Campbell partic.i.p.ates in the Monday executive management meeting, discusses the agenda that Schmidt sends out to partic.i.p.ants specifying the decisions they need to discuss at the meeting. He acts as envoy, visiting YouTube headquarters with some frequency in the first half of 2008 to find ways to generate revenues from the popular video site and improve communications between the two companies. Campbell is the only outside person ever welcomed into Google"s inner sanctums. In addition to executive meetings, he attends board meetings. "He"s closer to us than the board," said David Krane, director of global communications and public affairs. "Eric said management is a marathon, not a sprint. It"s stressful," Page said. "Bill plays an important role of keeping us all healthy and interacting."
Why does he volunteer to spend approximately two full days a week on the Google campus? "This is family for me," he said, a catch in his voice. "These are people I love dearly. I"ve been doing this since late 2001. I probably get as much out of this as everybody gets out of me. The joy of partic.i.p.ating at a company that is at the leading edge of anything going on in the personal technology s.p.a.ce. It"s centered here. There"s innovation daily. They think about changing the world." He refuses to be paid more than a dollar a year; in 2007, his compensation was increased when he was given a reserved parking s.p.a.ce on a campus where s.p.a.ces are usually filled by 10 a.m. Brin said he and Page had to insist on compensating Campbell with Google stock options. The fact that Campbell plays such an atypical role at Google suggests that in addition to coach or shrink he can also be described as a babysit ter. The fact that Google needs one is a reminder of its youth.
TO BETTER UNDERSTAND Bill Campbell, Jr., roll the reel back to Homestead, Pennsylvania, the small steel town near Pittsburgh where he was born on August 31, 1940. His mother, Virginia Marie Dauria, was a home-maker while his father, William V Campbell, worked the night shift in the steel mill and taught high school physical education. He became the basketball coach at Duquesne University, where he was a close friend of the football coach Aldo T "Buff" Donelli, then the princ.i.p.al of the local high school and finally the school superintendent of the district. Bill"s mom stayed home to raise him and his younger brother, Jim, who went on to become an All-American wide receiver at the Naval Academy. Bill was an honor student at the public high school, and though he weighed only 175 pounds, he was voted All Western Pennsylvania as an offensive guard and linebacker. What was his football talent? "Speed. And I would hit ya!" he said with a laugh. "When colleges came around, I couldn"t understand why guys who weren"t as good as I was were going to Penn State and Pittsburgh. It p.i.s.sed me off. So I got recruited by the Ivy schools."
Bill chose Columbia, where Buff Donelli, who had gone from Duquesne to Boston University, had just replaced Lou Little, the Columbia football team"s longtime coach. Bill received a scholarship and played middle linebacker on defense and offensive guard. He went on to star and captain the 1961 Columbia team that tied Harvard for its first, and only, Ivy League football championship. He hurt his knee that year, which ended his playing career and earned him a 4-F draft deferment. When he graduated in 1962 with a degree in economics, he decided to stay at Columbia to get a master"s degree so that he could stay involved with football. He was studying economics, but "I wanted to be a coach," he said. Donelli appointed him a.s.sistant freshman football coach, and he doubled as a resident adviser. His second year, he scaled back graduate studies to part-time in order to serve as the offensive and defensive end coach on the varsity football team.
His career goal was to become a head coach. "My dad was a coach," he said. "There was n.o.body I admired more than my dad and Buff Donelli. These were the two role models I had. I wanted to be Buff Donelli. I wanted to be Bill Campbell, Sr. My dad was so respected in town. He had been the coach, the superintendent. He just had this way about him. He could unite anybody."
Bill had a summer job after his second year as a coach at Columbia and eagerly antic.i.p.ated year three, starting in September 1964. But he received a notice from his Pennsylvania draft board to report for a physical. Expecting to again be declared 4-F, he was surprised when he pa.s.sed. He was even more surprised that "they took me in the service that same day." He was swiftly dispatched by train to Fort Knox and never got back to collect his belongings at Columbia. For the next two years he was an army private stationed at U.S. bases, landing at Fort Gordon, Georgia, where he ran the athletic program and was both the a.s.sistant football coach and the quarterback.
After being discharged from the army, Campbell returned to Columbia as the coach of the freshman football team, and studied for a master"s degree in education. The next year, he became Donelli"s offensive line coach and thought he was on his way to head coach-until Donelli chose to retire. The new coach brought in his own a.s.sistant coaches, and Campbell was out of a job. He found a new job as linebacker coach at Boston College, where he stayed six years, rising to defensive coordinator. He returned often to New York, where he met his future wife, Roberta Spagnola, a Columbia University dean, on a blind date. When Columbia called in 1974 and asked him to return as head coach, Campbell jumped at the chance. He and Roberta married in 1976, and would have a son and a daughter.
Over his six years at Columbia, Campbell had a record of twelve victories, forty-one defeats, and one tie. He blames his losing record on his devotion to the players as men rather than as athletes. He was a nurturer. "I really felt like I committed to these kids. My view was more father coun selor and adviser .... I wanted these guys to achieve. I wanted them to go to work for Procter and Gamble or IBM, if that"s what they wanted. I took great pride in getting summer internships for them at Merrill Lynch and Salomon Brothers. I was more engaged with them. I often think that had I been less worried about that and more dispa.s.sionate about playing, maybe I would have been better." If he had to do it over, though, he says, "I wouldn"t change. I couldn"t change."
