Ss In The Plex How Google Thinks, Works, and Shapes Our Lives by Steven Levy Few companies in history have ever been as successful and as admired as Google; the company that has transformed the Internet and become an indispensable part of our lives. How did Google do it? Veteran technology reporter Steven Levy takes us deep inside Google headquarters – aka the Googleplex – to show how Google really works. ―Does the world need another book about Google?‖ you might ask. With Android‘s remarkable success, Google‘s recent purchase of Motorola, a risk-taking ―new‖ CEO (Larry Page is back at the helm of the company) there are tons of new developments to report. Also, Steven Levy digs deeper than all who‘ve come before him, so he brings a fresh perspective to some of the stuff you may have heard about before. As a long-time senior reporter with Wired magazine, Levy has been poking around the Googolplex‘s corridors since the late 1990s. Levy spent two years researching In the Plex, and he enjoyed unfettered access to Google‘s two co-founders, plus many other top executives. Levy‘s insider perspective provided him with the keys to unlock the secrets of two of Google‘s most closely-guarded ―black boxes‖ – its advertising model, and its internal management philosophy. Needless to say, Google‘s search engine is an integral part of our daily lives, and the company‘s ad system on which it is based is arguably the single most important commercial product of the Internet age. For the first time ever, In the Plex reveals the full story of the development of this seminal money-making product. Levy also breaks-down Google‘s internal management philosophy to give us a better understanding of Google‘s strategy, values and reasons for success. And in doing so, he helps us understand the world of online business more generally, and allows us to make more accurate predictions about where this ever-changing marketplace is headed. But, to see where Google is going, we first need to understand where it began. So that‘s where this summary begins. The year is 1999, and it‘s five years before Google‘s Initial Public Offering, and months before its co-founders, Larry Page and Sergey Brin, came to the wise (but difficult) realization that they needed to hire outside help to achieve their vision. That help would come in the form of a professional CEO named Eric Schmidt 1 | The Business Source www.thebusinesssource.com All Rights Reserved Ss Google’s Early Years As just about everyone knows, Google was founded by two ambitious math wizards, Larry Page and Sergey Brin while they were attending Stanford University as PhD candidates. It was incorporated as a privately held company on September 4, 1998. Google began as a research project. Page and Brin wanted to simplify the challenge of finding information on the Internet, which was already growing by leaps and bounds. While the first wave of Internet search engines, such as Netscape, ranked results by counting how many times the user‘s search terms appeared on the page, Page and Brin developed a far better system that also analyzed the relationships between Web sites. They called their new technology Page- Rank, and set about to commercialize it. Google‘s first funding came in 1998 in the form of a $100K investment from Andy Bechtolsheim (a founder of Sun Microsystems). A year later, a crucial second round of funding came – this time $25 million – with VC firm Kleiner Perkins as the lead investor. Two years later, Page and Brin made remarkable progress continuing to improve and refine their Page-Rank technology. But they weren‘t making any money from the 70 million or so daily searches that were happening via their Web site and some of Google‘s initial investors were getting restless. One investor in particular, David Cheriton, began joking to friends that all he‘d gotten from his six-figure Google investment was a T-shirt. Times were tough. According to Levy, to several of the VCs represented on Google‘s board, the problem was no joking matter. According to one account, there was a real possibility that some funders would begin pulling their funding. Page and Brin begged the VCs to stay patient. As Levy reveals, Google‘s lack of revenues wasn‘t the VC investors‘ only concern. To their dismay, only a few months after Page and Brin took the $25 million from Kleiner Perkins and others, the founders began welshing on their commitment to hire a CEO. Page and Brin called up one of the VCs one day and said: ―We‘ve changed our mind. You know, we actually think we can run the company between the two of us.‖ This was a great concern to the members of the VC syndicate because, while Page and Brin were clearly geniuses and visionaries, they knew nothing about running a company. After that phone call, the investors really started to sweat. But they held off liquating their shares because, by then, they‘d come to know Page and Brin well enough to realize that the only way to get them to change their minds was through data. And the particular data the investors had in mind was first-hand exposure to the most brilliant CEOs in the Valley – names like Steve Jobs, Intuit‘s Scott Cook, and Amazon‘s Jeff Bezos. The investors offered the founders a deal: Page and Brin would have to meet with each of these CEOs, and if after that, they still thought they could run a company just as well, then the VC would reconsider forcing Brin and Page to bring in an outside CEO. After Page and Brin completed their ―Magical Mystery Tour of High-Tech Royalty,‖ they reported-back to the investors. They agreed to hire an outside CEO, but only one name in the industry would meet their standards: Steve Jobs. Of course, as Levy puts it, this suggestion was ―ludicrous for a googolplex of reasons.‖ Jobs was already the CEO of Apple, a successful, 2 | The Business Source www.thebusinesssource.com All Rights Reserved Ss growing company. And in addition, he was Steve Jobs. ―You would sooner get the Dalai Lama to join an Internet start-up than Steve Jobs,‖ writes Levy. Eventually, Brin and Page came to their senses and agreed to hire a fellow named Eric Schmidt. Schmidt, then in his early forties, had been the chief technology officer at Sun Microsystems. He was familiar with boardrooms and bottom lines. But the big factor in his favour was that he was a renowned computer geek, with a Berkeley science PhD. ―We liked him because he really understood computer science,‖ explained Page to Levy. And what‘s more, Schmidt wasn‘t a stuffed shirt. As Brin later said, ―Of all the guys we interviewed, Schmidt was the only candidate who‘d ever been to Burning Man.‖ From the start, Schmidt adopted a public stance toward the founders showing respect and unfettered admiration, a position he carefully maintained for years thereafter. ―I fairly quickly figured out these guys were good at what they do,‖ he told Levy in early 2002. ―Sergey is the soul and the conscience of the business. He‘s a showman who cares deeply about the culture, the one who talks more, with a bit of Johnny Carson. Larry is the brilliant inventor, the Edison. Every day I am thankful I accepted this job offer.‖ As the years went on, the founders would occasionally let remarks slip here and there that left outside observers with the impression that they were a little bitter about having to bring in an outside CEO. ―I guess we need adult supervision,‖ said Brin on one occasion. But overall, Levy believes Page and Brin genuinely appreciated Schmidt‘s contribution. Still, there was more work to do than bringing in a capable CEO. The company still needed to figure out a way to make money. By early 2001, funds had gotten so low that Schmidt instituted a tough new policy that limited all expenditures to one day a week. If an executive wanted to spend any amount of new money he or she would have to petition Schmidt for approval in his office at 10am on Friday. But then, just as the dark storm clouds were gathering on the horizon, there came a sudden development that was, according to Levy, ―transforming, decisive, and, for Google‘s investors and employees, glorious.‖ Google had invented what would soon become the most successful scheme for making money on the Internet that the world had ever seen. Google Ads: How to Make a Profit on the Internet It was 2001, and Google had a big secret. It was far and away Google‘s biggest secret; even better protected than the hidden algorithms that lay behind its search engine. Those who knew the secret (i.e. virtually everyone working at Google, and basically no one in the outside world) were instructed to keep their mouths shut. Outsiders who suspected the secret were given no winks of confirmation. No one dared spill the beans. According to Levy, what Google was hiding was how it had finally ―cracked the code‖ to making money online. Google‘s founders realized they‘d just invented one of the most important products in the world, and the company would soon be swimming in black ink. The secret finally slipped out on April 1, 2004. As a consequence of going public, Google was required to share its internal information with the bankers who would potentially handle the 3 | The Business Source www.thebusinesssource.com All Rights Reserved Ss IPO.