9-806-105 REV: NOVEMBER 9, 2006 THOMAS R. EISENMANN KERRY HERMAN Google Inc. Google’s mission is to organize the world’s information and make it universally accessible and useful. — Google’s mission statement In December 2005, Google paid $1 billion for a 5% stake in Time Warner’s America Online (AOL) unit. The implied $20 billion valuation for AOL came as a surprise; JPMorgan had recently valued the unit at $13.7 billion.1 However, the partnership was important to Google, which had signed a fiveyear deal to continue providing web search results and search-based advertising to AOL, as it had done since 2002. Google was expected to earn about $600 million in gross advertising revenue from AOL searches in 2005.2 The share of ad revenue that Google would pay to AOL was not disclosed, but seemed likely to exceed the 85-90% estimated for the prior deal.3 In addition to its $1 billion equity investment, Google would provide a $300 million credit for ads on Google promoting Time Warner products and would showcase Time Warner content in a special box on some Google search results pages. Critics complained about reports that Google would provide Time Warner with information about its search algorithms in order to help its partner’s pages secure higher positions in search results. Commenting on Google’s accommodations to AOL, author John Battelle said: “Each of them represents a step closer to a slippery slope. What they are giving away is the perception in the market place that Google isn’t for sale.”4 Google, based in Mountain View, California, had gross revenues of $6.1 billion in 2005 and an operating income of $2.0 billion. As of year-end 2005, the company had 5,680 employees and cash and equivalents of $8.0 billion. (See Exhibit 1 for Google financials 1999-2005.) Founded in 1999, the company completed its IPO in August 2004 with an $85 offering price. Google’s share price had climbed to $414 by year-end 2005, giving the company a $123 billion equity market value. Its website, Google.com, had a 37% share of all U.S. searches in Q3 2005; Yahoo.com, its closest rival, had a 30% share.5 Leveraging its own traffic and that of AOL, Ask.com, and other affiliates, Google garnered about 60% of U.S. search-related advertising revenue in 2005.6 Outside the United States, Google.com held a commanding 68% share of all search traffic in Q3 2005.7 (See Exhibit 2 for search engine market share data.) Since its IPO, Google had launched a flurry of products that had expanded its domain beyond web search. These included Gmail, a free e-mail service; Google Desktop, which allowed users to search the file contents of their personal computers; Google Maps; Google Book Search; Google Talk, which encompassed instant messaging and voice over Internet protocol (VoIP) services; and Google Base, a free online database for all kinds of user-provided content, ranging from help-wanted ads to product reviews. (See Exhibit 3 for a list of Google services and products.) ________________________________________________________________________________________________________________ Professor Thomas R. Eisenmann and Smita Bakshi, Sebastien Briens, and Shailendra Singh (all HBS MBA 2004) wrote the original version of this case, which is revised and replaced by this version prepared by Professor Thomas R. Eisenmann and Senior Researcher Kerry Herman, Global Research Group. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 806-105 Google Inc. These initiatives fueled speculation about Google’s strategic objectives. Products like Talk and Gmail, along with personalization features offered on Google’s home page, moved the company further into the domain of portals like Yahoo! and Microsoft’s MSN. Base, Book Search, and Maps, along with a payment service acknowledged to be under development by Google managers,8 suggested that Google could be targeting e-commerce giants like eBay and Amazon. Finally, Microsoft was threatened by Google’s ad-supported software, including Google Desktop and rumored web-based products such as a calendar program and an “open office” suite. In 2005, Microsoft responded by proposing a joint venture with AOL to develop search-related advertising. Some observers perceived Google’s success in deflecting this challenge as evidence that Google’s management team was mastering the art of strategic deal-making. Battelle noted: “This is Google’s first test as a chess player in a major corporate battle. They are saying, ‘We will take some of our pawns and block the move to our queen by Microsoft.’”9 But this raised the question: What moves should Google make next? Company History10 The need for search services grew with the expanding reach and magnitude of the World Wide Web. One of the earliest search services, Yahoo!, was a directory of sites selected and organized into categories by human editors. The Web soon grew too large for directory-based search. AltaVista invented technology that automated search, relying on software “spiders” that created a searchable index of page contents and on algorithms that ranked page relevance based on the frequency of keyword references. Yahoo! added AltaVista’s algorithmic search engine, but in 1998 replaced AltaVista with Inktomi, which used parallel-processing networks to offer faster processing and a larger index. As website developers exploited search algorithms by repeating keywords on their pages, searches increasingly returned irrelevant listings—”spam”—that frustrated users. In 1998, Sergey Brin and Larry Page tackled this problem as graduate students at Stanford. Their PageRank algorithm reliably delivered more relevant searches by favoring pages that were referenced—”linked to”—by other pages. These links were called “votes,” because they signaled that another page’s webmaster had decided that the focal page deserved attention. The focal page’s importance was determined by counting the number of votes it received, weighting votes more heavily when they were cast by pages that Google had previously deemed to be important. This approach required PageRank to solve an equation with 500 million variables and 3 billion terms.11 In June 1999, Brin and Page announced first-round funding for their start-up, Google, from two elite venture capital firms: Sequoia and Kleiner Perkins. In June 2000, Google’s index of 1 billion web pages surpassed those of its rivals and Google replaced Inktomi as Yahoo!’s search engine. At the time, Google was focused solely on algorithmic search. Until December 1999, Google earned revenue strictly by licensing its search technology to Yahoo! and other third-party sites. Google’s own website, Google.com, initially carried no advertising and—eschewing a portal’s positioning—offered no content other than search results and no communications or personal productivity tools. Portals, whose ad revenue increased in direct proportion to the number of pages viewed, offered such content and tools to encourage users to linger rather than quickly linking to third-party destinations following a search. 