After leaving Columbia, he became a sales and marketing executive at J. Walter Thompson, where he stayed until Eastman Kodak, a client, recruited him to be its director of marketing. Then, in 1983, John Sculley, recently appointed the CEO of Apple, heard about Campbell from a relative and began courting him for the job of vice president of marketing. He clinched the sale by demonstrating for Campbell the revolutionary Macintosh computer, which Apple would introduce in 1984. "It would be pretty unusual today to hire a football coach to be your VP of sales," Sculley later told a reporter. "But what I was looking for was someone who could help develop Apple into an organization." Campbell took over sales as well as marketing just months after he joined Apple, and set about firing the consultants and most of a sales force that "wore polyester pants and gold chains." He said he replaced them with recent college graduates, half of them women, and all hungry to succeed. "What I learned from coaching," he said, "is that if your guys are not as big and fast as the other guys, you"re f.u.c.ked!"
Campbell"s boldness appealed to the ever-rebellious Steve Jobs. The two men bonded. By 1984, said Campbell, "Sculley and Jobs were going at each other already." Although Jobs had recruited Sculley to bring professional management to Apple, he came to think he was more interested in marketing, including marketing himself, than in Apple products; Sculley believed Jobs wanted an acolyte, not a CEO. Nevertheless, Campbell earned the rare distinction of being able to both befriend Jobs and command Sculley"s respect. Before Sculley succeeded in pushing Jobs out of Apple in 1985, Campbell warned him it would be a huge mistake. Tensions flared between Campbell and Sculley, and in 1987 Campbell was put in charge of Apple"s Claris software division, with the intention of spinning it off as a private company with Campbell at the helm. But with Claris thriving, Sculley changed his mind. Campbell left rather than remain as a division head under Sculley.
At the recommendation of John Doerr, the Go Corporation hired Campbell as their CEO. The company was an early pioneer in pen computing-too early, it seemed, and when the market didn"t respond, Campbell unloaded the Go Corporation on AT&T, in 1993. He next became CEO of Intuit when Doerr suggested to founder Scott Cook that Campbell would be a great partner. Four years later, he moved up to chairman of the board. On the eve of Steve Jobs"s return to Apple in 1997, he asked Campbell to join his board.
Today Campbell serves as a mentor to some of the Valley"s most successful entrepreneurs, from Marc Andreessen to Steve Jobs, whom he walks and talks with most weekends in Palo Alto, where they are neighbors. He estimates that he spends about 10 percent of his time on Apple business, about 35 percent on Intuit business, an equal amount at Google, about 10 percent as chairman of the board of Columbia University, and the remainder on a.s.sorted activities. He said he has donated his Google stock to the foundation he established to make charitable gifts to his hometown, among others. He donated money to his Homestead high school for a new stadium, scholarships in his father"s name for student athletes, a new gym named for his brother, who died of lung cancer in 2006, and Apple computers for the school. In the fall, he coaches sandlot football for eighth-graders from St. Joseph"s School of the Sacred Heart in Atherton, California; in the spring, he coaches the eighth-grade girls in what"s called powder puff football.
He doesn"t have a lot of enemies. Marc Andreessen said of Campbell, "He"s been incredibly important in the Valley. Business is changing so quickly," and less experienced entrepreneurs turn to Campbell for guidance. "Bill has been a model mentor. When he"s not in the room, he"s still there because people ask, "What would Bill say?""
IN SCHMIDT AND CAMPBELL, Google had executives who could work with the founders and mentors the whole organization to work together. Now it needed to recruit senior executives. With an a.s.sist from Campbell, one of Schmidt"s initial targets was Sheryl Sandberg, who had just concluded her service as chief of staff to treasury secretary Lawrence Summers. The Clinton administration was winding down, and Sandberg, who was just thirty-one, was much in demand.
Sandberg has short dark hair, an angular face that is softened by a bright smile, and an engaging manner that makes strangers feel comfortable. She was the first of three children born to Adele and Joel Sandberg, she then a professor of English and other languages, he an ophthalmologist. The Sandbergs moved to Miami from Washington, D.C., when Sheryl was three, and although Sheryl was considered the smartest student in her public high school, she wasn"t a bookworm; from childhood, she has been popular. For college, she left Florida and went to Harvard and in her junior year there took a course from Lawrence Summers, then the rising star of the economics faculty. At the end of the semester he invited his five best students to lunch at the Harvard Faculty Club and offered to serve as their senior thesis adviser. Sandberg accepted Summers"s offer-"He changed my life," she said-and went on to win the John H. Williams Prize as the top graduating student in economics. When Summers was appointed chief economist at the World Bank, he brought her in as his special a.s.sistant.
Sandberg had a particular interest in health care, and in the early nineties went for a time with a team to India to work to alleviate leprosy and AIDS. Shaken by the poverty and suffering she witnessed, she vowed that she "was only going to do things that were good for the world." She wanted to work in nonprofits or government but felt she required a broader education. She stayed at the World Bank two years before deciding she would go back to school. "I come from a Jewish family," she laughed. "My dad"s a doctor. You had to have a graduate degree!"
Accepted at both Harvard"s law and business schools, she chose the latter, believing she needed a better understanding of how organizations worked. Between her first and second year she got married. Though the marriage lasted only a year, she graduated near the top of her cla.s.s as both a Baker and a Ford scholar; with her former husband in Washington, D.C., she fled to the West Coast, where she joined McKinsey & Company in California, working on health care. McKinsey gave her no more joy than her marriage. "You don"t do anything," she explained. "You just tell other people what to do." She left after one year.
