google assesses a page's importance
18:04by the votes it receives, end quote.
18:07In other words, when a site about, say, Abraham Lincoln, has been linked to 15 million times,
18:13that means that an awful lot of people have found it useful. Another Lincoln site that's
18:17been linked to, say, 11 times, has impressed almost no one. Realizing this led Page and
18:24Brin to their very own version of the dictate, follow the money. In order to find the most
18:29relevant sites, what you had to do was count the links.
18:33Larry's insight about link counting was simple, but kind of brilliant. And it would eventually
18:37be the core of Google's incredible success. But did Larry understand this at the time?
18:41Not a chance.
18:43The first person ever to see Google in action was one of the boys' computer science professors,
18:48Hector Garcia Molina.
18:51We played around in my office for a while looking at the in-link counts, as they're
18:55called, how many pages point to your page, of interesting pages. So we looked at the
19:00Stanford homepage, and then we compared it with other departments, maybe MIT or Berkeley,
19:05who are our competitors. And we had lots of fun seeing which of these pages was more important
19:12than the others because it was referenced more highly.
19:14When Larry and Sergey launched Google onto the Stanford website, everyone who saw it
19:20realized it was something special. Here was a search engine that cared about search again.
19:25From their grad student office on the Stanford campus, shown here in this never-before-seen
19:30footage, Page and Brin struggled to manage the runaway popularity of their wondrous innovation.
19:36There was so much traffic to Google that it nearly brought the entire Stanford University
19:41Internet to its knees. And so the university administration said, you must move off campus.
19:47Stanford had outlived its usefulness to Larry and Sergey. It was time for them to head off
19:51campus and into Silicon Valley proper, to look for some cash to turn their bright idea
19:56into an honest-to-goodness company. In doing so, they'd be joining thousands of would-be
20:00entrepreneurs seeking fame and fortune in the dot-com era of Silicon Valley, which meant
20:05that the odds were clearly stacked against them.
20:17Today, we look at Google with its stock market value of more than $200 billion, its vast
20:27campus in Silicon Valley, and its culture-shifting influence, and we assume that there must have
20:31been investors banging down the door, especially at the height of the dot-com bubble, when
20:35some of the dumbest ideas imaginable were being showered with cash. But at the time,
20:40the reaction among the money men to Google wasn't, hey, no-brainer. Instead, it was,
20:46oy vey, not another search engine.
20:49One of the few early dissenting voices to this chorus of doubt was that of Vinod Khosla, a
20:55hugely successful venture capitalist, tech guru, and one of the co-founders of Sun
21:00Microsystems.
21:02I met them. I loved them. I said I'd love to work with them in some way. So I introduced
21:08them to Excite. I said, this is a wonderful search engine and a better approach.
21:13To Khosla, the logic was simple. At the time, he was an investor in the search company Excite,
21:18and he figured that if Excite bought or licensed Google's search technology, it would give
21:23them an advantage against their bitter rival Yahoo, which seemed to be dominating every
21:27battle and vanquishing all of its opponents in the portal wars. If Excite wasn't going
21:32to be crushed by Yang and Philo's army, it would need some fresh artillery.
21:37As any military commander will tell you, the key to winning a war is striking the right
21:41alliances. Now, in the hopes of getting Excite to team up with Google, Khosla arranged a
21:46meeting for Excite's chief technologist, Graham Spencer, to meet with Larry and Sergey at
21:51this sushi restaurant.
21:52The Google boys arrived with high hopes of securing a lifeline for their project. They'd
21:57done a test to demonstrate how much better their search results were than Excite's. Now,
22:01firing up their laptops, they showed the results to Spencer.
22:05Spencer went back and told Excite's CEO, George Bell, about Google's technology, and so did Khosla.
22:12And there was a lot of resistance. And they'd always come back with a fairly rigid view
22:18that search was genetic, we can do this, we are almost as good, it doesn't matter. And
22:23it wasn't the issue of price, because Google was very cheap. They could have bought it
22:30for something like a million dollars. It's worth $100 billion today.
