History of Google

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This article covers the history of Google, the popular web-based search engine.

Early history

Google began as a research project in January, 1996 by Larry Page, a Ph.D. student at Stanford. Larry is the son of the late Carl Victor Page, Ph.D., an esteemed Michigan State University professor of computer science and artificial intelligence. Larry's brother is Carl Page, Jr., a co-Founder of e-Groups.com, later sold to Yahoo.com for nearly 500 million dollars. Larry was soon joined in his research project by Sergey Brin a fellow Stanford Ph.D. student and close friend. Larry Page hypothesized that a search engine that analyzed the relationships between websites would produce better results than existing techniques (existing search engines at the time essentially ranked results according to how many times the search term appeared on a page). It was originally nicknamed, "BackRub," because the system checked backlinks to estimate a site's importance. A small search engine called RankDex was already exploring a similar strategy.

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. Originally the search engine used the Stanford website with the domain google.stanford.edu. The domain google.com was registered on September 15, 1997. They formally incorporated their company, Google Inc., on September 7, 1998 at a friend's garage in Menlo Park, California.

In March 1999, the company moved into offices at 165 University Avenue in Palo Alto, home to a number of other noted Silicon Valley technology startups. Google received a big break in 1999 when one of the most popular search engines, AltaVista, relaunched itself as a user web entry point, or portal. This unexpected change alienated part of AltaVista's user base. Google quickly outgrew its University Avenue home. The company settled into a complex of buildings, called the Googleplex in Mountain View in 1999. Silicon Graphics leased these buildings to Google.

The Google search engine attracted a loyal following among the growing number of Internet users. They were attracted to its simple, uncluttered, clean design — a competitive advantage to attract users who did not wish to enter searches on web pages filled with visual distractions. This appearance, while imitating the early AltaVista, had behind it Google's unique search capabilities. In 2000, Google began selling advertisements associated with the search keyword to produce enhanced search results for the user. This strategy was important for increasing advertising revenue, which is based upon the number of "hits" users make upon ads. The ads were text-based in order to maintain an uncluttered page design and to maximize page loading speed. It also only cost a very small amount per click to the websites that advertised this way. This model of selling keyword advertising was originally pioneered by Goto.com (later renamed Overture, then Yahoo! Search Marketing). While many of its dot-com rivals failed in the new Internet marketplace, Google quietly rose in stature while generating revenue.

U.S. patent 6,285,999 describing Google's ranking mechanism (PageRank) was granted on September 4 2001. The patent was officially assigned to Stanford University and lists Lawrence Page as the inventor.

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 "red herring" or "S-1") for their IPO, noting, "We believe 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."

The Google site often includes humorous features such as cartoon modifications of the Google logo to recognize special occasions and anniversaries. Known as "Google Doodles," most have been drawn by Google's international webmaster, Dennis Hwang. Not only may decorative drawings be attached to the logo, but the font design may also mimic a fictional or humorous language such as Star Trek Klingon and Leet. The logo is also notorious among web users for April Fool's Day tie-ins and jokes about the company.

Financing and initial public offering

The first funding for Google as a company was secured in the form of a $100,000 contribution from Andy Bechtolsheim, co-founder of Sun Microsystems, given to a corporation which didn't yet exist. After a frantic few weeks, this was topped up to give an initial investment of almost $1 million. Around six months later, a much larger round of funding was announced, with the major investors being rival venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital.

In October, 2003, while discussing a possible IPO (Initial Public Offering of shares), Microsoft approached the company about a possible partnership or merger. However, no such deal ever 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.

On April 29, 2004, Google made an S-1 form SEC filing for an IPO to raise as much as $2,718,281,828. This alludes to Google's corporate culture with a touch of mathematical humor as e ≈ 2.718281828. April 29 was also the 120th day of 2004, and according to section 12(g) of the Securities Exchange Act of 1934, "a company must file financial and other information with the SEC 120 days after the close of the year in which the company reaches $10 million in assets and/or 500 shareholders, including people with stock options. Google has stated in its Annual filing for 2004 that every one of its 3,021 employees, "except temporary employees and contractors, are also equity holders, with significant collective employee ownership," so Google would have needed to make its financial information public by filing them with the SEC regardless of whether or not they intended to make a public offering. As Google stated in the filing, their, "growth has reduced some of the advantages of private ownership. By law, certain private companies must report as if they were public companies. The deadline imposed by this requirement accelerated our decision." The SEC filing revealed that Google turned a profit every year since 2001 and earned a profit of $105.6 million on revenues of $961.8 million during 2003.

