241 lines
10 KiB
Markdown
241 lines
10 KiB
Markdown
---
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created_at: '2015-08-20T06:05:44.000Z'
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title: Google's Toughest Search Is for a Business Model (2002)
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url: http://www.nytimes.com/2002/04/08/business/google-s-toughest-search-is-for-a-business-model.html
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author: ghosh
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points: 85
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story_text:
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comment_text:
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num_comments: 47
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story_id:
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story_title:
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story_url:
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parent_id:
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created_at_i: 1440050744
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_tags:
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- story
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- author_ghosh
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- story_10090218
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objectID: '10090218'
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year: 2002
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---
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The executives' disdain for business meant they spent nothing to
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advertise their site and cut very few deals with other sites. They have
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insisted that the ads that do run on Google should employ only words,
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not pictures, so as not to slow the site's amazingly quick response
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time.
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All this has made Google Silicon Valley's hottest private company, one
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deluged with 1,000 résumés a day. And the whisper is that when Google
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finally does go public, probably in the next year or so, it will make
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its debut with a multibillion dollar valuation. (That is one dot-com
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tradition the company probably will not disdain.)
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But Google has its share of challenges. The very success of Google .com,
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which is now the nation's sixth-most popular Internet site and is
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growing ever more popular abroad, undercuts its effort to be hired to
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provide search technology for other sites.
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Analysts wonder, in fact, whether Yahoo will see Google as too much a
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rival to renew its contract, which was worth $6.1 million in cash (and
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far more in publicity) for the last year. The Yahoo deal expires in
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June. Google's effort to expand to other areas, like providing search
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capabilities for corporations' internal Web sites, has yet to pay off.
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And most importantly, while Google is the leader in searching Web pages,
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it is a tiny force in the rapidly growing market for selling advertising
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related to search. The dominant player there is Overture Services, which
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began life as GoTo.com, a search engine that let Web sites bid to be
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listed and ranked in searches. (Whoever pays most gets listed first, the
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runner-up is listed second, and so on.)
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Users never warmed to GoTo, but advertisers, especially small ones,
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jumped on it. What better place to advertise your cozy inn than on a
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page where someone is searching for information about the Berkshires? So
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Overture regrouped, and it now offers to split revenue with sites that
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display its listings on their search results pages. Yahoo, MSN, America
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Online and all the other major sites -- except Google -- have agreed.
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Google has increasingly modeled its ad program on Overture's,
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introducing a feature in February that lets advertisers bid for more
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prominent position. (The ads on Google appear either above or to the
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side of the main search results.) Overture responded on Friday by suing
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Google, claiming patent infringement, an accusation Google denies.
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Advertisement
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[Continue reading the main story](#story-continues-4)
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But the bigger question is whether Google has the scale to capture a
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viable share of the search advertising market. In other words, can
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Google create a business model even remotely as good as its technology?
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''The days of investing in Web sites we love are over,'' said Lanny
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Baker, a Salomon Smith Barney analyst. ''People rave about Google. But
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as a business, it will take an awful lot for them to catch up to
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Overture.''
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Mr. Schmidt says Google's sales are growing so briskly he is not
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worried. Google will not disclose its results, but competitors estimate
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its sales at $15 million to $25 million a quarter. (Overture is expected
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to post $126 million in revenue for the first quarter.)
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The founders, Sergey Brin, now 28, and Larry Page, 29, who started
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Google in 1998 after dropping out of Stanford's computer science
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doctoral program, say they still believe that if they devote themselves
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to improving Web search technology, the users and thus the advertisers
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will follow.
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''We have pride that we are building a service that is really important
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to the world and really successful for the long term,'' Mr. Page said.
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The cornerstone of Google's search technology is something it calls Page
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Rank (after Larry Page, not Web page). It determines a site's popularity
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based on the number of other sites that have links pointing to it. When
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a user types a query into Google, it first finds all the pages that
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contain the query terms and then displays the pages in order, based on
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the Page Rank.
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The founders, both sons of university professors, take pride in their
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tough admission standards, having interviewed 50 candidates before
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choosing Mr. Schmidt as chief executive, for example.
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## Newsletter Sign Up
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[Continue reading the main story](#continues-post-newsletter)
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###
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Please verify you're not a robot by clicking the box.
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Invalid email address. Please re-enter.
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You must select a newsletter to subscribe to.
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You agree to receive occasional updates and special offers for The New
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York Times's products and services.
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### Thank you for subscribing.
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### An error has occurred. Please try again later.
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[View all New York Times newsletters.](/newsletters)
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The search was ''interminable,'' said Michael Moritz, the Sequoia
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Capital venture capitalist who is on Google's board. They still have not
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picked a chief financial officer. The soft-spoken Mr. Schmidt fit in
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because he is an accomplished engineer who happens to have spent some
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time running a company.