22:35Wait, let's rerun this. Excite could have bought Google for about a million bucks? That's
22:41a pittance in Silicon Valley terms. The company had just walked away from what for them would
22:46have been the deal of a lifetime.
22:48And sure, in hindsight, you know, I'll put my hand up and say I look dumb. But people
22:54didn't think you could make money from search, or people thought you could make some money
22:58from search. They certainly didn't think it was a mint. I mean, look, let's be honest,
23:03search is a mint. It's a mint.
23:06But it wasn't just Excite that failed to see Google's full potential. Every search company
23:11in Silicon Valley turned them down flat.
23:16So with increasing frustration, Larry and Sergey sought out a professor of theirs from
23:20Stanford who happened also to be a serial entrepreneur, a man named David Chariton.
23:25They were after, I think, a fairly modest amount of money in the sort of million dollar
23:29range. And I had made some money with this startup that had been bought by Cisco. And
23:35I was working with Andy Bechtolsheim, who is a well-known Silicon Valley investor.
23:42So David called me up and told me I really had to meet these Google guys. And I drove
23:48up to his house. It was a beautiful, you know, summer, sunny morning.
23:51Larry and Sergey were desperate now. If David Chariton and Andy Bechtolsheim didn't see
23:56the potential of Google, it was probably time for Google boys to get back to those PhDs.
24:03Larry showed up first, and then Sergey showed up, and Andy roared up in his Porsche.
24:09When I arrived at David's house, Larry and Sergey were already there. So, you know, they
24:14jumped right into giving me a demonstration.
24:16We met this guy. He quickly, you know, he took a quick look at our search engine. We
24:19chatted with him a little bit.
24:21They ran him through a demo of, here's Google, and we can type in this, and I'm feeling lucky,
24:26and all those sorts of elements.
24:28And it was immediately clear that this was a very, very good idea.
24:32I think Andy was sold very quickly on this.
24:35In fact, I think this was the best idea I've seen in my entire life.
24:39So he said, you know, I don't want you guys to have to, you know, take too low a value
24:43So he said, you know, I don't want you guys to have to, you know, take too low a value
24:46or to have to worry too much about these money things right now.
24:48Why don't I just write you a check?
24:50So I rushed out to my car, pulled out my checkbook, and wrote him a check on the spot.
24:54Came back with the checkbook, and he wrote us a check for $100,000.
24:58To Google for $100,000.
25:00The bank account, and Andy saying, well, put it in there when you do.
25:04I don't think I've ever written a check on the spot like this before.
25:07This was the only time in my life.
25:10Let's think about this.
25:12How many people do you know who'd be willing to write a $100,000 check on the spot
25:16to a couple of mangy grad students?
25:18I mean, even for a guy like Andy Bechtolsheim, who is worth many millions of dollars,
25:21the whole thing seems slightly nuts.
25:23But that's the kind of thing that happens here in Silicon Valley.
25:25It's why they call the early investors angels.
25:28They're in the business of doling out little miracles.
25:31Andy was clearly putting a lot of faith in them,
25:34not just to not go to Mexico with his money,
25:39but they left with an extra level of excitement, as I recall,
25:44that we can really do this.
25:46Bechtolsheim's investment was followed by checks from a handful of other angels,
25:50totaling $1 million.
25:55A million dollars must have seemed like a lot of money
25:57to a couple of students subsisting mainly on fast food.
26:00But as Larry and Sergey would learn soon enough,
26:02a million bucks was chicken feed in the boom year of Silicon Valley.
26:17This skinny Clark Kent-ish figure is L. John Doerr,
26:21arguably Silicon Valley's most famous and successful venture capitalist.
26:25Having bankrolled Sun, Compaq, Netscape, and Amazon.com,
26:29he's officially the man with the Midas touch.
26:32And so it was probably inevitable that Page and Brin
26:35would eventually wind up on Doerr's doorstep.
26:38They were so convinced that search was so big, so important,
26:42was going to grow so much, that I asked, so how big?
