Larry Page said in the early day, a guiding principle is Do No Evil. I wonder if we can say that today or is it just business as usual?

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So, here’s one of those.

[Out of this World Plumbing Ad]

Dave Young:

This is the Empire Builders Podcast, by the way. Dave Young here, Steve Semple there. I wonder, Stephen, if we could do this whole episode without mentioning the name of the company that we’re going to be talking about. I ask that for the simple reason of they already know. They already know what we’re talking about. They already know we’re talking about them. They probably knew we were going to talk about them.

Stephen Semple:

Because of all the research I’ve done on my computer.

Dave Young:

No, because they’re listening to everything. They probably already know the date that this is going to come out and how long it’s… I don’t know, right? When they first started, and I don’t think we felt that way about them, and I can remember back in the early 2000s, just after the turn-

Stephen Semple:

In the early days, they had a statement. Larry Page was very famous.

Dave Young:

Yeah, “Do no evil.”

Stephen Semple:

“Do know evil. Do no evil,” and that was a very, very big part. In fact, in the early stages, they made a bunch of decisions that challenged the company financially because they were like, “This is not good experience for the person on the other end.” I wonder if anybody’s guessed yet what we’re going to be talking about.

Dave Young:

Well, then you go public, and it’s all about shareholders, right? It’s like the shareholders are like, “Well, we don’t care if you do evil or not. We want you to make money.” That’s what it’s about because you have [inaudible 00:03:01].

Stephen Semple:

All those things happen.

Dave Young:

Yeah.

Stephen Semple:

This company that we’re talking about, we’ll go a little while before we’ll let the name out, was founded… On September 4th in 1998 was when it was actually founded.

Dave Young:

Oh, ’98. It goes back before the turn of the century [inaudible 00:03:14].

Stephen Semple:

Yeah. It was founded by Larry Page and Sergey Brin, who met at Stanford. Interesting note, the Stanford grads also created Yahoo.

Dave Young:

Okay, yeah.

Stephen Semple:

That’s giving you another little clue about the company that we might be talking about.

Dave Young:

In the same geek club.

Stephen Semple:

Yeah, so 1998. I was thinking back, one year after I graduated from university, Windows 98 is launched and, believe it or not, the last Seinfeld episode aired.

Dave Young:

Are you kidding me?

Stephen Semple:

No, isn’t that crazy?

Dave Young:

’98.

Stephen Semple:

Yeah.

Dave Young:

I mean, I was busy raising four daughters in ’98.

Stephen Semple:

Yeah. Today, this company, as you said, because you didn’t want me to name the company, has more net income than any other business in US history. It has, now, I got to let the cat out of the bag, eight and a half billion searches a day happen. And yes, we’re talking about the birth of Google, which is also now known as part of the Alphabet group.

Dave Young:

Alphabet, yeah. It’s funny how they got to get a name that means everything. Did they have a name before Google? I know Google was like… Oh, it’s a number really, right? It’s a gazillion, bazillion Googleplex.

Stephen Semple:

As we’ll go into a little bit later, they actually spelled it wrong when they registered the site. That’s not actually the way that the word is spelled. I’ll have to go… But yeah, the first iteration was a product called BackRub was the name of it.

Dave Young:

Backrub, okay.

Stephen Semple:

Alphabet also owns the second largest search engine, which is YouTube. Together, basically, it’s a $2 trillion business, which is larger than the economy of Canada. It’s this amazing thing. Going back to 1998, there are dozens of search engines all using different business models. Now, today Alphabet’s like 90% in the market. Up until this point, it’s been unassailable, and it’s going to be really interesting to see what the future of AI and whatnot brings to that business. But we’re not talking about the future, we’re talking about the past here, so back to the start.

Larry Page was born in Lansing, Michigan. His dad is a professor of computer science. His mom is also a computer academic. This is in the ’70s. Between 1979 and ’80, his dad does a stint at Stanford and then also goes to work at Microsoft. Now, Larry and Sergey meet at Stanford, and they’re very ambitious, they’re equal co-founders, but Larry had this thing he also talked about where he said, “You need to do more than just invent things.” It wasn’t about inventing things, it was about creating things that people would use.

Here’s what’s going on in the world of the web at this time to understand what’s going on. Here’s some web stats. In 1993, there’s 130 websites in the world. In 1996, three years later, there’s 600,000 websites. That’s a 723% growth year over year. The world has never seen growth like that before.