Summers was then deputy treasury secretary under Robert Rubin in the Clinton administration. The two had kept in contact and, again, he recruited her as his special a.s.sistant. For the next four and a half years, she worked for Summers; when he was elevated to treasury secretary she became his chief of staff. But when the second Clinton term ended in January 2001, she had to move on. Washington had taught her some surprising things. "Over the years," she said, "I got less naive. I no longer thought, The private sector is bad. The public sector is good." The private sector is bad. The public sector is good." At Treasury, her most "exciting" meetings had been with technology companies. In America, she believed, "economic growth was all technology driven." She decided she wanted "to go and be an operational executive in a tech company, a make-the-trains-run job." At Treasury, her most "exciting" meetings had been with technology companies. In America, she believed, "economic growth was all technology driven." She decided she wanted "to go and be an operational executive in a tech company, a make-the-trains-run job."
In early 2001, she moved out to San Francisco. Her sister lived there, and it was the technology capital of the world. She took time to clear her head, and in any case, with the dot-com bust still reverberating, it was a difficult time to seek a job. She signed up for cooking cla.s.ses and relished her free time. She was offered an executive position by eBay, but she had her sights set on Google. "When I came out of the government, I wanted to do something that I believed in," she told me. "I went to Google because Google had a higher mission, which is to make the world"s information freely available. But they weren"t offering me a job."
Schmidt talked to her in the fall of 2001, and like all top applicants, she met with Brin and Page as well. When Schmidt offered her a position in late 2001, she was excited, but on closer inspection wasn"t sure it was a real job. "I was supposed to be a business unit general manager, but there were no business units, and therefore nothing to be managed," she said. Schmidt "called me every week and said, "We"re profitable this week too!"" Friends advised her to "work for a real company," one that earned steady profits. "I met Eric and said there is no job. He looked at me and said, "You"re looking at this the wrong way. None of this matters. Growth matters. Get on a rocket ship and all things take care of themselves.""
She was employee number 268. Her t.i.tle was business unit general manager, even though, as she had noted, there was no business unit. There was also no CFO, which is perhaps why Eric Schmidt a.s.signed her a top secret mission, kept even from their venture capitalists, to investigate a potential round of private financing to pump money into a four-year-old company that had yet to have a profitable year. Among the people Sandberg spoke with was Mary Meeker, the author of the seminal Internet report at Morgan Stanley. Their discussions, Meeker said, made her take greater notice of Google. "Before Sheryl arrived," said Meeker, "they were so quiet and private. She was part of a push to bring people in." Months and many meetings later, Sandberg made a PowerPoint presentation to the founders and Schmidt. The consensus of the people Sandberg consulted was that Google should be valued at one billion dollars. The consensus of the founders and Schmidt was that they would not pursue more investment capital because this valuation was, she said, "a total insult."
The project was shelved. "I needed another job. I knew I wanted to work for Omid Kordestani, who runs all business and operations. We were launching AdWords CPC." Kordestani planned to expand the AdWords staff from four to eight. "Omid said to me, "I need a tractor. You"re a Porsche. Why do you want this job?""
She thought their ideas for selling ads were innovative. If they worked, they would be efficient-by cutting out sales teams-and bold, giving advertisers an incentive to make the ads more relevant. Advertisers would rank higher on the search results page based not just on the price they bid per keyword, but on the number of clicks their ads received. The more clicks, the lower the price, and the higher they would rank.
Advertising, Schmidt said, had not been viewed "as a priority" by the founders-nor, according to Doerr, by Schmidt. And, indeed, Schmidt had become convinced that since Google had succeeded in building the best search engine, the money would follow. But by 2002, at the helm of a four-year-old company that had yet to have a profitable year, Schmidt knew it was time to focus on money. But he also knew Page and Brin had definite ideas about what was "evil." Senior software engineer Matt Cutts recalled that a credit card company (it was Visa) offered five million dollars to put a link to their credit card logo on the bottom of Google"s home page. But Page and Brin wouldn"t budge, nor would they relax their strictures against advertisers paying for search results. "Google was really trying to do right by their users," said Benjamin A. Schachter, then the senior Internet a.n.a.lyst for UBS. But they weren"t building a profitable business.
Moritz was becoming restive, openly wondering if Schmidt was tough enough. A Google insider with direct knowledge said that in 2002, Moritz pressed for Schmidt to be fired. Another insider said the unhappiness with Schmidt was at first shared by others who also worried that he wasn"t tough enough, that he was moving too slowly to galvanize a management team, to challenge the founders, and most especially, to find a revenue stream.
Schmidt remained calm, at least outwardly. By late 2001, he knew of the effort at Google that Sandberg was now working on to devise the new version of AdWords, the advertising program a.s.sociated with search. In AdWords as it worked through 2001, advertisers paid Google the old-fashioned way, based on a cost per thousand (CPM) whether the searcher clicked on their ad or not. What Google was quietly exploring was switching to a cost-per-click model, an idea that built on the Overture model. In addition to Sandberg, Omid Kordestani a.s.signed Salar Kamangar, the author of the original Google business plan, to serve as a bridge between the engineering and the sales team as they improvised.
This began a long and intense period of brainstorming. The team liked the idea of charging by the click, thinking it was a way they could farm out not just search, as they had done with Netscape and Yahoo, but also advertising. "We knew we needed a lot of ads, and to have a lot of ads we also had to syndicate," Kamangar said, performing the search function for sites like Yahoo but also selling ads for them. He knew that Page and Brin would resist allowing advertisers to pay for placement within search results. He also knew advertisers were wary. The CPC model was a.s.sociated with low-quality ads that were harder to sell and were known as "remnant advertising." Advertisers like to determine where and when their ads appear, and if they allowed a company like Google to put their ads on other Web sites, and allowed the Web sites to choose the times they would appear, the advertiser would lose control. Was there a system to serve both users and advertisers?