2 Google Inc. 806-105 Paid Listings In the meantime, a robust new model emerged to monetize search: paid listings. Pioneered by Overture (which Yahoo! acquired in 2003), paid listings were short text ads identified as “Sponsored Links” that appeared either adjacent to or interspersed with web search results for specific keywords. Advertisers bid for keywords; the amount they bid determined the top-to-bottom ordering of ads on the search results page. Advertisers only paid the amount that they bid when users actually clicked on their listings. Overture’s paid-listings model was based on two premises. First, leads generated by a search engine were more effective for marketers than banner ads on other websites, because search engine users often were researching products and services that they planned to purchase soon. In fact, 70% of all e-commerce transactions originated through web search and 40% of all web searches had a commercial motivation.12 Second, ordering paid listings according to “cost-per-click” (CPC) auctions yielded results that met users’ needs. Users tended to click only on the top-most paid listings, ignoring ads that appeared lower on the search results page. Since marketers paid for click-throughs regardless of whether they resulted in a sale, they had an incentive to bid aggressively, but only for keywords that were closely related to their products. The marketer whose products most closely matched a searcher’s needs would probably convert the highest share of click-throughs into sales and thus could afford to bid the most for the top position. Spending on paid listings grew rapidly (see Exhibit 4). The market was dominated by Overture, which supplied paid listings to the three largest portals: Yahoo!, MSN, and AOL. In December 1999, Google introduced its first paid listings, which were priced on a cost-per-impression basis; that is, marketers were charged a fixed amount each time their ad was viewed, regardless of whether the viewer clicked on the ad. In February 2002, Google adopted a variant of Overture’s cost-per-click model. Google weighted CPC bids by the ratio of an ad’s actual click-through rate (CTR) to its statistically-derived expected CTR. This ranking method helped ensure that users saw the most relevant ads first. The method also maximized Google’s revenue, since a paid-listing provider received little revenue from ads with high CPC bids but low CTRs. Google soon emerged as a serious threat to Overture. By mid-2001, despite having spent nothing on marketing, Google.com was the ninth largest U.S. website with 24.5 million unique monthly visitors.13 In May 2002, AOL announced it would switch to Google for both algorithmic search results and paid listings. By 2003, the paid listings market had evolved into a near duopoly, with Overture and Google controlling 90% of the global market.14 Prospective entrants to the paid-listing business faced significant expenditures. Overture, for example, had invested 300 full-time-employee-years through April 2002 in developing the software that supported self-provisioning and the rapid, reliable delivery of paid listings.15 To boost conversion rates—click-throughs that resulted in a sale—Overture had also developed software tools and a 100-person product-quality team that screened advertiser listings for relevance and suggested ways to improve ad content or keyword selections.16 This assistance was valued by paid-listing advertisers, since most of them were small and lacked sophisticated marketing skills. Large companies with total media budgets in excess of $1 million accounted for only 12% of paid listing accounts in 2003 and about 20% of paid-listing revenues.17 In 2003, Google.com and its affiliates provided paid-listing advertisers with access to nearly 55% of Internet search volume, compared to nearly 45% for Overture’s network. In late 2003, Google also 3 806-105 Google Inc. had more advertisers than Overture—150,000 versus 100,000. But despite Google’s scale advantages, Overture captured 55% of global paid-listings revenue in 2003, compared to Google’s 35%.18 Google’s Business Model A paid-listing provider’s revenue depended on four factors: its coverage rate, click-through rate, average cost per click, and revenue split (see Exhibit 5 for forecasts). Coverage rates—the share of queries for which at least one paid listing was sold—were jointly determined by a network affiliate’s propensity to generate commercially motivated queries and by the size of the paid-listing provider’s advertiser base. Click-through rates tended to increase over time as advertisers improved their keyword targeting techniques. Average CPC increased with the size of the paid-listing provider’s advertiser base; additional bidders drove up keyword prices. In late 2003, Overture’s average CPC was estimated to be $0.40, whereas Google’s average was $0.30.19 Finally, revenue splits—the percentage of ad revenue that listing providers paid to network affiliates—were determined by the parties’ relative bargaining strengths and by the intensity of the rivalry among listing providers. In late 2003, Overture was estimated to pay an average of 65% of paid-listing revenue to its affiliates; at that time, Google’s split was estimated to be 70%.20 Large affiliates negotiated higher splits—Yahoo!, for example, was estimated to receive 70% from Overture in March 2003, when Overture’s average split across its entire affiliate base was 61%.21 In March 2003, Google expanded beyond search-related advertising by launching “contextual” paid listings; Overture soon followed suit. Contextual listings appeared on web pages that provided editorial content (e.g., news, blog postings) rather than on search results pages; they were delivered when an advertiser placed a CPC bid on a keyword related to a page’s content. For example, an iVillage.com page about allergies displayed a sponsored link offering a hypnosis program—”safe, fast, and guaranteed”—to end allergy symptoms. Google and other companies with web search technology had an advantage in selling such advertising, because they could use their index of web page content to map keywords to appropriate editorial pages. Google also began moving into new search domains. For example, in late 2002 Google launched Froogle, a product search service that identified merchants for specific products, along with their prices. Froogle was monetized through paid listings adjacent to search results; merchants did not pay to have their products appear in Froogle’s search results, nor did they pay referral fees when users clicked through Froogle’s results to the merchant’s website. Google’s Organization As the company grew, Brin and Page, with guidance from their VCs, sought a seasoned senior executive to help them lead the company. In March 2001, Eric