26:47And Larry Page, completely serious, said, well, $10 billion in revenue.
26:55Then I did fall out of my chair.
26:58I was certain that these were very ambitious entrepreneurs
27:03with a powerful vision.
27:05There were few things that floated John Doerr's boat
27:07more than outsized ambitions.
27:09And even back then, Page and Brin had ambitions
27:12that would make any mere mortal blush.
27:14They wanted to organize literally all of the information in the world,
27:18make it searchable and universally accessible.
27:20Whoa!
27:22In the early part of 1999, I got a call from John Doerr
27:25saying he wanted me to come on down to his offices.
27:27There was something he wanted to show me.
27:29I had no idea what he was talking about,
27:31but when John Doerr calls, you come.
27:34Doerr sat me down behind his desk
27:36and told me he'd made an investment in a new startup,
27:39a search engine, no less.
27:41Then he turned to his computer, fired up his browser,
27:43and showed me a website that I'd never heard of before, google.com.
27:48The difference was startling, as was Google's radical simplicity,
27:51and the results it spit out were remarkably on target.
27:54I turned to Doerr and I said, wow, that's impressive.
27:57But there aren't any ads on the site, or anything else for that matter.
28:00How's this thing ever going to make money?
28:02And Doerr replied,
28:03these guys are solving the single hardest problem on the Internet,
28:06and if we can't figure out how to make money from that,
28:08we ought to get out of this business.
28:12But sussing out how Google would become a profitable concern
28:15proved to be no easy thing.
28:17And as the passing days turned into passing months without a business model,
28:21the VCs grew queasier and queasier.
28:24There was no means of sustenance for anyone associated with Google.
28:29There was no money-changing hands.
28:32And the founders had to hire people.
28:35They had to pay the people.
28:37They had to buy equipment to house their service.
28:41And all of that required money.
28:44Something like half a million bucks was flying out of Google's door each month,
28:49which meant that $25 million in the bank wouldn't last for long.
28:53The obvious solution was to follow the likes of Yahoo and Excite,
28:57and put banner ads on their site.
28:59But in one of their gutsiest and most farsighted decisions,
29:02Page and Brin refused to follow the easy path.
29:05They simply couldn't stomach the idea
29:07of Google turning into just another cluttered portal.
29:10They wanted to make sure that they left people with a great experience,
29:15but also with advertisements that made sense to people.
29:20Page and Brin weren't against advertising per se.
29:23They just wanted it in a more user-friendly, webified form.
29:27But they couldn't think of what that would be.
29:29Time and money were running out, however,
29:31so in the most controversial move of their young company's life,
29:34they found the solution to their problem in true Silicon Valley style.
29:37They copied it from somebody else.
29:40That someone else was this man, Bill Gross.
29:43Based down in Los Angeles, Gross had no connection to Google.
29:46He ran a company called Idealab,
29:48a self-styled incubator of innovative notions and the startups that hatched them.
29:53It was Gross who cracked the riddle of Internet advertising
29:56and, in a roundabout way, provided Google with its salvation.
30:02I go through life looking around at problems that I see
30:05and looking for ways to solve them,
30:07whether they're life problems like traffic or health problems
30:11or technology problems.
30:12But I always like to look at everything and say,
30:14how could this be better?
30:16Over the course of his career,
30:17Gross has turned his attention to everything from robots to solar panels.
30:21But back in the late 1990s, his obsession was web advertising.
30:25When I saw this particular problem at this company,
30:28where companies were looking for ways to advertise more,
30:30and I was sort of saying to myself,
30:32how can we make this better?
30:33What's wrong with the way we're buying the advertising right now?
30:35What would we like it to be?
30:37In hindsight, Gross' insight, like pages count the links,
30:41was brilliantly simple.
30:43It started with the realization that when someone types in a search query,
30:46they're not just telling the world what they're interested in,
30:49they're often telling the world what they're interested in buying.
30:53So if I type in the words Bob Dylan,
30:58I'm saying at a minimum that I'm curious about him,
31:01maybe I even want to buy his new album.