For months they came up empty. Members of the team remember Kamangar walking about with two fingers pressed to his lips, muttering, "I"m thinking, I"m thinking." One day, he said, a "lightbulb went off." What if Google combined the cost-per-click model with a measurement of whether users found the ad relevant? Google engineers could come up with an algorithm to measure the quality of the ads, he thought, a.s.suming that more clicks meant users liked the ads. To sell them they could use what economists call a Vickery Auction, an idea suggested by a colleague, Eric Beach. In a Vickery Auction, named after William Vickery, the twentieth-century Canadian economist and n.o.bel laureate, after Google set a minimum bid price per keyword, the advertiser bids, say, fifteen dollars for a keyword. If the next bid is ten dollars, the winner only pays one cent more than the second highest bidder, saving nearly five dollars; the second-place bidder pays a penny more than the price bid by the third, and so on. The advantages for Google were many. By charging per click, Google could syndicate its ads-sell them on other Web sites as well as on Google search. The more ads it sold on different platforms, the more data Google collected, and thus the more reliant on Google advertisers became. And Google could automate the entire system, minimizing the size of its sales force.
The advantages for advertisers were manifest. They knew they were not being gouged, because they only paid a penny more than the next highest bidder. They benefited by being charged only when the user clicked on the ad. This gave them an incentive to produce a better ad because better ads produced more clicks, which lowered their cost per click. And by charging per click, Google opened online advertising to many small businesses who normally had nowhere else to turn but the Yellow Pages. By allowing Google to syndicate ads, advertisers were achieving the online equivalent of one-stop shopping offered by network television, whereby ads appeared on hundreds of local stations. And because the system was automated, advertisers were spared the expense of a monitoring system. They would simply transmit to Google their keywords, their bid per keyword, their monthly budget, and their billing information. And then using Google a.n.a.lytics, they could monitor the results online.
Page and Brin made a major amendment to the new AdWords before it was inaugurated in February 2002. At the annual technology, entertainment, design (TED) conference in Monterey, they engaged in conversation with the Israeli entrepreneur Yossi Vardi. Vardi is a bear of a man with a walrus mustache and a friendly, even impish manner. His company started ICQ, the Internet"s first instant messaging system, and sold it to AOL for four hundred million dollars. He and the Google founders discussed search ads-how to make them un.o.btrusive and yet relevant to users. Vardi suggested that they could use two-thirds of the page for search results and wall off the text ads from the search content the way a newspaper walls off ads. They could do this by placing a thin blue line between the search results and a smaller gray box on the right-hand side of the page containing the text ads and links to the advertiser. Users could either click on the link or not. Vardi"s idea, Brin recalled, was the genesis for the way ads were displayed. Page and Brin decided the ads should be small, a couple of lines long, imposing a limit of ninety-five characters, and insisting that they be informational.
It was unclear when the new AdWords was introduced that it would be what it became: a Google money machine. "The AdWords is brilliant because it allows you to scale the advertising solution to what you need," said former Microsoft executive Nathan Myhrvold. It democratizes advertising, allowing Google to use it for either small or large advertisers. It was also, Myhrvold believes, pirated from Overture. The rival search engine thought so too, and later that year filed a patent infringement lawsuit against Google.
A year later, a second money gusher-AdSense-would spring from the CPC model. At the time, Paul Bouchet was developing Gmail and working on software to match words sent in an e-mail with keywords selected by advertisers, allowing small text ads to instantly appear. Brin wondered why they couldn"t apply this innovation to a new program that would help bloggers and any Web site make money. This idea would be called AdSense. If a reader was looking at an a.n.a.lysis of computers on a Web site like Engad get, an HP or a Dell ad could appear. Similarly, readers of a story about the law in an online newspaper might see a law firm"s ad, while people looking at a Web site devoted to pancreatic cancer could see ads for pharmaceuticals. Google would serve as the matchmaker, delivering the advertising and sharing the revenues. As with AdWords, the advertiser would pay only when the ad received a click. And as AdWords democratized advertising, luring small advertisers online, so AdSense would become a way for Web sites to generate income. The effort was led and architected by Susan Wojcicki, vice president, product management, who later received the prestigious Google Founders Award-paying about twelve million dollars-to honor her efforts. AdSense, Danny Sullivan told USA Today, USA Today, "basically turned the Web into a giant Google billboard. It effectively meant that Google could turn everyone"s content into a place for Google ads." "basically turned the Web into a giant Google billboard. It effectively meant that Google could turn everyone"s content into a place for Google ads."
Eric Schmidt recalled how Brin lobbied him for money to market the program. "He and an engineer developed a system of showing ads on people"s blogs or Web sites. They came to show this to me. It was not an exciting demo. And Tim Armstrong"s sales guy is a.s.signed to help them out. Now we"ve got three people out of control! So Sergey comes in and said, "I need to buy inventory to make this happen.""
"How much?" asked Schmidt.
"I need a million dollars," said Brin.
"We don"t have a million dollars!" said Schmidt.
"Sure we do," said Brin.
"I didn"t give a precise answer"-a couple of hundred thousand dollars, said Schmidt, chuckling. (Susan Wojcicki remembers that he alloted them a marketing budget of two hundred thousand dollars.) Weeks later, Schmidt asked Brin, "Sergey, how much money did you spend?"
"A million and a half dollars," said Brin.
"Sergey, you said one million!"
"No, you didn"t give me a precise figure!" said Brin.
"What does that tell you about them?" Schmidt said of the founders. "He had the idea. He a.s.sembled the activity. He figured out who his opposition was-which was me, in a friendly way. He told me about it because he wanted my support. And he evaded my guidance. And as a result, built a multimillion-dollar business." (By 2004, AdSense would produce about half Google"s revenues.) Schmidt paused to chuckle again, then said, "You see why I work with these people!"