Schmidt, formerly chief technology officer of Sun Microsystems and CEO of Novell, joined Google as CEO. Brin and Page took the titles of president-technology and president-products, respectively. In 2003, Google earned gross revenues—derived almost entirely from paid listings—of $1.5 billion and an operating profit of $342 million. Through its own website, Google.com, and through licensees, which included Yahoo! and AOL, Google powered over 75% of the 300 million searches conducted daily in the United States in 2003 and a similar share of the 300+ million searches conducted daily outside the United States.22 In February 2003, Google.com alone accounted for 31% of U.S. searches and had 73.5 million unique visitors.23 4 Google Inc. 806-105 Despite this success, the top management trio resisted taking Google public.24 However, pressure mounted to provide liquidity for investors and to reward employees holding options, so in April 2004, the company announced plans for an IPO. The IPO prospectus included an unusual letter from Page. He wrote: “Google is not a conventional company. We do not intend to become one.”25 The letter explained several distinctive aspects of Google’s organization, including its governance structure and its corporate values. Governance Google’s IPO prospectus announced plans for a dual-class equity structure, giving ten votes per share to holders of Class B stock, versus one vote per Class A share. Assuming that Brin, Page, and Schmidt retained all their Class B shares while Google’s VCs and other Class B shareholders (e.g., other Google managers who exercised stock options) eventually sold theirs, Google’s top management trio would own, in aggregate, roughly one-third of Google’s shares but would control over 80% of shareholder votes.26 In practical terms, this gave Brin, Page, and Schmidt immunity from replacement by disgruntled investors who might second-guess the company’s strategy. While some observers argued that the dual-class equity structure would encourage strategic risk taking, many potential investors were concerned that it would dilute their influence over the company’s direction.27 Page’s letter explained the rationale for relying on dual-class stock: We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long-term bet on the team, especially Sergey and me, and on our innovative approach. We want Google to become an important and significant institution. That takes time, stability and independence. We bridge the media and technology industries, both of which have experienced considerable consolidation and attempted hostile takeovers. While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there… Media observers frequently point out that dual-class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results.28 Potential investors also expressed reservations about Google’s unusual reliance on a top management trio, concerned that the lack of clear hierarchy might cause decision-making delays. Page acknowledged that the triumvirate structure was “unconventional, but we have worked successfully in this way.” He continued: “To facilitate timely decisions, Eric, Sergey and I meet daily… Decisions are often made by one of us, with the others being briefed later… For important decisions, we discuss the issue with the larger team.”29 Corporate Values Early in Google’s history, Page and Brin had instilled strong and distinctive corporate values. (See Exhibit 6 for excerpts from Google’s statement of philosophy.) These values could be summarized as (1) don’t be evil; (2) technology matters; and (3) we make our own rules.30 The co-founders had also stamped Google with a unique personality. Battelle noted: “The company’s founders are, upon first impression, strikingly similar to the persona that Google projected during [its] early years—aloof, supersmart, dismissive of unsolicited advice. They are … first and foremost engineers. And engineers are not the best communicators, nor do they make the best diplomats or business development executives.”31 5 806-105 Google Inc. Don’t be evil. A central tenant of “don’t be evil” was never compromising the integrity of search results. Google’s statement of philosophy clarified: “We never manipulate rankings to put our [advertising or content] partners higher in our search results. No one can buy better PageRank. Our users trust Google’s objectivity and no short-term gain could ever justify breaching that trust.” Brin acknowledged that it could be difficult to translate ethical standards into decisions about paid listings: “For example, we don’t accept ads for hard liquor, but we accept ads for wine. It’s just a personal preference. We don’t allow gun ads, and the gun lobby got upset about that. We don’t try to put our sense of ethics into the search results, but we do when it comes to advertising.”32 Schmidt commented on how “don’t be evil” was used in company debates about policy: When I showed up, I said, “You’ve got to be kidding.” Then one day, very early on, I was in a meeting where an engineer said, “That would be evil.” It was as if he’d said there was a murderer in the room. The whole conversation stopped, but then people challenged his assumptions. This had to do with how we would link our advertising system into search. We ultimately decided not to do what was proposed, because it was evil. That kind of conversation is repeated every hour now with thousands of people.33 Technology matters. Google’s management was committed to leveraging leading-edge technology. This was evident in research to improve both Google’s search algorithms and its software for serving advertisers (described below). Google also invested heavily in the infrastructure that supported lightning-fast returns on search queries. Google’s custom-designed, low-cost, Linux-based server architecture was modular, so it scaled readily. By late 2005, the company reportedly relied on over 250,000 Linux servers to handle more than 3,000 searches per second.34 We make our own rules. Google’s founders had a penchant for unconventional management practices. Their “Owners Manual” highlighted several examples, including their refusal to provide earnings guidance to Wall Street analysts or to “smooth” earnings to create the appearance of steady growth. Likewise, Google’s prospectus revealed unorthodox plans to auction IPO shares rather than the traditional approach of allocating shares based on underwriters’ discretion. Google’s management was secretive with outsiders, which frustrated prospective investors. Page justified the company’s stance in his letter: “As a public company, we will of course provide you with all information required by law, and we will also do our best to explain our actions. But we will not unnecessarily disclose all of our strengths, strategies and intentions.”35 Managing Innovation Google also had adopted some unconventional approaches for managing innovation. (See