31:03Now take that information
31:05and all the other musicians' names I've ever typed into Google,
31:08and suddenly you have a detailed picture of me as a music fan,
31:11a picture of no small value for the music business.
31:14And this, in essence, is what Bill Gross saw,
31:16and saw before anyone else,
31:18that a search engine could be, and probably would be,
31:21the world's most powerful and efficient market research tool.
31:26In tech jargon, the terms you type into a search engine are called keywords,
31:30and Gross realized that they could be worth a fortune.
31:33Keywords are the future of the business.
31:35Keywords were so valuable
31:37because when a person types in a keyword to a search engine,
31:40they are giving you a huge window into the mind of their intent at that moment.
31:45You get them to type a few words, that's insanely valuable.
31:49Gross believed that he could sell keywords to advertisers.
31:52BMW, for instance, would pay good money
31:54to ensure that every time someone typed the word car into a search engine,
31:58a link to the BMW site appeared up high in the search results.
32:02But even among Gross' own people,
32:04the idea of paying for placement seemed crass, objectionable.
32:08And that was very distasteful to some people in this meeting.
32:11There were some people rolling their eyes at the idea.
32:13They're saying, no way you can get away with that.
32:15I said, come on, it's just like the Yellow Pages.
32:17Think about that. Think how useful the Yellow Pages are.
32:19And I left the meeting, and I ran back to my office,
32:21and I grabbed the Yellow Pages, I brought it back in,
32:23I plopped it down, I opened it up, I said, look at this.
32:25Look how useful this is. You look for something in here.
32:27These are paid ads, and this is what the customer wants
32:29when they're searching for a plumber.
32:31Why wouldn't we do that in a search engine?
32:32Why wouldn't that be helpful?
32:33It turned out to be the big idea,
32:35that search could be like Yellow Pages.
32:37Gross ultimately persuaded the skeptics at his company,
32:40and in 1998, he launched a site based on keywords and sponsored links
32:44that would eventually be known as Overture.
32:47It was an instant success.
32:50The CEO of the company came up to me and said,
32:52we are handling billions of microtransactions.
32:55We are bigger than the phone company, even,
32:57in the number of transactions we're handling.
32:59And that was really incredible.
33:00That's when I realized, this really is a big thing.
33:03What Gross didn't know was that back in Silicon Valley,
33:06his moves were being watched,
33:08and that Google would come to see his idea
33:10as the solution to its business model quandary.
33:14Larry and Sergey happened on a little site
33:19that was growing quite nicely,
33:22with sponsored listings called Overture.
33:25And Larry in particular, I think,
33:27felt that this offered a roadmap
33:32for a business that Google might be able to get into.
33:36The Google boys arranged to meet Bill Gross,
33:38and then to meet him again and again.
33:40Much of business history is determined by such meetings,
33:43between aspiring titans meeting behind closed doors.
33:47Well, I met Larry and Sergey,
33:49and we were talking to them about finding some way
33:52to blend the really great monetization that GoTo was having
33:56and the incredibly relevant search results that Google had.
33:59And we talked a number of times
34:01about different ways to incorporate those together.
34:04Sometimes meetings like this end
34:06with both sides emerging arm-in-arm.
34:08But other times, not.
34:10And that was the case with Google and Overture.
34:12What exactly transpired remains a bit of a mystery,
34:15but the outlines are clear enough.
34:17First, Larry and Sergey walked away from the talks
34:19without cutting any kind of deal.
34:21And then, shortly thereafter,
34:22Google released a service called AdWords
34:24that was uncannily similar to Overture's.
34:26Sound suspicious? You bet it does.
34:31Gross sued Google over that similarity
34:33and the appropriation it suggested.
34:35But ultimately, the two sides settled out of court.
34:38And one thing's sure,
34:40the settlement included enough money in Google stock
34:42to keep Bill Gross extremely happy.
34:45We thought it would add value.
34:47We never thought it could have this kind of impact and reach
34:49and really make for such a valuable economic model online.