Dave Young:

Right, yeah. It was amazing to experience it. People that are younger than us don’t realize what it was. Josh Johnson, the comedian, has a great routine on trying to explain to people what it was like before Google. You needed to know something-

Stephen Semple:

What it was like for the internet.

Dave Young:

Yeah. You had to ask somebody who knew. If you needed the answer to a question, you had to ask somebody. And if they didn’t know, then you had to find somebody else, or you had to go to the library and ask a librarian and they would help you find the answer-

Stephen Semple:

Well, I don’t think it’s like a-

Dave Young:

… maybe by giving you a book that may or may not have the answer.

Stephen Semple:

Here’s an important point. I want you to put a pin in that research. We’re going to come back to it. I was about to go down a rabbit hole, but let’s come back to this in just a moment, because this is a very, very important point here about the birth of Google.

Larry and Sergey first worked on systems to allow people to make annotations and notes directly on websites with no human involved, but the problem is that that could just overrun a site because there was no systems for ranking or order or anything along that lines. The other question they started to ask is, “Which annotations should someone look at? What are the ones that have authority?” This then created the idea of page rankings. All of this became messy, and this led to them to asking the question, “What if we just focused on ranking webpages?” which led to ranking search.

Now, whole idea was ranking was based upon authority and credibility, and they drew this idea from academia. So when we would do research, David, and you’d find that one book, what did you do to figure out who the authority was on the topic? You went and you saw what book did that cite, what research did this book cite. The further you went back in those citations, the closer you got to the true authority, right? Do you remember doing that type of research?

Dave Young:

Yeah, sure.

Stephen Semple:

Right. They looked at that and they went, “Well, that’s how you establish credibility and authority is who’s citing who.” Okay. They decided that what they were going to do was do that for the web, and the way the web did that was links, especially in the early days where a lot of it was research.

Dave Young:

Yeah. If a whole bunch of people linked to you, then that gives you authority over the words that they used to link on and-

Stephen Semple:

Well, and also in the early days, those links carried a lot of metadata around what the author thought, like, “Why was the link there?” In the early days, backlinks were incredibly important. Now, SEO weasels are still today talking about backlinks, which is complete. Dude, backlinks, yeah, they kind of matter, but they’re… Anyway, I could go down a rabbit hole.

Dave Young:

Yeah. It’s like anything, the grifters figure out a way to hack the system and make something that’s not authoritative seem like it is.

Stephen Semple:

Yeah. It’s harder that you can’t hack the system today. Anyway, but the technology challenge, how do you figure out who’s backedlinked to who? Well, the only way you can do it is you have to crawl the entire web, copy the entire web, and reverse engineer the computation to do this.

Dave Young:

Yeah. It’s huge. We’ve been talking about Google’s algorithm for as long as Google’s been around. That’s the magic of it, right?

Stephen Semple:

Yeah. In the early days, with them doing it as a research project, they could do it because there was hundreds of sites. If this happened even two years later, like 1996, it would’ve been completely impossible because the sheer size to do it as a research project, right? Now, they called this system BackRub, and they started to shop this technology to other search engines because, again, remember there was HotBot and Lyco and Archie and AltaVista and Yahoo and Excite and Infoseek. There were a ton of these search engines.

Dave Young:

Don’t forget Ask Jeeves.

Stephen Semple:

Ask Jeeves? Actually, Ask Jeeves might’ve even been a little bit later, but yeah, Ask Jeeves was one of them once when it was around.

Dave Young:

There was one that was Dogpile that was… It would search a bunch of search engines.

Stephen Semple:

Right, yeah. There was all sorts of things.

Dave Young:

Yeah.

Stephen Semple:

There was another one called Excite, and they got close to doing a deal with Excite. They got a meeting with them, and they’re looking at a license deal, million dollars for BackRub, and they would go into the summer and they would implement it because they were still students at Stanford. They got so far as running for the executives there a side-by-side test. They demo this test and the results were so good with BackRub. Here’s what execs at Excite said, “Why on earth would we want to use your engine? We want people to stay on our site,” because, again, it would push people off the site because web portals had this mentality of keeping people on the site instead of having them leave. So it was a no deal. They go back to school and no one wants BackRub, so they decide to build it for themselves at Stanford. The original name was going to be Whatbox.