Exhibit 7 for a summary of Google’s rules for management.) Engineers were encouraged to spend 20% of their time working on projects of their own choosing. Many initiatives had been spawned in this manner, including Google News, which used algorithms to aggregate stories, and Orkut, a social networking site.36 In fact, Brin maintained that all Google’s new product ideas emerged bottom-up from the employee ranks, rather than top-down from centralized planning processes.37 To encourage rapid execution, Google engineers typically worked in teams of only three to five people.38 Schmidt noted: “We try to keep it small. You just don’t get productivity out of large groups. ... We try to have as little middle management as possible.”39 The result was a flexible organization with small teams pursuing hundreds of projects, an approach that “let a thousand flowers bloom.”40 6 Google Inc. 806-105 With so many projects underway, setting priorities was a challenge. Management used a 70/20/10 rule for allocating engineering efforts, including the discretionary time granted to technical staff. Seventy percent of engineering time was spent on the core business—that is, web search and paid listings; twenty percent was spent on projects that extended the core, such as Gmail; ten percent was spent on fundamentally new businesses such as a proposed initiative to offer Wi-Fi service in San Francisco.41 Google’s top management team was willing to invest in promising long shots. In the “Owner’s Manual,” Page wrote: “We will not shy away from high-risk, high-reward projects because of shortterm earnings pressure.... For example, we would fund projects that have a 10% chance of earning a billion dollars over the long term. Do not be surprised if we place smaller bets in areas that seem very speculative or even strange.”42 2004–2005 Initiatives After announcing IPO plans, Google’s managers accelerated the pace of product development. Most initiatives fell into four categories: improvements to web search, expansion into new search domains, enhancements to advertising services, and software tools and services. Web Search Initiatives At least half of all web searches failed to deliver useful results.43 (See Exhibit 8 for search engine attributes valued by users.) To improve performance, Google’s engineers were constantly fine-tuning search algorithms and evaluating leading-edge concepts from computer science. For example, in January 2004, Google launched Personalized Search, which ordered search results based on analysis of the types of results a user had clicked on in past searches. Personalized Search incorporated Search History, which gave users access to an archive of all their past searches, with links to results they had accessed. Other initiatives included local search and vertical search. (See Exhibit 9, which provides additional background on selected Google initiatives.) New Search Domains In 2004 and 2005, Google expanded search into new domains. For example, Desktop Search, launched in October 2004, was a free downloadable application that indexed a personal computer’s hard drive, allowing a user to search the contents of all types of files, including e-mails, Word documents, PDFs, JPEGs, and MP3s. The beta version of Desktop Search did not incorporate paid listings, but keyword-based advertising was an option for monetizing the service. In November 2005, Google introduced Base, a free service that accepted submissions of online and offline database content, such as recipes, products, movie reviews, lists of used cars, help-wanted ads, and podcasts. To facilitate indexed searching, submissions included labels and descriptions. In its beta version, Base did not include paid listings. Other new search domains targeted by Google included books and video (see Exhibit 9). 7 806-105 Google Inc. Enhancements to Advertising Services Google took numerous steps to upgrade its advertising products, such as refining keyword bidding practices, combating click fraud (see Exhibit 9), and offering free software that marketers could use to optimize their paid-listing campaigns. Such enhancements paid off. Whereas Google had lagged Yahoo!’s Overture in terms of revenue per search through 2003, by late 2005, Google had a significant edge in monetizing search traffic. In Q3 2005, Google and its affiliates earned 60% of U.S. paid-listing revenue from 52% of U.S. search queries (see Exhibit 2), which meant that Google earned 38% more revenue per search than Yahoo!. As of December 2005, the percentage of Google’s searches yielding a paid-listing click-through was twice as high as Yahoo’s (21% versus 11%; see Exhibit 10).44 Observers cited two reasons for Google’s superior performance. First, Google bettered Overture’s policy of ranking paid listings based solely on CPC bids by also considering listing relevancy. Second, by late 2005, Google’s paid-listings network had attracted two to three times as many advertisers as Overture’s.45 Advertisers were drawn to Google because its network offered more search traffic and allowed lower minimum CPC bids than Overture’s (1¢ versus 5¢). Beyond paid listings, Google was experimenting with other ad formats, including banner ads and video ads.46 For example, Google made contextual advertising more attractive for brand advertisers by allowing them to pay on a cost-per-impression basis and to specify sites on which their ads could appear. Google had also teamed with PC Magazine and other publications to resell print ads to paidlisting advertisers. A longer-term opportunity for Google was targeting ads based on users’ demographics, psychographics, and/or online behavior, in addition to keywords. Products such as Gmail, Desktop Search, and Personalized Search could allow Google to assemble rich profiles of individual users. However, allaying users’ concerns about privacy would be a big barrier to leveraging such profiles for ad-targeting purposes. Software Tools and Services Google’s enormous server base supported “virtual” applications, which were either standalone software clients or browser-based programs that communicated seamlessly over the Internet with servers.47 Many of these applications relied on Asynchronous JavaScript and XML (AJAX), a set of programming technologies that avoided the continual stops and starts typical of earlier web-based tools as they updated based on user input. AJAX-based maps, for example, allowed a user to navigate from coast to coast without ever refreshing or loading a new web page. Virtual applications required fast and reliable Internet connections and made privacy issues more salient. However, persistent connections allowed a service provider to deliver fresh data and/or advertising, enabled behavioral tracking, and facilitated accessibility from any Internet-enabled device. Two of Google’s most strategically significant virtual applications were Gmail and Personalized Home Page. Gmail, a