The chuckle is appropriate, for Google would not have succeeded without a measure of luck. As Larry Page confessed to a Stanford cla.s.s, discovering the advertising formula that would work "probably was an accident more than a plan." A reminder that timing, serendipity, luck-not just a smart strategy or brilliant execution-sometimes determines success. With programs like AdSense, Google did not aim to build a huge Web-based political const.i.tuency, but it did. As its advertising dollars rained on Web sites, Google was hailed as a benefactor. Not only was Google not evil, it was beneficent. Google would call these content Web sites partners, and give them about two-thirds of the ad dollars, with Google pocketing the rest. Many small businesses would be discovered and thrive. It was largely overlooked at the time that automated AdSense cut out the advertising middleman. Or as Wojcicki told me, "It changed the way content providers think about their business. They know they can generate revenues without having their own sales team." In the online world, Google was potentially dis-intermediating not just the media buying agency but the sales forces of content companies.
AdWords and AdSense would solve the mystery of how Google could monetize its search engine. For the first time, in 2001, Google turned a profit: $7 million on revenues of $86 million. The next year, revenues more than quadrupled to $439 million, and profits jumped to $100 million. Google"s search index included three billion Web doc.u.ments. Not surprising, among the top ten searches on Google in 2001 were these: World Trade Center, Osama Bin Laden, anthrax, World Trade Center, Osama Bin Laden, anthrax, and and Taliban. Taliban.
In 2002, Urs Holzle, who is now Google"s senior vice president of operations, was undecided whether to return to his tenured faculty position at the University of California at Santa Barbara. AdWords made that decision simple. Google had finally found a way to make money. "Now we could fund all these things we couldn"t fund before," he said, "2002 was when we said, "We can afford to spend more on machines!"" This was also the year Google discovered, as Eric Schmidt would tell me several years later, "We are in the advertising business." Ignited, the Google rocket took off.
CHAPTER FIVE.
Innocence or Arrogance?
(2002-2003).
Eric Schmidt now fully shared Page and Brin"s faith in Google"s ascendancy. What set Google apart, he came to believe, is that while people like him always a.s.sumed "Google would be an important company, the founders always a.s.sumed that Google would be a defining company." The scope of Google"s ambition was presaged by something Page said when he and Schmidt spoke before a Stanford cla.s.s in 2002. "If we solve search, that means you can answer any question," Page said. "Which means you can do basically anything."
Their audacity was displayed in May 2002 when Google made its most ambitious-and riskiest-deal yet. With its new AdWords in place, Google was eager to start syndicating ads, and even though it was doing about 150 million searches a day, it wanted to do more. AOL would be their vehicle. Because AOL later went into a tailspin, it"s often forgotten how dominant the company was. Webheads would sneer that using AOL was "the Internet on training wheels." Yet it was AOL"s user-friendliness that helped popularize the Web-and which attracted thirty-four million paid subscribers in 2002. For Google, AOL was a ripe target, a giant portal with an enormous audience. But search rival Overture was doing AOL"s searches and advertising, and besides, as AOL"s then executive vice president, Lynda Clarizio, said, "No one knew who Google was." Overture"s contract ended in May 2002, and the founders were determined to snare it.
"I want us to bid to win!" Page declared at an executive staff meeting, according to Susan Wojcicki.
"You"re betting the company if you do that," Kordestani warned.
"We should be able to monetize the pages," Page responded. "If not, we deserve to go out of business."
With $10 million in the bank, Google promised AOL 85 cents of each advertising dollar collected, and guaranteed a minimum annual payment of $150 million in revenues. "We could have gone bankrupt," Brin said.
"Overture offered more money," said former AOL president Robert Pittman. But Google offered a better search engine, a more inventive approach to reaching smaller advertisers, and higher minimum guaranteed payments.
Google won the bid, to the surprise of many industry watchers. It was a milestone, "probably the biggest" deal Google has ever done, Brin said. "Every time you did a search on AOL, it said "Powered by Google,"" recalled Nick Grouf, CEO of Spot Runner, an Internet based advertising agency. "By cutting a deal with Google, what AOL did was surrender the front door to its walled garden" of consumer data. The deal "affected how we thought about doing partnerships and deals," said Tim Armstrong. And the partnership would become a huge moneymaker for both Google and AOL.
The deal enlarged Google"s appet.i.te. Schmidt remembers the day in 2002 he walked into Page"s office and Page surprised him by showing off a book scanner he had built. It had been inspired by the great library of Alexandria, erected around 300 B.C. to house all the world"s scrolls. Page had used the equivalent of his own 20 percent time to construct a machine that cut off the bindings of books and digitized the pages. "What are you going to do with that, Larry?" Schmidt asked.
"We"re going to scan all the books in the world," Page said. For search to be truly comprehensive, he explained, it must include every book ever published. He wanted Google to "understand everything in the world and give it back to you." Sort of "a super librarian," he said. "Where are all the books?" Page asked.
"The Library of Congress," Schmidt said.
"Good, we"ll do a deal with the Library of Congress!" Page said.
"You"re Larry," Schmidt said. "n.o.body gives a s.h.i.t about you."
"Well, how can we get to the Library of Congress?" Page asked.
They arrived at the answer simultaneously.
"We call up Al Gore," Schmidt said. "He"s friends with the guy who"s in charge of the Library of Congress." At the same time, Page proposed to his alma mater, the University of Michigan, that Google would pay to digitize the seven million books in its library. After Page had the university"s consent, he flew to Washington to make a deal with the Library of Congress. Google would soon sign up Stanford, Oxford, and the New York Public Library, among others. They established an internal team under the joint direction of Dan Clancy, who had a Ph.D. in artificial intelligence and had worked at NASA, and Adam Smith, a former investment banker who had served as vice president of new media at Random House. Clancy offered another reason to support the effort: to promote reading among young people who did their reading online. "I sampled college students and asked, "How many of you went to a library in the last year?"" Only half raised their hand. "There"s so much information on the Web that students accept secondary sources." He hoped to combat this. Adam Smith saw their effort "as a book-promoting vehicle," bringing the work of authors to a wider audience. About 90 percent of the more than twenty million books ever published were out of print, and Sandler and Smith had a goal of digitizing ten thousand books each day.