Dave Young:

Whatbox? I’m glad they didn’t use Whatbox.

Stephen Semple:

Yeah. They thought it sounded too close to a porn site or something like that.

Dave Young:

Okay, I’ll give them that.

Stephen Semple:

Larry’s dorm mate suggested Google, which is the mathematical term of 10 to the 100th power, but it’s spelled G-O-O-G-O-L.

Dave Young:

Googol, mm-hmm.

Stephen Semple:

Correct. Now, there’s lots of things here. Did Larry Page misregister? Did he decide purposely? There’s all sorts of different stories there, but the one that seems to be the most popular, at least liked the most, is that he misspelled it when he did the registration to G-O-G-G-L-E.

Dave Young:

I think that’s probably a good thing because when you hear it said, that’s kind of the first thing you go-

Stephen Semple:

That’s kind of how you spell it.

Dave Young:

… how you spell it. I think we’d have figured it out, but-

Stephen Semple:

We would’ve, but things that are easier are always better, right?

Dave Young:

Yeah.

Stephen Semple:

By spring of ’98, they’re doing 10,000 searches a day all out of Stanford University.

Dave Young:

Wait, 10,000 a day out of one place.

Stephen Semple:

Are using university resources. Everyone else is just using keywords on a page, which led to keyword stuffing, again, another one of these BS SEO keyword stuffing. Now, at one point, one half of the entire computing power at Stanford University is being used for Google searches. It’s the end of the ’98 academic year, and these guys are still students there. Now, sidebar, to this day, Stanford still owns a chunk of Google.

Dave Young:

Okay.

Stephen Semple:

Worked out well for Stanford.

Dave Young:

Yeah, I guess.

Stephen Semple:

Yeah. Now, Larry and Sergey need some seed round financing because they’ve got to get it off of Stanford. They’ve got to start building computers. They raise a million dollars. Here’s the interesting thing I had no idea. Guess who one of the first round investors are who ended up owning 25% of the company in the seed round?

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Using Stories To Sell Ad]

Dave Young:

Let’s pick up our story where we left off and trust me you haven’t missed a thing.

Stephen Semple:

Guess who one of the first round investors are who ended up owning 25% of the company in the seed round? Jeff Bezos.

Dave Young:

Oh, no kidding.

Stephen Semple:

Yeah, yeah. Jeff Bezos was one of the first four investors in Google.

Dave Young:

Okay. Well, here we are.

Stephen Semple:

Isn’t that incredible?

Dave Young:

Yeah.

Stephen Semple:

Now, AltaVista created a very interesting technology because AltaVista grew out of DEC computers who were building super computers at the time. They were basically one of the pre-leaders in search because what they would do is everybody else crawled the internet in series. They were crawling the internet in parallel, and this was a big technological breakthrough. In other words, they didn’t have to do it one at a time. They could send out a whole ton of crawlers, crawling all sorts of different things, all sorts of different pieces, bringing it back and could reassemble it.

Dave Young:

Got you.

Stephen Semple:

AltaVista also had therefore the most number of sites indexed. I remember back in the day, launching websites, like pre-2000, and yeah, you would launch a site and you would have to wait for it to be indexed and it could take weeks-

Dave Young:

You submit it. Yeah, there were things you could do to submit-

Stephen Semple:

There was things you could submit.

Dave Young:

… the search engines.

Stephen Semple:

Yes, yeah, and you would sit and you would wait and you’d be like, “Oh, it got crawled.” Yeah, it was crazy. We don’t think about that today. [inaudible 00:15:57] websites crawl.

Dave Young:

You’d make updates to your site and you’d need to resubmit it, so it would get crawled again-

Stephen Semple:

Oh, yeah. Yeah.

Dave Young:

… if there was new information.

Stephen Semple:

People would search your site and it would be different than the site that you would have because the updates hadn’t come through and all those other things.

In 1998, Yahoo was the largest player. They were a $20 billion business, and they had a hand-curated guide to the internet, which worked at the time, but the explosive growth killed that. There was a point where Yahoo just couldn’t keep up with it. Then Yahoo went to this hybrid where the top part was hand-curated and then backfilled with search engine results. Now, originally, Google was very against the whole idea of banner ads, and this was the way everyone else was making money, because what they knew is people didn’t like banner ads, but you’re tracking eyeballs, you’re growing, you need more infrastructure, because basically their way of doing is they’re copying the entire internet and putting it on their servers and you need more money. Now, one of the other technological breakthroughs is Google figured out how to do this on a whole pile of cheap computers that they just stacked on top of each other, but you still needed money.