free web-based e-mail service launched in April 2004, initially offered a gigabyte of storage—many times the amount then provided by rivals. The service was supported by paid listings, generated by scanning an e-mail’s content. This sparked privacy concerns, which Brin acknowledged had been a surprise.48 He explained, “It’s automated. No one is looking.”49 Personalized Home Page, offered in May 2005, integrated several Google products (such as Search and Gmail) as well as user-designated “really simple syndication” (RSS) feeds. RSS was an open standard that allowed websites to deliver new content (e.g., headlines, blog postings) to subscribers. Subscribers viewed RSS content (“feeds”) in a standalone application (an RSS “reader”) or in a 8 Google Inc. 806-105 personalized web page such as Google’s. Clicking on links in an RSS feed sent the subscriber back to the originating site. Other new software products included Google Talk, Earth, Maps, Picasa, and Web Accelerator (see Exhibit 9). Possible Future Offerings Google management had acknowledged working on an online payment solution, which industry observers had dubbed “Google Wallet.”50 A payment service would be a natural extension of Google’s existing systems for collecting revenue from paid-listing providers. A payment service also could allow Google to charge for videos or e-books. Others saw an opportunity to link a payment service to Base, which might position Google as a middleman in e-commerce transactions. Many industry observers believed Google was developing web-based software products that would compete with Microsoft’s Office. Google managers denied such plans, but had acknowledged that they would contribute engineering talent to OpenOffice.org, an open-source initiative.51 Also, Google representatives had attended meetings, hosted by IBM, to discuss ways to boost adoption of “Open Document Format,” a set of open standards for office applications.52 By late 2005, rumors about the scope of Google’s expansion plans were getting pretty wild. For example, Google’s proposal to provide Wi-Fi service in San Francisco led one observer to predict that the company would offer free Wi-Fi to everyone in America, funded through location-targeted advertising.53 In a similar vein, tech pundit Robert Cringely speculated that Google would disperse hundreds of compact data centers around the world, linked through a private fiber network and interconnected with the Internet. Google could use this infrastructure to deliver content directly to users. Cringely wrote: “There will be the Internet, and then there will be the Google Internet, superimposed on top. We’ll use it without even knowing. The Google Internet will be faster, safer, and cheaper.”54 Competitors Some say Google is God. Others say Google is Satan. But if they think Google is too powerful, remember that with search engines, unlike other companies, all it takes is a single click to go to another search engine. People come to Google because they choose to. We don’t trick them. — Sergey Brin55 By 2005, Google’s remarkable success had engendered a perhaps inevitable backlash. Many Google advertisers charged that the company neglected customer service. Interactions with the company had left other business partners feeling that Google’s management was unresponsive, selfcentered, and dangerously cocky.56 Industry pundits issued warnings about the company’s everexpanding scope and its enormous influence. Even foreign governments voiced their concerns. In August 2005, French President Jacques Chirac announced a loan program for the development of a Franco-German multimedia search engine on the grounds that Google was “a tool of U.S. cultural imperialism.”57 One observer noted that “Google’s ever-expanding agenda has put it on a collision course with nearly every company in the information technology industry: Amazon.com, Comcast, eBay, Yahoo!, even Microsoft.... Who’s afraid of Google? Everyone.”58 9 806-105 Google Inc. Yahoo! As a leading Internet portal with revenue of $5.3 billion in 2005, $1.1 billion in operating income, and more than 345 million worldwide monthly visitors,59 Yahoo! competed head-to-head with Google in search and paid listings. Most of Google’s new products also had direct rivals at Yahoo!, including Google’s Local Search, Video, Home Page, Froogle, Gmail, Maps, and Picasa. Yahoo!’s management quickly recognized the competitive threat from Google and the growth potential for paid listings, partly because Yahoo! was an early investor in Google and had a privileged view of the start-up’s success. In response, Yahoo! management resolved to end the company’s dependence on third parties for algorithmic search and paid listings and acquired Inktomi and Overture in 2003, for $235 million and $1.6 billion, respectively. By early 2006, Yahoo! seemed locked in an arms race with Google, with each firm’s new product announcement soon matched by an even better version from its rival. Yahoo! had an important advantage in this competition: It was a full-fledged portal. Beyond tools for search, communication, and personal productivity—which Google also offered—Yahoo! provided easy access to a broad range of third-party content and related transactional services, organized into “channels” such as Autos, Finance, Games, Health, Kids, Movies, Music, Sports, and Travel. Yahoo! also owned HotJobs, the third-largest online recruitment site. Yahoo! built the Web’s second-largest dating site; hosted over 100,000 stores in its Shopping service; and supplied free websites to millions of groups, organized around school activities, hobbies, and so on. Yahoo!’s management and engineering staff had mastered the difficult art of ensuring seamless integration and customer-centric ease-of-use across Yahoo!’s many offerings. Battelle described such integration in Yahoo!’s search results and how it contrasted with Google’s philosophy: The shortcut [a box at the top of search results] is Yahoo’s attempt to bring all the most pertinent information about [musical artist] Usher into one place at one time, so as to quickly allow the searcher to declare and execute his intent. In four lines or so, the shortcut offers the Usher artist page on Launch (Yahoo’s music service), photos and videos of the artist (also on Launch), and the ability to buy the artist’s CDs (on Yahoo Shopping). Yahoo News results are incorporated as well. With its shortcuts Yahoo makes no pretense of objectivity—it is clearly steering searchers toward its own editorial services, which it believes can satisfy the intent of the search.... Apparent in that sentiment lies a key distinction between Google and Yahoo. Yahoo is far more willing to have overt editorial and commercial agendas, and to let humans intervene in search results so as to create media that supports those agendas. Google, on the other hand, is repelled by the idea of becoming a content- or editorially-driven company.... Google sees the problem as one that can be solved mainly through technology—clever algorithms and sheer computational horsepower will prevail.60 Microsoft Microsoft’s Internet portal, MSN—like Yahoo!