But in their rush to fulfill this mission, Google did not first pause to extensively consult with American publishers and authors who owned the copyrights to many of these books. "If we had done that," Brin said, "we might not have done the project." Because they didn"t do that, Google would later have a lawsuit to contend with.
THE FOUNDERS USUALLY FOCUS on different things. Page devotes more time to how consumers interact with Google, hence his chosen t.i.tle, president of products. Brin spends more time on technology, hence his t.i.tle, president of technology. The t.i.tles can be misleading, because "we overlap a lot," said Brin. It"s also inexact because each founder has unpredictable interests or quirks. Brin, for example, thrusts himself into the middle of strategy sessions for many business negotiations, which is welcomed by his fellow executives. He is also a princ.i.p.al proponent, according to vice president of people operations Laszlo Bock, of Google"s ma.s.sage programs and child care centers, while Page is more a.s.sertive about which engineers to hire, the food served, and the size of cafeterias. Within Google, this sometimes creates confusion. For example, Bill Campbell, who is in many of the key meetings, said he believes Brin is most focused "on the end user experience" and that Page is more focused on "the product development process to get there." On the other hand, employee number 1, Craig Silverstein, thinks Brin "brings more of an operational focus."
"We"re pretty lucky because we have both of us plus Eric," said Brin. "We are able to choose the things to focus on. It"s a great luxury." Because "I can"t escape being a bit of a tech nerd," Brin said, he spends a lot of time on technology. But so does Page. "These things are subtle. We overlap a lot."
What both bring, said Nick Fox, the group business manager, ads quality, is "an ability to push you down paths you wouldn"t have thought about before." When Fox first joined Google and watched Page and Brin at TGIF, "I thought they must be two guys who had a great idea and got lucky." But he quickly concluded they always had "great insights," and an ability to provoke thought. He offers this example: They were in a meeting discussing new ways to advertise with search and how to move beyond the text ads Google relied upon. Brin was holding a plastic bottle of water, and said, "Let"s turn this bottle upside down. If I"m a butcher and I"m trying to get customers into my store, maybe a text ad is not an effective way to get customers into my store. But maybe if I was able to film a video of myself showing all the fresh food and great prices and I"m just talking about my store with a lot of pa.s.sion, maybe this is the way I can get people to come into my store." It was not the typical auto dealer ad announcing a President"s Day sale, Fox said. "You don"t think about ads of people talking pa.s.sionately about their store." For various reasons, such ads are still not part of search, but to Fox that is less important than the ability of the founders to "turn the way people think about something upside down."
Alissa Lee encountered this upside-down approach. In the first five years of Google"s life, one or both founders insisted on interviewing each applicant. Brin was introduced to a Harvard Law graduate, Alissa Lee, by David Drummond, who was the company"s outside counsel in the late nineties and became Google"s corporate counsel in 2002. Lee was a contracts lawyer, and in the course of her interview, Drummond remembers, Brin said, ""I really need to see how you will practice law. I need you to draw me a contract. Don"t spend a lot of time on it. Draft it and send it to me and to David so we can review your work."" And then came the Google test: ""I need the contract to be for me to sell my soul to the devil."" Brin remembered his request and recalled: "I just figured that if I"m interviewing an attorney I should validate their work product."
Lee remembered repeating the question, not sure she had heard it correctly. Brin told her he wanted the contract e-mailed to him in the next thirty minutes. "Amid the surreal oddity of it all," she recalled, "I had forgotten to ask him all sorts of lawyerly questions, like what sort of protections he needed, what conditions he wanted to attach, and what he wanted in return for his soul. But then I realized that I had missed the point. He was looking for someone who could embrace a curveball, even relish it, and thrive in the process of tackling something unexpected. I"m not sure he actually looked at what I sent him, but something in my crazy sale agreement or in my response must have satisfied him."
"She was a clear hire," said Drummond. Today Lee is Google"s a.s.sociate general counsel.
John Doerr encountered a similar upside-down approach when Page asked him what he thought of Google"s buying a Boeing 767.
"I think that"s a terrible idea," said Doerr.
"Why?"
"For the ethos and egalitarian nature you want to have in the company," Doerr answered, "you"re never going to get away from the public perception of two Silicon Valley entrepreneurs owning a personal 767."
"Look at the numbers," Page said, showing Doerr a sheet of paper revealing that for seven million dollars they could purchase the 767, and for another ten million dollars they could install improved engines and a new interior. "A totally upgraded 767," Doerr realized, "cost less than a G-5." And it could fly longer distances and accomodate thirty-five people, transporting engineers and the founders or Schmidt around the world to visit Google sites. "They went ahead and did it." They later purchased an additional plane, a Boeing 757.
