While Brin is more approachable than Page, he, too, can be awkward around strangers. His wife Anne Wojcicki’s company, 23andMe, was feted at a fashionable cocktail party in September 2008 that was cohosted by Diane von Furstenberg and her husband, Barry Diller, Wendi and Rupert Murdoch, and Georgina Chapman and her husband, Harvey Weinstein. The event was held at Diller’s Frank Gehry-designed IAC headquarters in Manhattan. Brin appeared wearing a dark crewneck sweater and gray Crocs. He and Google are investors in her company and he is openly proud of her work. But she had to quietly beseech him to stay. He did, but hid behind his oversized Canon camera, moving about the vast room or retreating to a corner, always snapping pictures.
THE YEAR 2000 BEGAN with two bangs. The first was that Google entered the new year averaging seven million searches a day, a massive jump from half a million at the beginning of 1999. The second was the sudden crash of technology stocks. Between March and October, the NASDAQ Composite Index, which lists most tech and Internet companies, fell 78 percent. Yahoo’s stock at one point plunged from $119 a share to $4. As a private company, Google was both spared and offered opportunities. “As in any successful venture, there’s a lot of luck,” said Hal Varian. “One of the great things from Google’s point of view was the dot-com collapse in 2000. A lot of talent became available.” Google cherry-picked some good engineers.
But the company was burning through its cash. While Google’s revenues would total $19.1 million in 2000, its losses would be $14.7 million, more than double those of the previous year. And they’d had “zero discussion” about any kind of Google advertising until late 1999, recalled Salar Kamangar, who crafted Google’s first business plan and became vice president of product management. The founders feared ads would slow searches. They still believed Google could outsource monetization to ad firms like DoubleClick, or sell their search services to corporations. Page and Brin were relying on their faith that a way would be found to make money. This faith produced more friction with their two major investors, but Page and Brin were undeterred.
In The Search, John Battelle describes an encounter around this time between Page and Brin and Bill Gross, the founder of the Go To search engine. Gross had come up with an idea: he was convinced advertisers or Web sites would pay more for certain keywords if they could pay on a cost-per-click (CPC) basis, meaning they paid only if the user showed enough interest in a given ad to click on their link and perhaps make a purchase. The price for the keyword and the placement of the ad would be set in an online auction process. By mid-1999, GoTo had a network of eight thousand advertisers, with some paying by the click and others paying a fee to appear at the top of the search results. Gross approached Page and Brin to propose that the two companies merge, reports Battelle, but “Brin and Page turned a cold shoulder to Gross’s overture. The reason given: Google would never be associated with… a company that mixed paid advertising with organic results.” (Gross later changed his company’s name, GoTo, to Overture, and in 2002 would sue Google for allegedly stealing its cost-per-click model.)
Meanwhile, Google decided to offer its search to other Web sites and to share any revenues. It was a way to extend its reach, and to be paid for the use of its search engine. The most significant deal, signed in June 2000, established Google as Yahoo’s official search engine. Google paid dearly for the privilege, granting Yahoo a warrant to acquire 3.7 million shares of Google when it was issued. And few users knew they were conducting a Google search, because Yahoo wouldn’t allow Google’s branded search box on its page. For Google, the deal was another milestone. Its search traffic doubled to fourteen million on the first day of the partnership.
While most experts by the end of 2000 thought Google had the best search engine, this claim was conjectural. What was indisputable was that Google was now the most-visited search engine on the Web, with one hundred million daily search queries and a worldwide market share of about 40 percent. Yahoo had given Google a boost, but “it was really about the quality of the search,” said Search Engine Land editor Danny Sullivan. “People were coming to Google because they heard about it.” The rapid growth would provide Google a vital and at the time overlooked asset. More searches generated more data for Google about users, which led to better searches, which would eventually lead to more ad dollars.
The question of how to monetize search by turning traffic and data into cash remained unanswered. Unlike AOL, Google didn’t have subscription revenues. And unlike portals such as Yahoo, it didn’t have content sites on which to place banner or display advertising. In October 2000, Google introduced its first advertising program, called AdWords. It was a small beta test, available to 350 advertisers who paid for a selection of search keywords that allowed the advertiser’s small text ads to appear on the side of the search results. It was a self-service program. Companies gave Google their keywords and went online to retrieve data on the number of times users typed their keywords into the search box. The effort was clunky, and grew very slowly.
Although AdWords was a new media advertising effort, it borrowed an old media CPM (cost-per-thousand) model. Much in the way that a television network might know that millions of viewers were exposed to a thirty-second spot, but not whether they actually watched it or made a purchase because of it, advertisers paid based soley on the number of times their ad appeared. There was a link to the advertiser allowing users to learn more about a product, though Google did not get paid if the user clicked through. The program was also limited in that Google could not easily syndicate AdWords to partners because GoTo had already tied up other search engines, making Google less attractive to advertisers. In addition, prominent advertisers were not inclined to place their dollars on search keywords. Giving credence to something that seemed so puny was alien to the brand advertising they were accustomed to. Because Page and Brin insisted that all advertising be relevant to the keywords, Google only allowed ads to appear in 15 percent of all searches, which meant that Google was forgoing advertising dollars if the ads were not judged “relevant.” Page and Brin liked to boast that Google could move on a dime, but their company was moving ever so gingerly to embrace advertising.
They were moving too gingerly for Doerr and Moritz, who admit they were frustrated by Google’s mounting losses. In the eyes of investors, the issues of monetization and management were twined. Good managers would impose the discipline every profit maker requires. “The understanding when we invested was that a CEO, among others, would be hired over time,” said Moritz. The venture capitalists finally persuaded Page and Brin to hire a headhunter to find a CEO, but the young founders were resistant, fearful that “a suit” would subvert the Google culture. They met with about fifteen candidates, all accomplished executives who were invited to attend TGIF, to share meals with the founders in the cafeteria, to sit in on staff meetings. Brin went heli-skiing with one prospective CEO who boasted that he was an expert at the sport. (He wasn’t.) “They thought everyone they had talked to was a clown,” Paul Buchheit said. “The candidates didn’t understand technology.” Omid Kordestani said Page and Brin “knew in their gut that they wanted a fellow intellectual.”
The VCs feared the founders would find an excuse to reject every candidate, which was true. Marissa Mayer said she believes the CEO search was so protracted in part because “they were not convinced it needed to happen.” Mayer knew Page and Brin’s thinking. She was a central member of the engineering team. And she and Page were dating, as they would for about three years. Like most company founders, they believed they could better manage their baby, better ensure the implementation of their vision, better preserve the culture. Asked if the founders resisted, Moritz now responds like a State Department officiaclass="underline" “They resisted hiring ordinary people, and that’s a wonderful tribute to them. One of the many lessons I learned from the Google investment is the importance of hiring spectacular people. Sometimes it frustrated us, but they were spot-on.”