—faced competition from Google. Through 2004, MSN had relied on Inktomi and Overture—two Yahoo! units—for algorithmic search and paid listings, respectively. However, Microsoft replaced Inktomi in early 2005 with a search engine developed in-house at an estimated cost of $100 million.61 Microsoft also announced plans to develop its own paid-listings service. In a bid to provide more search traffic for that service, Microsoft unsuccessfully courted AOL in late 2005 as a joint venture partner. 10 Google Inc. 806-105 Beyond the threat to MSN, Google’s prowess in developing ad-supported virtual software applications challenged Microsoft’s traditional model of charging users a license fee for software. To date, Google’s applications had inflicted little direct damage, although Google Desktop Search had preempted one of the key features in Vista, Microsoft’s planned 2006 update of Windows. Furthermore, if Google were to launch its rumored web-based, ad-supported calendar and office programs, Microsoft’s profitable Exchange and Office franchises might suffer. Industry observers had speculated about a more ominous scenario. As users became increasingly dependent on Google for web and desktop search, for communications tools, and for a wide range of other software applications, they might feel less compelled to use the Windows operating system (OS) itself. Google’s applications could run on Linux, and users might become more comfortable switching to that free OS if Google engineered a user-friendly interface.62 Microsoft’s management was initially dismissive of the challenges posed by Google. Microsoft vice president James Allchin, for example, while answering questions about Vista in February 2003, had said: “Google’s a very nice system, but compared to my vision, it’s pathetic.”63 By 2005, however, Microsoft management was acutely aware of a threat from Google, as evidenced by a November 2005 memo to Microsoft employees from chief technical officer Ray Ozzie. Ozzie acknowledged that “a new business model has emerged in the form of advertising-supported services and software. This model has the potential to fundamentally impact how we and other developers build, deliver, and monetize innovations.”64 Ozzie’s memo was leaked as Microsoft unveiled Windows Live, a major initiative that would offer “software as services,” initially including an RSS-enabled personalized home page, enhanced e-mail and instant messenger programs, mapping tools, and web-based extensions of Office programs targeted at small and mid-sized businesses (e.g., customer relationship management software and collaboration tools). eBay Google’s initiatives also threatened eBay. After all, search was the first step in many e-commerce transactions. Customers shopping for a product could visit eBay’s marketplace to find a qualified seller, or they could search for a vendor through Google. In fact, many of Google’s advertisers were also eBay sellers; these small companies carefully compared eBay’s transaction fees to the costs of generating leads through paid listings. Google’s Base raised the stakes in e-commerce, amassing over 10 million listings within just six weeks of its launch, 8.9 million of which were for new and used products. By comparison, eBay had 15 million current U.S. listings in November 2005.65 While Base’s rapid growth was impressive, previous full-frontal assaults on eBay’s core marketplace had been expensive failures. Between 1999 and 2001, both Yahoo! and Amazon had failed to capture significant market share in online auctions, despite investing heavily and, in Yahoo!’s case, waiving all fees to sellers.66 In addition to products, Base had attracted hundreds of thousands of listings for jobs, housing, and vehicles. This put Google into competition with Craigslist—25% owned by eBay—which accepted free listings in all but a few categories. To capture significant share in e-commerce, Google would need an online payment service. When launched, Google’s electronic wallet would compete with eBay’s PayPal unit. In 2005, PayPal had about 87 million accounts worldwide and facilitated transactions totaling $18.9 billion. 11 806-105 Google Inc. eBay would soon have another asset in defending its e-commerce franchise. In October 2005, the company announced that it would pay $2.6 billion to acquire Skype, a VoIP service provider with 54 million registered users as of September 2005.67 eBay management planned to leverage VoIP to build trust among potential trading partners, allowing them to discuss the terms of their transactions. What Should Google Do? It will take, current estimate, 300 years to organize all the world’s information. — Eric Schmidt68 In early 2006, managers in technology and media companies around the world observed Google with awe, envy, and fear. The company’s opportunities seemed boundless. What would Google do next? One option was to stay focused on the company’s distinctive competence: developing superior search solutions and monetizing those solutions through targeted advertising. This approach offered many avenues for growth, especially when search was broadened beyond the World Wide Web to encompass print, video, and other information sources. Alternatively, Google could branch into new arenas. Three opportunities seemed promising. The first was to build Google into a portal like Yahoo! or MSN by aggregating content into thematic channels. The second was to extend Google’s role in e-commerce beyond search into a more active role as an intermediary facilitating transactions. The third was to challenge Microsoft’s hegemony over the PC desktop by developing products to compete with Office and Windows. Any of these initiatives would be an enormous undertaking, with tremendous risks and huge potential rewards. But were they consistent with the company’s mission to organize the world’s information? And if Google chose to pursue these opportunities, would the company’s unique governance structure and its distinctive bottom-up approach to managing innovation prove to be assets or liabilities? Google’s top executives were characteristically cryptic about the company’s strategic plans, but Schmidt did dismiss some opportunities. He deflected the suggestion that Google might create its own web-based operating system: The problem I have with that question is that “operating system” and “platform” and “Web OS” are very generic terms, so I prefer to not engage in those discussions. There is this presumption that Google has to go build its own OS, its own browser, when those technologies are quite mature and well valued. There is a great deal of strategic leverage for us in building an ecosystem around content and advertising that is an extension of our search mission.69 Schmidt responded in the same vein when asked whether Google would become a portal: “You’re using a tired model ... looking at us based on market share for technologies and ideas that were invented 10 years ago. A much better way to ask that is to say, ‘Are the things that we’re doing consistent with the mission of the company?’ We’re not in the portal business, we’re in the business of making all the world’s information accessible and useful.”70 12 $20.0 N/A N/A N/A Cash and marketable securities, year-end Purchase of property and equipment Depreciation and amortization of property and equipment Acquisitions, net of cash acquired -- N/A N/A $19.1 N/A N/A N/A $(14.7) $(14.7) $33.8 $74.0 12.4 $33.6 13.1 9.8 -- $7.0 $11.0 $75.5 -- -14.2 16.5 20.1 12.3 12.4 -- 66.0 -19.5 $86.4 2001 $275.3 72.5 $146.3 37.2 17.8 -- $99.7 $186.5 $253.0 -- $94.5 37.0 31.7 43.8 24.3 21.6 -- 307.0 103.9 28.6 $439.5 2002 $707.9 254.0 $334.7 176.8 43.9 40.0 $105.6 $342.4 $1,123.5 -- $525.6 99.3 91.2 120.3 56.7 229.4 -- 792.1 628.6 45.3 $1,465.9 2003 $2,127.1 1,062.2 $2,132.2 319.0 128.5 22.0 $399.1 $640.2 $2,549.0 -- $1,228.7 229.0 225.6 246.3 139.7 278.7 201.0 1,589.0 1,554.3 45.9 $3,189.2 2004 Source: Google S1 and 2005 10K statement. * Stock-based compensation of $200.7 million in 2005 is attributable to Cost of Net Revenue ($5.6M), R&D ($115.5M), Sales & Marketing ($28.4M), and G&A ($51.2M). N/A N/A $(6.1) Net income Revenue by Geography: – United States – International $(6.5) Income (loss) from operations -$6.7 Contribution to Google Foundation TOTAL EXPENSES -0.9 2.9 1.7 1.2 --- Traffic acquisition cost (for network sites) Cost of net revenue (for data centers, bandwidth, etc.) R&D Sales and marketing G&A Stock-based compensation Yahoo patent litigation settlement -6.1 10.5 10.4 4.4 2.5 -- N/A N/A N/A N/A N/A N/A 2000 $19.1 1999 $0.2 Google Financials, 1999–2005 ($ in millions) Revenue: – Ad revenue • Google sites • Network sites – Licensing and other Exhibit 1 $3,744.5 2,394.0 $8,034.3 838.2 256.8 86.5 $1,465.4 $2,017.4 $4,121.2 90.0 $2,115.0 456.5 484.0 439.7 335.3 200.7* -- 3,377.0 2,688.0 73.6 $6,138.6 2005 806-105 -13- 806-105 Google Inc. Exhibit 2 U.S. and International Search Engine Market Share U.S. Search Query Share 40% 35% 30% 25% 20% 15% 10% 5% 0% Q1:04 Q2:04 Q3:04 Google Q4:04 Yahoo! Q1:05 Q2:05 MSN Q3:05 Others* * “Others” includes AOL and Ask.com, which had 8.7% and 6.5% shares in November 2005, respectively. Ask.com used its own technology for web search and relied on Google for paid listings. International Search Query Share 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1:04 Q2:04 Google Source: 14 Q3:04 Q4:04 Yahoo! Q1:05 MSN Q2:05 Q3:05 Others Compiled and adapted from comScore Media Metrix data, from Mark Mahaney, “GOOG: Increased Conviction in Google,” Citigroup Global Markets, Citigroup, December 8, 2005, http://www.comscore.com/metrix/, via Thomson Research/Investext, accessed December 12, 2005). Google Inc. Exhibit 3 806-105 Select List of Google’s Products and Services Product/Service (by year introduced) Description 2000 Non-English search Google launched in ten languages; expanded to 120 by 2006 Directory Organized by volunteer editors Wireless Search Google accessible on wireless devices AdWords Keyword-targeted advertising with pay-per-impression model Toolbar Browser plug-in 2001 Deja.com (acquisition) Search archive of Usenet postings and message threads Image Search Launched with 250 million images; over 1 billion by 2006 Zeitgeist Real-time statistics on popular queries Catalog Search Search and browse over 1,100 mail-order catalogs 2002 Search Appliance Plug-and-play enterprise search solutions Web APIs Release of Google’s first application protocol interface, allowing thirdparty programs to query Google directly AdWords Pay-per-click model added Compute Took advantage of idle cycles on users’ PCs to help solve computationally-intensive scientific problems News Launched with access to 4,500 news sources from around the world Froogle Product search service 2003 Pyra Labs (acquisition) Offered Blogger.com’s blogging tools and hosted services AdSense Contextual ads Deskbar Put search box in the Windows task bar Local Searcha Search within local geographies 2004 SMS Search through cell phone text messaging Keyhole (acquisition) a a Satellite image mapping; relaunched as Earth in 2005 Picasa Digital photo management Orkut Social networking Zipdash (acquisition) Real-time traffic information 15 806-105 Google Inc. Exhibit 3 (continued) Select List of Google’s Products and Services Hello Post photos to blogs and share via instant messaging Gmail E-mail service Personalized Search Search results reflect user’s past behavior; incorporates Search History Desktop Search Search contents of a user’s PC files a Book Search Originally called Google Print; searches contents of books provided by publishers and several libraries 2005 Personalized Home Page Talk a Incorporates RSS feeds, Gmail, Search History, etc. Instant messaging and VoIP service Dodgeball Social networking for mobile users Sitemaps Webmasters prioritize which pages Google crawls first and alert Google when pages have been updated Blog Search Search blog contents Urchin Software (acquisition) Advertising analytics software allows advertisers to track marketing campaign performance Mapsa Online mapping for North American users; integrated with Keyhole satellite images Videoa Web Accelerator Search archive of video programs submitted by rights holders a Speed web page delivery Source: Casewriter research; compiled from Google.com; Stephen Arnold, The Google Legacy (no location: Infonortics, 2005); Robert S. Peck, Alexia Quadrani, Vincent B. Anthony, and Julia Choi, “In the Fast Lane of the Information Superhighway,” Equity Research, Bear Stearns, September 22, 2004; Mark Mahaney, “Live From New York . . . It’s Online Advertising,” Citigroup Global Markets, Citigroup, September 28, 2005. a Exhibit 9 provides further detail on these initiatives. 16 Google Inc. Exhibit 4 806-105 U.S. Paid-Listings Spending Forecast, 2005–2010 ($ millions) 2004 2005 2006 2007 2008 2009 2010 $2,974 $3,949 $4,873 $5,682 $6,444 $7,113 $7,740 Contextual listings 648 914 1,181 1,426 1,665 1,881 2,089 Paid inclusion 222 271 321 366 408 447 485 Agency fees 424 537 691 813 946 1,092 1,258 $4,268 $5,671 $7,067 $8,287 $9,463 $10,533 $11,571 36% 39% 41% 42% 43% 44% 44% Paid search Total Search ad spending as % of total online ad spending Source: Adapted from Charlene Li and Shar VanBoskirk, “U. S. Online Marketing Forecast: 2005–2010,” Forrester Research Trends, (May 2, 2005), via Forrester Research, www.forresterresearch.com, accessed December 14, 2005. Note: Through “paid inclusion” programs, websites pay to ensure they are indexed and appear in a search engine’s web search results, although payment does not influence ranking. 