Googled: The End of the World as We Know It

PART TWO The Google Story

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 assumed “Google would be an important company, the founders always assumed 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 class 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 appetite. 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. “Nobody gives a shit 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 title, president of products. Brin spends more time on technology, hence his title, president of technology. The titles 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 principal proponent, according to vice president of people operations Laszlo Bock, of Google’s massage programs and child care centers, while Page is more assertive 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 passion, 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 passionately 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 associate 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 documents, 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 button. 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 Passport program. Introduced in 1999, the program stored personal information and allowed access via a log-in name and password. 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 Passport was because Google believed its intentions were noble 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 sanctity 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 button and the advertising feature of Gmail, believing the small tempest would pass. It did not, and Google was forced to add a delete button. For Winograd this was an early sign of troubles to come. He has enormous respect for his former students (and gratitude 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 attitude, 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 title principal 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 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 Associated 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. When the space shuttle 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.

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 title. 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 competitors—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 Bayshore 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 space 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 space 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 bumped 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.