WITH INTENSE PRODDING from the founders, the Google engineering shop was innovating at a furious pace. Among the new projects developed at this time were Desktop Search, Froogle (later changed to Google Product Search), Google Maps, Google Print (renamed Google Book Search), Google Docs, to allow users to create and edit doc.u.ments, presentations, and spreadsheets, and Pyra Labs, a site to facilitate the creation of blogs. The founders were particularly enthusiastic about the idea for a new e-mail system. Unlike providers such as AOL, Google"s e-mail would be free, and would allow its users to easily search their own e-mail archives for content and contact names. And while Yahoo"s free e-mail offered its users 4 megabytes of storage, Google"s Gmail would provide 1 gigabyte, 250 times as much. To the engineers, it seemed clear that this was enough storage that a user would never have to delete e-mails. In the interest of efficiency, the first version of Gmail did not include a delete b.u.t.ton. This had an unforeseen effect: Users feared that Google would peek at e-mails. And Paul Buchheit"s e-mail scanning software-the same program that had grown into AdSense-only fanned this fear. For Google, it was a way to make money from e-mail by placing ads when certain keywords were typed. But critics said it was an invasion of privacy, that Big Brother was watching everything. Google"s engineers failed to absorb the lesson of Microsoft"s Pa.s.sport program. Introduced in 1999, the program stored personal information and allowed access via a log-in name and pa.s.sword. Its release triggered a storm of protests, complaints that Microsoft would access this personal data for its own business reasons. Perhaps a reason Google failed to absorb the lessons of Pa.s.sport was because Google believed its intentions were n.o.ble and that Microsoft"s were probably not.
Terry Winograd, the Stanford professor, was a consultant on Gmail and described a "huge debate" over the program. "We said, "People want to delete things. There should be a delete." Larry, among others, said, "We want them to start thinking differently."" Page said that because Google was offering so much storage, users could keep everything, and went on to argue: "If you delete stuff, you might later on decide you want it. Plus, you spend time thinking about whether I should delete this or not." The "engineering optimization side," said Winograd, claimed this was an inefficient use of users" time.
The Electronic Privacy Information Center, a public interest research center in Washington that focuses on privacy and civil liberties issues, demanded that Gmail be shut down, declaring that it was "an unprecedented invasion into the sanct.i.ty of private communications." Of course, a computer, not a human, was scanning the e-mail, as most e-mail providers do to prevent spam. At first, the founders and Schmidt tried to defend the no-delete b.u.t.ton and the advertising feature of Gmail, believing the small tempest would pa.s.s. It did not, and Google was forced to add a delete b.u.t.ton. For Winograd this was an early sign of troubles to come. He has enormous respect for his former students (and grat.i.tude for the Google stock grants that made him a rich man), but what he saw in the Gmail debate was that Google relied so much on science, on data and mathematical algorithms, that it was insensitive to legitimate privacy fears-and, later, to fears they would dominate the search market. Winograd describes his two former students as impatient: "Larry and Sergey believe that if you try to get everybody on board, it will prevent things from happening. If you just do it, others will come around to realize they were attached to old ways that were not as good." The att.i.tude, he said, "is a form of arrogance: "We know better." The idea that somebody at Google could know better than the consumer what"s good for the consumer is not forbidden."
Only die-hard Google bashers, however, would deny the idealism that drives many of the decisions Brin and Page have made at Google. In the wake of 9/11, Krishna Bharat, an Indian-born engineer who joined Google in 1999 and today has the t.i.tle princ.i.p.al scientist, was moved by the awful events of that day to ponder its lessons. One lesson, he believed, is that Americans were largely ignorant of other peoples and creeds, including radical Islam. There was too little international news in print or on television. Bharat said he wanted to "broaden horizons, allowing people to see other perspectives, to see what the Arab street is saying today. It is hard for the New York Times New York Times to do justice to that." Devoting his 20 percent time to this project, Bharat devised a program that would be known as Google News, initially offering free access to almost five thousand worldwide news links. The placement and selection of stories is made, Google announced, by "computer algorithms, without human intervention." Google News would be ad-free, meaning Google would lose money from this effort. Like digitized books, Google News was advanced as a promotional and sales vehicle. It would, Google said, broaden newspaper readership, and allow newspapers to sell advertising once a user clicked on the newspaper"s link. "We send traffic to newspapers," Bharat said. However, newspapers didn"t all jump up and down with glee. to do justice to that." Devoting his 20 percent time to this project, Bharat devised a program that would be known as Google News, initially offering free access to almost five thousand worldwide news links. The placement and selection of stories is made, Google announced, by "computer algorithms, without human intervention." Google News would be ad-free, meaning Google would lose money from this effort. Like digitized books, Google News was advanced as a promotional and sales vehicle. It would, Google said, broaden newspaper readership, and allow newspapers to sell advertising once a user clicked on the newspaper"s link. "We send traffic to newspapers," Bharat said. However, newspapers didn"t all jump up and down with glee.
One of the major dissenters was the a.s.sociated Press. Founded in 1846 to provide news stories to newspapers in exchange for annual fees, the AP had begun to extend this franchise online, selling national and international news to portals like AOL, MSN, and Yahoo. But as Jim Kennedy, the AP"s vice president of strategic planning, described it, Google News was sifting news stories, "making copies and taking pieces of this content and posting it as if it were their own news." Google claimed it was fair use, said Kennedy, since it was posting only part of the article and providing a link. Google said it was both creating reader traffic and promotional value for the news sites. The AP, which is a wholesaler of news, claimed Google was commoditizing their content and insisted on a license agreement. Google resisted, and the AP considered bringing a lawsuit.
Did Tom Curley, the CEO of the AP, think Google was naive? "No, there is nothing naive about these guys," he said. "They have a very, very aggressive legal view. They have pushed the envelope.... They know exactly what they"re doing. They have the greatest business ever invented. They are taking everybody else"s work and they are figuring out how to do a deal with most other people in which heads, they win, and tails, most everyone else loses." He cited the 80 or so percent Google said it pays its large content partners in the AdSense program. Since Google sells the ads, he said, it charges a commission of about 15 percent off the top, leaving about two-thirds-not 80 percent-for the content creators. "That"s not enough."