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Mr. Brin and Mr. Page, who share a dry and impetuous sense of humor,
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have also cultivated an impudent culture, as if nerds had taken over a
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college dorm. Programmers work by the light of lava lamps into the wee
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hours of the morning, taking breaks to ride motorized scooters down the
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halls and eat spicy meals prepared by the house cook, Charlie Ayers, the
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former chef for the Grateful Dead.
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Advertisement
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[Continue reading the main story](#story-continues-5)
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This bitbucket bonhomie has resulted in a steady stream of nifty
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features, like a rather unusual approach to fixing users' spelling
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errors. Instead of a predetermined dictionary, it looks for correct
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spelling in its index of the entire Web. That means it can propose
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correct spellings to proper names, and it works in 74 languages, most of
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which no one at Google has ever spoken. Or in some cases, no person
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anywhere has ever spoken: Google runs versions of its sites in a few
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languages that no one has spoken, like Bork Bork Bork, purported to be
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the tongue of the Swedish chef on ''The Muppet Show.''
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The company is so infatuated with its technical prowess and sense of
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destiny that it has developed a reputation as being difficult to deal
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with.
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''Serge and Larry are very blunt and very cocky,'' said Danny Sullivan,
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editor of Search Engine Watch, an online newsletter. ''They honestly
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believe they can do a better job than other people, and they don't have
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any hesitation in saying that.''
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Mr. Schmidt, who is 46, makes clear that managing Google's cocky culture
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is one of his tasks. ''It's easy for companies like ours to get
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arrogant,'' he said. ''That makes people get madder as you are winning.
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I think you need to win, but you are better off winning softly.''
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Mr. Schmidt has also done other things grown-up executives are supposed
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to do. Like reining in spending for his first few months until the
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company became profitable. Like recruiting a bunch of new vice
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presidents and imposing systems for sales forecasting. And ordering an
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international expansion.
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He also sometimes challenges the geeks to be less geeky. Late last year,
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Mr. Schmidt, no novice at technical matters, wanted to test the ease of
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installation of one of Google's new products -- a computer server the
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size of a pizza box, which corporations can buy to search their internal
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networks.
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After four frustrating hours, he sent off a nasty e-mail to the
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designers. The revised version he received several days later was much
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easier to use. But at a company meeting several days later, David
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Watson, an engineer and one of the rebuked designers, stood up and
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presented Mr. Schmidt with a certificate labeled ''Tester Technical
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Award: Most Improved.''
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''That doesn't happen in real companies,'' Mr. Schmidt says, still in
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wonder at the act, cheeky even by engineers' insubordinate standards.
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The certificate now hangs on the wall of Mr. Schmidt's small office.
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Advertisement
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[Continue reading the main story](#story-continues-6)
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The biggest challenge for Mr. Schmidt, though, is balancing Google's
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increasing popularity among Web users with the needs and demands of the
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other Web sites, like Yahoo, for which it provides search technology.
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Google still charges a fee for each search conducted. And in the last
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two years, it has lost ground to others like Overture and Inktomi, which
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actually pay Web portals to use their technologies -- since their
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revenue comes from the sites whose pages Overture and Inktomi index.
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To keep other portals interested, Google recently started letting other
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sites run the text ads it sells alongside its search results and agreed
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to split the revenue.
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So far, only Earthlink has agreed, bouncing Overture's paid listings
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from its main page.
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But Google does not yet appear to have sufficient clout with some of the
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bigger sites. Analysts say Google cannot deliver enough money to
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supplant Overture from AOL, the AOL Time Warner flagship service. And
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Microsoft's MSN selected Inktomi -- not Google -- to provide technology
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for its search service, because Inktomi does not operate its own search
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site.
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''At the end of the day, Google is becoming more of a competitor to
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Microsoft and MSN,'' said Brian Gluth, a senior product manager for MSN.
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''We want to work with partners who don't compete with us.''
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Mr. Schmidt argues that Google's search technique is so superior that
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other sites gain traffic and happy users when they adopt it. He will
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have to hope he can convince Terry Semel, chief executive of Yahoo, when
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Google's current contract with the leading Web portal expires in two
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months.
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''Terry must be asking why Yahoo has helped build what could be one of
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its greatest competitors,'' said Evan Thornley, the chief executive of
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LookSmart, a Google competitor.
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Meanwhile, other companies are not willing to concede the search quality
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game to Google. One of them, Ask Jeeves, has acquired Teoma, a search
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service developed at Rutgers University. And last month, Look-Smart
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bought WiseNut, a Korean-backed search technology firm.
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''The history of search is that pundits declared the winner at the end
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of every lap,'' Mr. Thornley said. ''You have to be careful if you start
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to smoke your own stuff and believe you are the only one who can build a
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great search engine. There was a two-year window when Google was the
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only company focused on building search. No more.''
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[Continue reading the main story](#whats-next)
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