34:52But we're so thrilled that it has.
34:54Google would tweak Gross's original idea in important ways.
34:58Most crucially, it would separate the ads
35:01from the so-called organic search results.
35:03Take a look at the Google page
35:05that we're all so familiar with by now.
35:07Here's the white box where you type in your query.
35:09Here are the untainted results
35:11generated by the Google relevance algorithm.
35:13And then here, at the top and to the right, are the ads,
35:17the blue-colored sponsored links that companies have paid for.
35:20And it's from these that Google has derived billions in profits
35:23over the past few years.
35:25It was clear that it was a better user experience
35:29than arriving at a website
35:32that looked as if it was 42nd Street or Times Square
35:36at 2 o'clock in the morning.
35:38And they thought that would be better for advertisers as well
35:41because it would bring advertisers more business.
35:43And that was a wonderful, shrewd, stunning, incredible insight
35:50at the beginning of 2000.
35:53What Google had done wasn't merely to chart a path
35:55towards its own commercial success.
35:57It had laid the foundations for the astronomical takeoff
36:00of Internet advertising writ large.
36:02Suddenly, with AdWords and similar services
36:04from Microsoft and Yahoo,
36:06anyone who wanted to hawk their goods online,
36:08from Toyota and Citibank
36:10to a shepherd in the Ural Mountains peddling goatskin rugs,
36:13had at their disposal a measurably effective means
36:16of reaching a global marketplace.
36:18What we now understand is the Internet economy was being born
36:21with Google as its most essential player.
36:34On August 19, 2004, Google went public,
36:38listing its shares for sale on the NASDAQ stock market.
36:41In the previous five years,
36:43the company had gone from zero
36:45to a staggering $3 billion annually in revenue,
36:48and had become a household name.
36:50The Google IPO caused a frenzy of speculation and anticipation,
36:54especially among those who hoped, prayed,
36:57it might revive a tech sector
36:59still recovering from the dot-com crash.
37:01Out in Silicon Valley,
37:03a commonly seen bumper sticker around the time read,
37:06Please Just Give Us One More Bubble.
37:09But the way that Google conducted its offering
37:11aroused the ire of many
37:13who wanted to talk on that fateful day
37:15of a disaster in the making.
37:17I remember that morning,
37:19sitting in a conference room with a television
37:21and watching people on CNBC
37:23talking about what a terribly unsuccessful offering
37:27this was going to be
37:29and how unlikely we were to be successful.
37:31The controversy over the IPO arose
37:34from the fact that Google had chosen
37:36an unconventional auction process for selling its shares.
37:39And this had alienated much of Wall Street,
37:41which profited handsomely
37:43from the conventional way of doing business.
37:45Google's roadshow to drum up interest in the IPO
37:47and the financial community
37:49earned terrible reviews.
37:51The company's executives came across
37:53as arrogant and unforthcoming.
37:57The Google IPO was quite the talk of financial media,
38:01and there were many powerful forces on Wall Street
38:05who believed this was not the way
38:07they wanted public offerings to be done.
38:12The great and the good of Wall Street
38:14were in that conference room
38:15in the Nasdaq Tower in Times Square.
38:17So were John Doerr, Eric Schmidt, Larry Page, and me.
38:21The tension was thick,
38:23and the only thing that cut it
38:25was when Larry planted his soon-to-be-billion-dollar butt
38:27in a plate full of creme fraiche.
38:31It's surreal.
38:32There's this enormous wall of pixels and graphics,
38:35and you have some sense that here's the whole world's economy
38:38sweeping across your eyes.
38:41And then up onto the stage go Larry and Eric.
38:47And there was a great deal of anticipation
38:49about the market opening.
38:56And then off they went.
39:05Of course, at noon, the trading turned on,
39:07and the first trade was at $100,
39:09which was $15 higher than the previous day's price,
39:11and it never went below that.
39:13In the end, despite all the sturm und drang,
39:16the Google IPO was a success
39:18by the measure that matters most.
