When Google was first started everybody said that it could never compete with the existing search engines. In late 1998, as Google was just getting started, an article in Fortune magazine declared, "The search wars are over, and Yahoo has won."
When Google became an instant hit, everyone said that it wouldn't last. Yahoo and Microsoft were bound to match its technology and take over. Six years and billions of dollars of spending later, Yahoo and Microsoft have at best closed the technology gap to the point of being a year behind Google's innovations.
At the time of Google's IPO, everyone said that it was over priced, and that Yahoo would be a better investment because its revenue base was more "diversified." A year later, Google's stock price has nearly quadrupled, while Yahoo has been stagnant.
Now everybody acknowledges that Google is scaring the blue jeans off Microsoft, but that it is becoming its own "Evil Empire." Don't count on it.
Google is not perfect. But it is an extraordinary company.
Google represents a true revolution in business. It is the most important company of the 21st Century, and it is likely to remain so for decades to come. It is altering almost every business it puts its minds on, demonstrating to the world how to thrive in the Internet age. It has pioneered an entirely new business model for the new Millennium—a model that is transforming world commerce.
Every company doing business on the internet should study and emulate this model. But anyone doing business off the internet had better pay attention as well. As more online companies start emulating Google’s practices, the havoc that the internet has already lavished on business—by dropping prices as close to zero as possible and increasing competition to as close to infinity as possible—will look like sandlot softball once millions of online businesses join Google in the major leagues.
Google has thrown business as usual out like an old and cracked bat. Its new model is deceptively simple in concept but extraordinarily difficult to implement. It centers on one overriding principle, the philosophy succinctly encapsulated in the company’s most famous and hugely underestimated rule of business, “Don’t be evil.”
Larry and Sergey have been widely criticized for boasting that credo, including putting it in their prospectus for its initial public stock offering. Some dismiss it as hype. The Securities & Exchange Commission was not happy when Google put a letter to shareholders at the top of its IPO prospectus stating that its main goal was to make “the world a better place.” An assistant director at the SEC wrote a letter to the company asking it to explain why such nonsense should head off a legal document to the federal government that was supposed to explain the company’s finances, opportunities and risks. Under pressure from the SEC, the letter was moved to page 27 of the 150-page filing. Another SEC query asked the company to remove claims of being primarily dedicated to doing "things that matter" and providing "a great service to the world." That language, however, also stayed in the SEC filings. The prospectus also had a tendency to refer to executives and investors casually, using just their first names in several sections, another affectation that remained in the final documents.
Many pundits have criticized Google for publicly proclaiming its desire to avoid evil. If nothing else, they say, it puts a ridiculously high standard on the company, one that they are bound to fail to live up to. But it does keep Google more honest, because people expect it. Imagine if Microsoft or Yahoo, or even Ebay, were to proclaim a dedication to doing no evil. The would be roundly lol’d around the internet for even making the claim.
Google’s executives take this stuff seriously. If they seem naively idealistic in thumbing their nose at business convention, consider the fact that the internet is the biggest disruptive technology the world has seen in over three decades.
Early internet pioneers and their venture backers recognized the need for a new business model to suit the new age, but in the first dot-com boom they lacked the imagination to figure out what it was. They treated the internet as merely a new channel for selling products. It wasn’t enough, and the dot-com infrastructure, built with too much cash and too little substance, collapsed.
Proving the truth of Albert Einstein’s maxim that “Imagination is more important than knowledge,” Larry and Sergey, with absolutely no experience in business, had the singular courage to experiment with a new way of doing business, and changed the world.
This is a critical point in world commerce. The internet is leading the globalization of the world’s economy, and increasing the number of competitors exponentially. Companies throughout the world can reach anybody with a computer. Customers are becoming radically more demanding, and comparison shopping and free access to information are bringing revolutionary changes in the relationship between customer and seller, overwhelmingly favoring the customer.
Given that amount of choice, who ya gonna call? The Business Ghost Busters, the company that buries dead and overly-greedy business models and replaces them with more idealistic ones. The company that puts your interests first, to the extreme of giving away its products for free and putting extreme limitations on those who want to take your money, even its own advertisers and partners. The company that wants to make the world a better place by doing things that matter and providing a great service to the world—in other words, to you.