In May 2004, Google officially cut Goldman Sachs from the IPO, leaving Morgan Stanley and Credit Suisse First Boston as the joint underwriters. They chose the unconventional way of allocating the initial offering through an auction (specifically, a "Dutch auction"), so that "anyone" would be able to participate in the offering. The smallest required account balances at most authorized online brokers that are allowed to participate in an IPO, however, are around $100,000. In the run-up to the IPO the company was forced to slash the price and size of the offering, but the process did not run into any technical difficulties or result in any significant legal challenges. The initial offering of shares was sold for $85 a piece. The public valued it at $100.34 at the close of the first day of trading, which saw 22,351,900 shares change hands.

After some initial stumbles, Google's initial public offering took place on August 19, 2004. 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 $1.67 Billion, of which approximately $1.2 Billion went to Google. The vast majority of Google's 271 million shares remained under Google's control. The IPO 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. The company was listed on the NASDAQ stock exchange under the ticker symbol GOOG.

Growth

In February 2003, Google acquired Pyra Labs, owner of Blogger, a pioneering and leading weblog hosting website. Some analysts considered the acquisition inconsistent with Google's business model. However, 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.

At its peak in early 2004, Google handled upwards of 84.7 percent 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 marketshare, 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 genericized trademark).

Analysts speculate that Google's response to its separation from Yahoo! will be to continue to make technical and visual enhancements to personalized searches, using the personal data that is gathering from orkut, Gmail, and Froogle to produce unique results based on the user. Frequently, new Google enhancements or products appear in its inventory. Google Labs, the experimental section of Google.com, helps Google maximize its relationships with its users by including them in the beta development, design and testing stages of new products and enhancements of already existing ones.

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 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, however, 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 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.

On June 1, 2005, Google shares gained nearly 4 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 the rapid accumulation of the stock within index funds that track the S&P 500. The rumors, however, were premature and 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.

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".

On September 28, 2005, Google announced a long-term research partnership with NASA which would involve Google building a 1-million square foot R&D center at NASA's Ames Research Center. NASA and Google are planning to work together on a variety of areas, including large-scale data management, massively distributed computing, bio-info-nano convergence, and encouragement of the entrepreneurial space industry. The new building would also include labs, offices, and housing for Google engineers.

Time Warner's AOL unit and Google unveiled an expanded partnership on December 21, 2005, including an enhanced global advertising partnership and a $1 Billion investment by Google for a 5% stake in AOL. As part of the collaboration, Google plans to work with AOL on video search and offer AOL's premium-video service within Google Video. This will allow users of Google Video to search for AOL's premium-video services. Display advertising throughout the Google network will also increase.

Additionally, Google has also recently 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.

With Google's increased size comes more competition from large mainstream technology companies. One such example is the rivalry between Microsoft and Google. Microsoft has been touting its MSN 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 other applications (for example, Microsoft's Windows Live Local competes with Google Earth). Some have even suggested that in addition to an Internet Explorer replacement Google is designing its own Linux-based operating system called Google OS to directly compete with Microsoft Windows. There are also rumors of a Google web browser, fueled much by the fact that Google is the owner of the domain name "gbrowser.com." This corporate feud is most directly expressed in hiring offers and defections. Many Microsoft employees who worked on Internet Explorer have 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).

Google and Microsoft reached a settlement out of court on 22 December 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. Jessie Stricchiola, president of Alchemist Media, called Google, "the most stubborn and the least willing to cooperate with advertisers," when it comes to click fraud.

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 Sun-Times. They have been filling unsold space in the newspaper that would have normally been used for in-house advertisements.

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 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."

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%.

Over the course of the past decade, Google has become quite well known for its corporate culture and innovative, clean products, and has had a major impact on online culture. In July, 2006, the verb, "to google," was officially added to both the Merriam Webster Collegiate Dictionary as well as the Oxford English Dictionary, meaning, "to use the Google search engine to obtain information on the Internet."

On October 9, 2006, Google announced that it would buy the popular online video site YouTube for $1.65 billion in stock.

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Criticism and controversy

Copyright issues

A number of organizations have used the Digital Millennium Copyright Act to demand that Google remove references to allegedly copyrighted material on other sites. Google typically handles this by removing the link as requested and including a link to the complaint in the search results.

