Even new media was put on notice when, in 2004 and 2005, Google swooped in at the last minute to beat both Microsoft and Yahoo in auctions. The first came in October 2004. Brin and Page were on an overnight flight, heading to a Madrid sales conference on a chartered Boeing 737, when they learned from Omid Kordestani that AOL Europe was close to renewing its European contract with Yahoo. (Although AOL was losing subscribers, it still had more than twenty million worldwide in 2005, making it a valuable platform to generate more searches.) “We told the pilots to head to London,” where AOL’s European headquarters were located, recalled Brin. The founders’ families were aboard to accompany them from Madrid to Rome, where they were to receive an award from the prestigious Marconi Society for their scientific contributions. When they awoke, they were astonished to find that they were not in sunny Madrid but instead at Stansted Airport outside gray London.
Brin and Page drove to AOL’s European offices. Jonathan Miller, the chairman and CEO of AOL at the time, recalled the jolt he felt Monday morning when the head of AOL Europe phoned. Miller thought they had a deal with Yahoo, but now his European executive described the proposal made by Brin, who takes the lead in business negotiations: “He offered a number that was 40 percent higher than Yahoo’s. And he told us we had two weeks to get back to them.” There were, added a still stunned Miller, “no lawyers, no nothing.”
Google won the prize.
The second victory came a year later, in the fall of 2005. Tim Armstrong was attending meetings in Mountain View when Eric Schmidt entered and whispered, “We’re about to lose AOL to Microsoft.” The merger between AOL and Time Warner was not working; the touted synergies had not materialized. Into this chaos stepped Microsoft, determined to catch up in search. Back when Google was still headquartered in a garage, Gates and Microsoft had had it within their grasp to build a powerful search engine when it purchased an online advertising company, LinkExchange. Although the creator of LinkExchange, Ali Partovi, then twenty-six, told Microsoft that his partner, college dropout Scott Banister, had come up with a way to include ads in with search using keywords and that a search auction system would be “the next big thing,” Microsoft spurned the advice and declined to start a search engine. As first reported by Robert A. Guth in the Wall Street Journal, Microsoft believed the pot of gold lay not in tiny search text ads but in portals like their own MSN. But now Microsoft had launched its own search engine, Live Search, and with its deep pockets was seeking to replace Google as AOL’s domestic search engine.
Armstrong and others hammered out a counterproposal and showed it to Schmidt, before Armstrong flew back to New York to meet with Time Warner executives. Microsoft executives were on one floor, Google executives were on another, and Time Warner shuttled between them. At one point, Armstrong said, Microsoft left, “thinking they had the deal done. We stayed.” Schmidt flew to New York, as did Brin. In the end, Google and AOL reached agreement to become worldwide partners, with Google pledging to make more AOL content available to Google users, guarantee minimum annual advertising revenues to AOL, and invest one billion dollars to acquire a 5 percent stake in AOL.
Silicon Valley companies, accustomed to thinking of Microsoft as a foe, were now becoming uneasy about Google. When Yahoo executives read Google’s financial reports, they were punched in the nose with the realization of how much more successful and efficient Google was in selling search advertising. Google’s search business was growing twice as fast as Yahoo‘s, and was attracting more text ads. Yahoo poured engineering resources into a new automated ad-sales system, code-named “ Panama,” vowing that it would help them catch up. Microsoft and Yahoo conducted talks to see if there was a way to slow the Google juggernaut. And eBay, which had long sold advertising on Google, grew alarmed that Google had started a classified-advertising service that competed with its listings, and had inaugurated Google Checkout, which competed with its PayPal online payment service. So fearful of Google was eBay that the Wall Street Journal reported on its front page in 2006 that eBay was holding secret talks with Microsoft and Yahoo about allying against Google. Bill Gates further stoked the fever of fear when he told Fortune magazine that Google was “more like us than anyone else we have ever competed with.”
GOOGLE’S MANEUVERINGS AND DEALS may have made it unpopular with various media companies, but these did not tarnish Google’s image with the public. What happened in China did. In 2002, a Chinese-language version of Google search was launched, and then Google News in 2004. As user traffic mushroomed, the Chinese government found some of the news politically objectionable. China didn’t want users to be able to search for news about “free Tibet ” or for photos of Tiananmen Square protests. At first, Google refused to engage in any self-censorship. Often, the Chinese government banned Google searches. Senior Google executives believed they had to make a choice between denying Chinese citizens some political searches and denying them all searches. Google decided to comply with Chinese laws, stripped its news results of offending material and eventually, in 2006, created a separate search Web site, Google.cn, on which it would offer politically sanitized searches in China. If a user searched for a picture of Tiananmen Square on Google in London, The Guardian reported, the iconic picture of one man blocking a tank’s path appeared; if the same search was conducted on Google.cn, a picture “of happy smiley tourists” appeared.
Having escaped as a child from an oppressive government, Brin was anguished by the decision. Four years later, at Google’s annual shareholder meeting, two resolutions were introduced calling on Google to support human rights and oppose all forms of censorship in China; the resolutions implicitly rebuked Google. Page and Schmidt and Google management had the votes and defeated the resolution. Instead of vigorously opposing Google’s decision, Brin meekly abstained. When a shareholder rose to ask for an explanation, Brin gave a long tortured reply that vacillated between “I agreed with the spirit of the resolutions,” and “I am pretty proud of what we’ve been able to accomplish in China.”
Google rationalized its decision. Executives said they were complying with Chinese law, as they complied with German law to screen Nazi materials or would later comply with the government of Thailand by blocking YouTube videos that “defamed” the king. It said it was serving Chinese users, who still received more information from even a bowdlerized Google search than from any available alternative. It said that the Internet would, over time, help democratize China. And it said it would be transparent and notify users when search requests were blocked.
Google could also justifiably claim that it did not cross the line Yahoo had when, perhaps inadvertently, it shared with the Chinese government the e-mail accounts of prodemocracy journalists, resulting in long jail sentences for two journalists. But there was another reality Google confronted, and it was acknowledged in testimony made to Congress in February 2006 by Elliot Schrage, Google’s vice president, global communications and public affairs. Baidu, a Chinese search engine, had seen its market share jump from just below 3 percent in 2003 to 46 percent in 2005, he testified, while Google’s plunged to below 30 percent, and was falling. China was steering its citizens away from Google. “There is no question that, as a matter of business, we want to be active in China,” Schrage said, adding, “It would be disingenuous to say that we don’t care about that because, of course, we do.” What Schrage and Google were less transparent about was that Google had invested in Baidu, and presumably had to win the concurrence of the Chinese government in order to do so. The next year Google sold its 3 percent stake.