Google has figured out how to do this and, almost as if by magic, turn an enormous profit at the same time. It’s an extraordinary combination.
We’re also still struggling through the lawsuits and dissolution of companies caught in a web of deceptive practices and illegal activity during the dot-com boom. But because of the internet—and because of Google—deceptive business practices, greed and arrogance are secrets that are becoming exponentially more difficult to keep. The internet has pulled the veil of secrecy from the public eye just as the public is being harshly reminded that information is critical, that information is power, and that some companies are very happy to hoard and abuse it. In the wake of dot-com and other business scandals, companies now have to hold themselves to higher standards of honesty. It’s guaranteed that their customers will, for no other reason than that they will be able to.
This is not a temporary change. The internet, as far as the most far-sighted eye can see (about two decades,) is forever. When it is finally gone, it will be replaced with something that continues these changes, even amplifies them.
Silicon Valley had become accustomed to winning the business wars with better technology and lower prices. But that was not enough for online business success. On the Internet, no company can maintain an advantage in technology or price for very long. That sets off a difficult spiral that ends up with the market gravitating to the company with the best technology and cheapest products. Guess which company best fits the bill.
Still, companies with deep pockets, like Yahoo and Microsoft, can accomplish those goals nearly as well as can Google. What they can’t duplicate, however, is Google’s dedication to its customers, to empowering individuals at the expense of large corporations, to melding with the culture of the Internet. It’s too hard to change their ingrained cultures.
Google was born with a new culture. In their early years at Stanford, Larry and Sergey didn’t even want to create a profit-making company. I know that John Battelle, in his excellent book, "The Search," says that Google engineer Paul Buchheit came up with the phrase "Don't Be Evil" in 2001. but the concept existed whil Larry and Sergey were still at Stanford. Brian Lent, who worked with Sergey as a graduate student in Computer Science at Stanford, says, “Originally, ‘Don’t be evil’ meant ‘Don’t go commercial.’” In fact, Lent stopped working with them on their search engine research project because he did want to go commercial. He dropped out to join a startup company in 1996. He confesses today that it was a superbly bad decision.
Others confirm this attitude. Around that same time, Silicon Valley programmer Andre Broder, a researcher at System Research Center, the birthplace of Alta Vista, was making occasional trips to Stanford University, his Alma Mater, to chat with other computer scientists. One pair he ran into occasionally was Larry and Sergey. They would sit around and discuss search technology over coffee. He found them to be “obviously very intelligent, and out to reinvent the world,” he recalls now. But one of their ideas surprised him. They weren’t worried about making money, the bane of every other search engine in existence. “One funny thing about Larry was that he was very adamant about search engines not being owned by commercial entities,” he says. “I remember having a long discussion with him about that. He said it could all be done by a nonprofit. I guess he has changed his mind.”
Indeed he has. Silicon Valley is not in the habit of funding non-profit companies, and Larry and Sergey were almost forced to start a for-profit company in order to get their technology out to the world. But they decided to run it almost like a non-profit, where the goal of improving the world takes precedence over revenues. The interesting thing is that, by taking this attitude, they tapped into the zeitgeist of the internet and became hugely profitable.
Larry and Sergey are revolutionaries at a time when technology and culture demand a revolution. They are idealists at a time when the world demands idealism. On the internet, being ruthlessly competitive means being ruthlessly idealistic.
The dedication to doing no evil makes a lot of business decisions obvious. It means never cheating the millions of people conducting searches every day, in order to squeeze every bit of revenue out of them as possible (practices still going strong at Ebay, Microsoft and Yahoo.) It means putting severe restrictions on advertisers and partners so as not to irritate customers; and demanding that the ads people see are relevant to their interests so as not to waste their time. It means treating the company’s mission, collecting the world’s information for everyone to see, as an almost sacred service. It means creating business partnerships that favor individuals and small business over big corporations, spending millions on public service acts that generate no revenues, and sticking to these principles even if it means giving up revenues to do so.
Those principles are what keep Google innovative, loved by the public, and more successful than General Motors—or Yahoo—or, eventually, Microsoft—in turning a profit. This one principle is not a mere marketing phrase. It is the future of business.