There have also been complaints that Google's Web cache feature violates copyright. However, Google provides mechanisms for requesting that caching be disabled. Google also honors the robots.txt file, which is another mechanism that allows operators of a website to request that part or all of their site not be included in search engine results. The U.S. District Court of Nevada ruled that Google's caches do not constitute copyright infringement under American law in Field v. Google and Parker v. Google.

On June 2005, Google Watch revealed the details of a contract between the University of Michigan and Google to create digitized copies of the copyrighted materials stored at the University's library. This contract is part of Google Print's effort to digitize millions of books and make the full text searchable. There are claims that it is a violation of copyright laws to use copyrighted material for profit by placing search ads beside the search results of these digitized books. Also, Google is setting a new precedent by making digital copies of copyrighted material on a wide scale without explicit permission from copyright holders. Meanwhile, Google claims that it is in compliance with all existing and historical applications of copyright laws regarding books. The contract between Google and the University of Michigan does make it clear that Google will provide only excerpts of copyright text in a search. The contract says that it will comply with "fair use", an exemption in copyright law that allows people to reproduce portions of text of copyrighted material for research purposes.

Agence France Presse dispute

In March 2005, Agence France-Presse (AFP) sued Google for $17.5 Million, alleging that Google News infringed on its copyright because, "Google includes AFP's photos, stories and news headlines on Google News without permission from Agence France-Presse." It was also alleged that Google ignored a cease and desist order, though Google counters that it has opt-out procedures which AFP could have followed but did not.

It is possible that AFP will make additional arguments in court that it has not yet made in public, but currently, many pundits are confused by the decision to sue because Google does not display the full article on its site, provides a link to one of AFP's 600 online clients such as Singapore's Channel NewsAsia (which presumably benefits AFP because more people view the article and advertising), and because the articles are available via the providers' websites regardless of Google's actions. It was also argued that had AFP wanted to prevent free use of its articles, it should have asked its providers to require subscriptions rather than suing Google. Additionally, "in 2002, a federal appeals court ruled that websites may reproduce and post 'thumbnail' or downsized versions of copyrighted photographs," so Google News' thumbnails are likely legal. Still, AFP argues that the headline and first sentence of an article constitutes the, "heart" of the work and that reproducing it is copyright infringement.

According to the Canada Free Press, "Google Inc. is now attempting to remove all postings of Agence France-Presse material from its site, although AFP spokesmen say that even if this is done, the lawsuit will continue. It seems that the basis of the lawsuit is just the abstract notion of copyright without any real damages to justify the action." The article concluded, "It would be a sad day for those who look to the Internet for news if AFP is successful in limiting what Google can display. AFP's lawsuit, if successful, is bound to have a major impact on how news is delivered on the Internet."

On February 21, 2006, in a similar lawsuit involving adult online site Perfect 10, a U.S. District Court Judge ruled that Google's image search function had violated the law by copying, without permission, photographs of naked women created by Perfect 10.

Authors Guild lawsuit

On September 20, 2005, the Authors Guild, a group that represents 8,000 U.S. authors, filed a class action suit in federal court in Manhattan against Google over its unauthorized scanning and copying of books through its Google Library program. The lawsuit seeks damages and an injunction that will prevent the company from continuing their very ambitious digitization project. Arguments in the case will hinge around the interpretation of the four factors of Fair Use.

Many commentators in the world of copyright law and technology were not surprised by this development as the Authors Guild has also been involved in attempting to make online publishers pay royalties to writers whose stories appear in any number of online databases without their expressed consent. In a concession to general concerns about the nature of their project, Google had announced plans in August 2005 that they would respect the wishes of copyright holders who contacted the company to inform them that they did not want their works included in this digitization project.

Copiepress dispute

In September, 2006, Belgian newspapers Le Soir, La Libre Belgique and La Derniere Heure, represented by Belgian newspaper group Copiepresse won a court case against Google for copyright infringement, for republishing snippets of their newspapers' content on Google news without permission. To comply with the judgment, Google was ordered to remove all news stories of these sites from their news search results, as well as to publish the judgment on the news.google.be site. In November, 2006, Google will defend the case again as an interpretation of the court order.

Censorship

Google has been criticized for some of its censorship practices. See Google censorship for further details.