At this moment, had no model for making money. They were getting all these eyeballs, they were faster because they built data centers around the world because they also figured out that, by decentralizing it, it was faster. They had lots of constraints. What they needed to do at this point was create a business model. What does one do when one needs to create a business model? Well, it’s early 1999, they’re running out of money. They hire Salar Kamangar, who’s a Stanford student, and they give him the job of writing a business plan. “Here, intern, you’re writing the business plan for how we’re going to make money. Go put together a pitch deck.”

Dave Young:

I wonder if they’re still using the plan.

Stephen Semple:

What they found at that point was there was basically three ways to make the money. Way number 1 was sell Google Search technology to enterprises. In other words, companies can use this to search their own documents and intranets.

Dave Young:

I remember that, yeah.

Stephen Semple:

Yeah. Number 2, sell ads, banner ads, and number 3, license search results to other search engines.

Dave Young:

Okay.

Stephen Semple:

Based upon this plan, spring of ’99, they do a Series A fundraise. They raised more money, and they also meet Omid [inaudible 00:18:22] who’s from Netscape, and he’s kind of done with Netscape because Netscape had been just bought by AOL, and they recruit him as a chief revenue officer. Omid tries to sell the enterprise model, kind of fails, so things are not looking good on the revenue front. It’s year 2000, and the technology bubble is starting to burst. The customer base is still growing because people love it, love Google, but they’re running out of money again. They decide to do banner ads, because they just have got no money. Here’s the interesting thing is, in this day, 2000, I want you to think about this, you have to set up a sales force to go out and sell banner ads to agencies, people picking up the phone and walking into offices, reaching out to ad agencies.

Dave Young:

Yeah, didn’t have a platform for buying and selling… And banner ads, gosh, they were never… Google ads, in the most recent memory, are always context-related, right?

Stephen Semple:

Yes.

Dave Young:

But if you’re just selling banner ads to an agency, you might be looking for dog food and you’re going to see car ads and you’re going to see ads for high-tech servers and all kinds of things that don’t have anything to do with what you’re looking for.

Stephen Semple:

That’s how the early banner ads work. Hold that thought. You’re always one step ahead of me, Dave.

Dave Young:

Oh, sorry.

Stephen Semple:

Hold that thought. No, this is awesome.

Dave Young:

I’m holding it.

Stephen Semple:

What I want to stress is, when we talk about how the world has changed, in 2000, Google decides to do banner ads and how they have to do it is a sales force going out, reaching out to agencies, and agencies faxed in the banner ads.

Dave Young:

Okay. Yeah, sure. It would take too long for them-

Stephen Semple:

I’m not making this up. This is how much the world has changed in 25 years.

Dave Young:

“Fax me the banner.”

Stephen Semple:

Salespeople going out to sell ads to agencies for banners on Google where the insertions were sent back by fax.

Dave Young:

For the people under 20 listening to us, a fax machine-

Stephen Semple:

Who don’t even know what the hell a fax machine is, yeah.

Dave Young:

A fax machine, yeah, well, we won’t go there.

Stephen Semple:

Yeah. Now, here’s what they do. They also say to the advertisers at this point, “Google will only accept text for banner ads for speed.” Again, they start with the model of CPM, cost per a thousand views, which is basically how all the agencies were doing it, but they did do a twist on it. They sold around this idea of intent that the ads were showing keyword-based and they were the first to do that. What they did is they did a test to prove this. This was really cool. They set themselves up as an Amazon affiliate and dynamically generated a link on a book search and served up an ad, an affiliate ad, and they’re able to show they were able to sell a whole pile of books. The test proved the idea worked. And then what they did is they went out and they white-labeled this for others. For example, Yahoo did it, and it would show on the bottom of Yahoo, “Powered by Google.” But here’s the thing, as soon as you start saying, “Powered by Google,” what are you doing? You’re creating share of voice. Share of voice, right?

Dave Young:

Well, yeah, why don’t I just go to Google?