Eric Schmidt disputes this portrayal. "This is a company that [at the time] had only three or four business development people," he said. Those people alerted Schmidt that the AP felt Google was stealing their content, he said, but "we had a lawyer at the time who advised that this was fair use." Google refused to pay. The AP claimed that for news Google was becoming "an end user," not a search site that sent people elsewhere. The idea, Schmidt said, had "never occurred to us."
Reeling from shrinking revenues, newspapers fretted that Google was depriving them of compensation for their content. They feared Google was expanding from search to the news business. And they were offended that Google thought an algorithm could perform the work of an editor. "Google is driven by engineers who believe that what is most popular is most valuable," said L. Gordon Crovitz, then the publisher of the Wall Street Journal. Wall Street Journal. When the s.p.a.ce shuttle When the s.p.a.ce shuttle Columbia Columbia disintegrated, killing its crew of seven, the Google algorithm allowed the story to rank low and thus disappear from Google News. "Their presentation of news devalues brands. Unlike traditional journalism, it does not communicate to readers the level of authority or authenticity of information." Over time, he said, Google would blur an understanding of which journalism was most reliable, making news more of an undifferentiated commodity. But the wails from newspapers and publishers were fairly muted throughout 2002 and 2003. The anxiety Mel Karmazin felt after his 2003 visit had not yet gripped the old media. disintegrated, killing its crew of seven, the Google algorithm allowed the story to rank low and thus disappear from Google News. "Their presentation of news devalues brands. Unlike traditional journalism, it does not communicate to readers the level of authority or authenticity of information." Over time, he said, Google would blur an understanding of which journalism was most reliable, making news more of an undifferentiated commodity. But the wails from newspapers and publishers were fairly muted throughout 2002 and 2003. The anxiety Mel Karmazin felt after his 2003 visit had not yet gripped the old media.
Nor was Google focused on extinguishing external fires: it had its own internal flare-ups to douse. The founders continued to be uncomfortable with Eric Schmidt"s efforts to impose streamlined management, fearful it would squelch Google"s entrepreneurial spirit. Google was a company rocketing to financial success on the brilliance of its founders and engineers, yet hobbled by them as well. "Larry and Sergey didn"t like management," Schmidt said, and they let the new managers know this. They were, he said, "unduly harsh."
In early 2003, Google had four product managers: Salar Kamangar, Marissa Mayer, George Harik, and Susan Wojcicki. To oversee them as senior vice president, product management, Schmidt recruited Jonathan Rosenberg, who had been a senior manager at Apple and other tech companies. Page and Brin were restive with still more managers being added, and Schmidt was caught in the middle. A series of summit meetings was held, with no resolution. Schmidt was not then convinced that relying on four product managers was the best approach. But, he said, "at the time, Larry was having a relationship with Marissa. It was a very complicated set of issues. Eventually, Marissa announced that we should rank all our projects. A great idea. Unfortunately, the top one hundred on the list had three hundred things on it." And then "there was this huge to-do because Larry doesn"t agree with the list, and the engineers are not working on what they"re claiming to be working on, and the management, which he doesn"t like anyway, is getting away-getting too bureaucratic." Page asked everyone to prepare a list of exactly what he or she was working on and insisted on getting the reports directly, said Schmidt, in order "to completely avoid being filtered by all these management types, which includes me!"
This was round two of the founders" unease with Schmidt. Page and Brin would whisper to other Google executives, said one recipient of these whispers, "What does Eric do?" This executive believes Page wanted to reclaim his CEO t.i.tle. Sometime in the summer of 2002, Coach Campbell again intervened. With the fervent support of John Doerr, the coach set out to make the marriage work. Before 2003 was very old, the three men achieved harmony. Asked in 2008 to describe the most important milestones in Google"s success, Doerr does not cite the myriad deals with Yahoo, AOL, or revenue gushers like AdWords or AdSense. Instead, he said, "The biggest milestone was for Larry and Sergey and Eric to conclude they were going to work together. It did not happen overnight. They learned to adapt. Bill was very helpful in that, and I was too, in a less key way."
By the end of 2003, the Google rocket was cruising. Its search now controlled 60 percent of the market outside the United States, which produced nearly a third of its revenues. Many of its search compet.i.tors-AltaVista, Infoseek, Excite, HotBot-had crashed or would soon crash. Yahoo and Microsoft had jumped into the search business, but Google soared far above them. Already it was common to say "I"ll Google it," rather than, "I"ll search it."
Google"s employee roster nearly tripled in size between 2002 and 2003, reaching 1,628 at the start of 2004. Like a child outgrowing his clothes, the company had become too big for its two-building campus on Baysh.o.r.e Parkway in Mountain View. Its new campus, christened the Googleplex, was a stone"s throw from the old one, faced the same mountains and desertlike expanse, and sprawled over so much territory that Google provided bicycles for employees to travel between buildings. It is a measure of Google"s confidence in its own future growth that the company leased 1.5 million square feet of office s.p.a.ce in four multistory buildings that once housed Silicon Graphics, and would eventually purchase an additional fifty-six buildings and 2.5 million square feet of building s.p.a.ce on sixty nearby acres in Mountain View.
Although its growth was extraordinary, Google remained below the radar of most media companies, unlike Microsoft in the nineties or IBM in the eighties. "Don"t be evil" was a heartfelt, galvanizing slogan for Googlers, but it was also an effective way to brand Google as a nonthreat ening, almost cuddly, company. Google had b.u.mped into book publishers and the AP, but it was not yet widely perceived as anything more than a narrow search company. As a private company, it was not required to reveal its profits or aims, and so the menace Google might pose to the old media-to broadcast and cable television, to advertising, to movies and print and telephone-was not yet apparent. This was about to change.