Gonzalez v. Google

On Wednesday, January 18 2006, the U.S. Justice Department filed a motion to compel in U.S. District Court in San Jose seeking a court order that would compel search engine company Google Inc. to turn over, "a multi-stage random sample of one million URL’s," from Google’s database, and a computer file with, "the text of each search string entered onto Google’s search engine over a one-week period (absent any information identifying the person who entered such query)." Google maintains that their policy has always been to assure its users privacy and anonymity, and challenged the subpoena. Noticeably, on January 20, when both the DOW and NYSE fell around a percent, Google stock fell close to 10%. It has since bounced back somewhat. On March 18th 2006, a federal judge ruled that while Google must surrender 50,000 random URLs, the Department of Justice did not meet the necessary burden to force Google to disclose any search terms entered by its users.

Past legal issues

Google's efforts to refine its database have led to some legal controversy, notably a lawsuit in October 2002 from the company SearchKing which sought to sell advertisements on pages with inflated Google rankings. In its defense, Google stated that its rankings are its constitutionally-protected opinions of the websites that it indexes. A judge subsequently threw out SearchKing's lawsuit in mid-2003 on precisely these grounds.

In May 2004, the Baltimore Sun interviewed Peri Fleisher, a great-niece of Edward Kasner, the mathematician whose nephew coined the word, "googol," who said Kasner's descendants were, "exploring" legal action against Google due to its name.

The same year, Google settled a patent infringement lawsuit with Yahoo! by issuing 2.7 million shares of Google stock to them. Yahoo! had earlier alleged that Google's AdSense program violated a patent held by Yahoo!'s Overture unit. The settlement cost Google around $275 Million which resulted in the company posting a net loss in the third quarter of 2004.

Personnel issues

On August 18 2005, former Google sales executive Christina Elwell, promoted to national sales director at Google in late 2003, accused her supervisor of discrimination against her when he terminated her employment after she informed him of her pregnancy. After the loss of three of her quadruplets, which she claimed was due to the stressful circumstances created by Google, Elwell sued the company. She also refused an offer from Shona Brown, Google Vice President of Business Operations, to reinstate her to a "low-level operations position".

Privacy

Main article: Google and privacy issues

Some have pointed out the dangers and privacy implications of having a centrally-located, widely popular data warehouse of millions of Internet users' searches, and how under controversial existing U.S. law, Google can be forced to hand over all such information to the U.S. government, or any other government of a country which Google serves.

It has been claimed that Google infringes the privacy of visitors by uniquely identifying them using cookies which are used to track Web users' search history. The cookies possess notably distant expiration dates and it is claimed users' searches are recorded without permission for advertising purposes. In response Google claims cookies are necessary to maintain user preferences between sessions and offer other search features. The use of cookies with such distant expiration dates is common.

Some users believe the processing of email message content by Google's Gmail service goes beyond proper use. The point is often made that people without Gmail accounts, who have not agreed to the Gmail terms of service, but send email to Gmail users have their correspondence analyzed without permission. Google claims that mail sent to or from Gmail is never read by a human being beyond the account holder, and is only used to improve relevance of advertisements. Other popular email services such as Hotmail also scan incoming email to try to determine whether it is unsolicited spam email (which Gmail also does). Chris Hoofnagle, associate director of the Electronic Privacy Information Center in Washington, DC warned that, "As courts become more frequent integrators of electronic records, there is a greater risk of Google ... becoming a serious privacy threat."

PageRank system

Google's central PageRank system has been criticized. Some, such as Daniel Brandt, call it, "undemocratic". Common arguments are that the system is unfairly biased towards large web sites, and that the criteria for a page's importance are not subject to peer review. PageRank is a largely automated system which is impartial insofar as it knows no personal bias. However, Google's system also relies on a certain degree of human oversight, and use of company names on Adwords. Furthermore, the deletion of critical sites from Google results (for example, sites critical of Scientology) is decided by individual human beings according to company policy. It remains unclear whether any process could assert the importance of a page in a way that would draw less criticism than the current PageRank system.

The system is also susceptible to manipulation and fraud through the use of dummy sites; see Google bomb, Political Google bombs and Spamdexing.

Digital rights management

Announced on January 6, 2006 at the CES in Las Vegas, Nevada, the Google Video store sells copyrighted content at the Google Video website. Initially, this service is restricted to the United States and certain other countries. To protect the copyright of these popular shows such as MacGyver and The Twilight Zone, Google created a Google DRM (Digital Rights Management) lock for certain paid content. The fact by itself that Google was using DRM was enough to cause criticism by some bloggers, even before Google Video was launched. The design of the system also has minor privacy implications that Google does not make explicit on their Video site; namely, Google learns who purchases each movie and what computers they watch it on.

External links

• Google Corporate History (official)