Stephen Semple:

Why don’t I just go to Google? Look, we had saw this a few years earlier when Hotmail was launched by Microsoft where you would get this email and go, “Powered by Hotmail,” and you’d be like, “What’s this Hotmail thing?” Suddenly, everybody was getting Hotmail accounts, right?

Dave Young:

Yeah.

Stephen Semple:

No one has a Hotmail account, no longer they have Gmail accounts, they hardly have Gmail accounts anymore.

Dave Young:

No, I could tell you that we’ve got a lot of people at Wizard Academy that email us off with a Hotmail.

Stephen Semple:

Still have Hotmail accounts?

Dave Young:

Sure.

Stephen Semple:

Oh, wow. So it’s still around? Okay.

Dave Young:

And then some Yahoos, yeah.

Stephen Semple:

Wow, that’s amazing. That’s amazing. Well, still-

Dave Young:

Yahoo, the email, not the customer. They’re not a Yahoo, but they have an account there.

Stephen Semple:

In October 2000, they launch AdWords with a test of 350 advertisers. And then, in 2002, they launched pay-per-click Advertising. And then 2004, they go public.

Now, here’s one of the other things I want to talk about in terms of share of voice. They had a couple things going on with share of voice. They had that, “powered by Google,” which created share of voice because… We often think of share of voice as being just advertising in terms of how much are people knowing about us. I remember knowing nothing about Google and then learning about Google when Google went public because Google dragged out going public. They talked about it for a long time, but it meant it was financial press, it was front page news. It got a lot of PR and a lot of press around the time that they went public. That going public for them also created massive share of voice because there was suddenly a whole community that were not technologically savvy that we’re now suddenly aware of, “Oh, there’s this Google thing.”

Dave Young:

And they’re in the news, yeah. So I’ve got an idea for us, Steve.

Stephen Semple:

Yep, okay.

Dave Young:

All right.

Stephen Semple:

Let’s hear it.

Dave Young:

Let’s pick up part 2 of Google at the point they go public.

Stephen Semple:

All right, let’s do that. That’ll be an episode we’ll do in the future, yeah.

Dave Young:

We don’t do very many two-parters, but we’re already kind of a lengthy Empire Builder Podcast here.

Stephen Semple:

Oh, yeah. I was just taking it to this point, but I think that would be very interesting-

Dave Young:

Oh, okay.

Stephen Semple:

… because look, Google is a massive force in the world today-

Dave Young:

Unbelievable, yeah.

Stephen Semple:

… and I think it would be interesting to do the next part because there’s all sorts of things that they did to continue this path of attracting eyeballs.

Dave Young:

We haven’t even touched on Gmail yet. No, we have not. We have not.

Stephen Semple:

Because that happened after they went public.

Correct. Let’s do that.

Dave Young:

Okay.

Stephen Semple:

Here’s the lesson that I think that I want people to understand is share of voice comes from other things, but we’re going to explore that even more in this part 2. I like the idea of doing this part 2. They really looked at this problem from a completely different set of eyeballs, and this is where I commend Google, from the standpoint of there’s all this stuff in the internet and what we really want to know is who is the authority. They looked at the academic world for how does it establish authority, and how authority is established is how much is your work cited by others, how much are other… So, now, Google has of course expanded that to direct search and there’s all these other things, but they’ve always looked at it from the standpoint of, “Who in this space has the most authority? Who is really and truly the expert on this topic? We’re going to try to figure that out and serve that up.”

Dave Young:

Yeah.

Stephen Semple:

That’s core to what their objective has been.

Dave Young:

We could talk about Google for four or five episodes probably.

Stephen Semple:

We may, but we know we’re going to do one more.

Dave Young:

All right.

Stephen Semple:

Awesome.

Dave Young:

Well, thanks for bringing it up. We did mention their name. Actually, if we just put this out there, “Hey, Google, why don’t you send us all the talking points we need for part 2?” There, I put it out there. Let me know how that works.

Stephen Semple:

My email’s about to get just slammed. All right. Thanks, David.

Dave Young:

You won’t know it’s from them though. You won’t know. You won’t know. Isn’t that good?

Stephen Semple:

That’s true. That’s true.

Dave Young:

Thank you, Stephen.

Stephen Semple:

All right. Thanks, David.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big, fat, juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.