39:20Anyone who bought shares that day
39:22and is still lucky or smart enough to have them
39:24has made a whopping bundle.
39:26Three years after the offering,
39:28Google was valued more highly than FedEx,
39:30McDonald's, Coke, Intel, IBM, or Walmart.
39:34Shares that traded at $100
39:36had soared to nearly $700.
39:38Meanwhile, Brynn and Paige
39:40are ranked among the top 30 richest people in the world.
39:44Google, full stop, is the fastest growing company ever.
39:50Despite racing into the Fortune 500,
39:52Google's founders have always been at pains
39:54to ensure that their company isn't perceived
39:56as yet another rapacious bully,
39:58like, say, Microsoft at its zenith.
40:01Their ostentatiously altruistic corporate motto is
40:04Don't Be Evil.
40:06Their campus is a throwback to the dot-com era,
40:09with its free food, beanbag chairs, and Segway scooters.
40:12But for all the feel-good fripperies,
40:15Google remains a highly tuned capitalist machine,
40:18one that continues to thrive
40:20on the marriage of search and advertising
40:22that the company has perfected.
40:24Until advertising online was really effective,
40:28there was no way to pay for all the programmers
40:30who were building all the software.
40:32They were subsidized.
40:33So, for example, at Sun,
40:34we would sell systems or hardware,
40:36and we would use that money
40:37to pay for our Internet programmers.
40:39The Internet businesses today
40:41can pay for their Internet programmers
40:43with Internet revenues,
40:44which are typically advertising.
40:45So the development of the technology
40:47and the advertising go hand in hand.
40:49But Google isn't kicking back
40:51and milking its core business.
40:53It's not resting on its laurels.
40:55Quite the contrary.
40:56It knows full well that to stand still
40:58in the technology business
41:00is to commit commercial suicide.
41:02Google has poured its gargantuan profits
41:05into countless experiments and projects,
41:07sticking its fingers into every pie within its reach.
41:10There's Google Library, Google Books,
41:12Google Maps, and Google Earth.
41:14There's Gmail, Google Calendar,
41:16Google Spreadsheets, and Google Docs.
41:18The company bought the startup Blogger
41:20for personal web publishing.
41:22It bought the startup Picasa
41:23for online photo sharing.
41:25And, of course, YouTube for online video sharing.
41:28It all adds up, in the eyes of many,
41:30to a plan for world domination.
41:32And so it's no wonder that Google mania
41:35has gradually started to give way
41:37to creeping Google phobia.
41:39Where the sense of Google phobia may be most acute
41:41is among privacy crusaders
41:43who worry about how much information
41:45about all of us is stored in Google's databases.
41:48But it's not just civil libertarians.
41:50Even Page and Brin's original mentors
41:52have their worries.
41:54People are going to feel that there really is a danger
41:57in having too much information stored
41:59about everything they've done,
42:00everything they've searched for.
42:02And we're going to see more and more about that.
42:05For others, Google's metastasizing dominance
42:07and ravenous expansion is a call to arms.
42:10Although Excite is long dead,
42:12Yahoo has ramped up its search and advertising offerings.
42:15And also making its mission to take down Google
42:17is Microsoft,
42:19a company well known for never giving up,
42:21for coming late to the party,
42:23but always being the last man standing.
42:26Generally, if there was a large Internet
42:28or software opportunity,
42:30Microsoft would figure that out pretty quickly.
42:33And they have a lot of really smart people
42:36and enormous assets and strengths.
42:38More to the point,
42:40as Google has expanded its reach
42:41into so many corners of commerce,
42:43its list of enemies outside the tech business
42:45has grown longer and more formidable.
42:47From Viacom and Rupert Murdoch's News Corporation
42:50to book publishers,
42:52and soon enough,
42:53the entire telecommunications industry.
42:55The forces now amassing against Google
42:57will confront the company
42:59with challenges far greater
43:00than any it's ever caught up against before.
43:02For Google to continue its astonishing rocket ride,
43:05Larry and I are looking forward to it.