17 $0.6 International search market forecast ($billions) Source: 153.3% $1.5 0.25 6,018 10.0% 30.0% 200,592 28 597 68.8% $4.3 0.40 10,793 22.3% 52.4% 92,568 38 203 2004E 117.5% $3.3 0.27 12,119 14.0% 35.0% 247,320 30 687 50.0% $6.4 0.43 14,869 23.0% 60.0% 107,748 41 219 2005E 80.4% $5.9 0.30 19,672 17.0% 38.0% 304,524 33 769 25.0% $8.0 0.44 18,165 24.0% 61.0% 124,080 44 235 2006E 33.3% $7.9 0.34 23,132 18.0% 38.0% 338,184 33 854 19.9% $9.6 0.47 20,617 24.0% 62.0% 138,552 46 251 2007E 29.6% $10.2 0.35 29,117 19.0% 40.0% 383,112 34 939 20.8% $11.6 0.48 24,132 25.0% 63.0% 153,216 48 266 2008E 22.9% $12.5 0.36 34,786 20.0% 42.0% 414,120 35 986 15.7% $13.4 0.49 27,356 26.0% 64.0% 164,400 50 274 2009E -18- Compiled from IDC, comScore, IWS and JPMorgan estimates from Imran Khan, Dana Maynard Gray, Joseph Okleberry, and Derrick Nueman, “Nothing But Net,” North American Equity Research, JPMorgan Securities Inc., January 9, 2006, via Thomson Research/Investext, accessed January 12, 2006. Y/Y growth rate 0.20 2,970 Monetized queries (millions) Average cost per click ($) 9.0% 25.0% 132,000 22 500 Click-through rate Coverage Number of queries/year (millions) Average queries/month/Internet user Internet users (millions) International Paid Market Search Forecast, 2003–2009 Y/Y growth rate $2.5 6,647 Monetized queries (millions) U.S. search market forecast ($ billions) 19.0% Click-through rate 0.38 45.5% Coverage Average cost per click ($) 76,860 35 183 Number of queries/year (millions) Average queries/month/Internet user Internet users (millions) 2003E U.S. and International Search-Related Ad Market Forecasts, 2003-2009 U.S. Paid Market Search Forecast, 2003–2009 Exhibit 5 806-105 Google Inc. 806-105 Exhibit 5 (continued) U.S. and International Search Advertising Metric Forecasts for Google Websites and Google Network Websites, 2005–2008 (US$) 2005E 2006E 2007E 2008E Google Websites Queries (billions) Coverage Click-through rate Cost per click ($) 72.0 49% 20% $0.48 90.5 50% 23% $0.56 108.0 51% 24% $0.60 124.0 52% 25% $0.63 Google Network Websites Queries (billions) Coverage Click-through rate Cost per click 58.8 49% 20% $0.47 62.0 50% 23% $0.55 64.0 51% 25% $0.59 67.4 52% 25% $0.62 Source: Adapted from Mark Mahaney, “GOOG: Increased Conviction in Google,” Citigroup Global Markets, Citigroup, December 8, 2005, via Thomson Research/Investext, accessed December 12, 2005. 19 806-105 Google Inc. Exhibit 6 Google’s Statement of Philosophy Our Philosophy Never settle for the best “The perfect search engine,” says Google co-founder Larry Page, “would understand exactly what you mean and give back exactly what you want.” Given the state of search technology today, that’s a far-reaching vision requiring research, development and innovation to realize. Google is committed to blazing that trail. Though acknowledged as the world’s leading search technology company, Google’s goal is to provide a much higher level of service to all those who seek information, whether they’re at a desk in Boston, driving through Bonn, or strolling in Bangkok. To that end, Google has persistently pursued innovation and pushed the limits of existing technology to provide a fast, accurate and easy-to-use search service that can be accessed from anywhere. To fully understand Google, it’s helpful to understand all the ways in which the company has helped to redefine how individuals, businesses and technologists view the Internet. Ten things Google has found to be true 1. Focus on the user and all else will follow. From its inception, Google has focused on providing the best user experience possible. While many companies claim to put their customers first, few are able to resist the temptation to make small sacrifices to increase shareholder value. Google has steadfastly refused to make any change that does not offer a benefit to the users who come to the site: • • • • The interface is clear and simple. Pages load instantly. Placement in search results is never sold to anyone. Advertising on the site must offer relevant content and not be a distraction. By always placing the interests of the user first, Google has built the most loyal audience on the web. And that growth has come not through TV ad campaigns, but through word of mouth from one satisfied user to another. 2. It’s best to do one thing really, really well. Google does search. With one of the world’s largest research groups focused exclusively on solving search problems, we know what we do well, and how we could do it better. Through continued iteration on difficult problems, we’ve been able to solve complex issues and provide continuous improvements to a service already considered the best on the web at making finding information a fast and seamless experience for millions of users. Our dedication to improving search has also allowed us to apply what we’ve learned to new products, including Gmail, Google Desktop, and Google Maps. As we continue to build new products* while making search better, our hope is to bring the power of search to previously unexplored areas, and to help users access and use even more of the ever-expanding information in their lives. 3. Fast is better than slow. Google believes in instant gratification. You want answers and you want them right now. Who are we to argue? Google may be the only company in the world whose stated goal is to have users leave its website as quickly as possible. By fanatically obsessing on shaving every excess bit and byte from our pages and increasing the efficiency of our serving environment, Google has broken its own speed records time and again. Others assumed large servers were the fastest way to handle massive amounts of data. Google found networked PCs to be faster. Where others accepted apparent speed limits imposed by search algorithms, Google wrote new algorithms that proved there were no limits. And Google continues to work on making it all go even faster. 20 Google Inc. 806-105 4. Democracy on the web works. Google works because it relies on the millions of individuals posting websites to determine which other sites offer content of value. Instead of relying on a group of editors or solely on the frequency with which certain terms appear, Google ranks every web page using a breakthrough technique called PageRank™. PageRank evaluates all of the sites linking to a web page and assigns them a value, based in part on the sites linking to them. By analyzing the full structure of the web, Google is able to determine which sites have been “voted” the best sources of information by those most interested in the information they offer. This technique actually improves as the web gets bigger, as each new site is another point of information and another vote to be counted. 5. You don’t need to be at your desk to need an answer. The world is increasingly mobile and unwilling to be constrained to a fixed location. Whether it’s through their PDAs, their wireless phones or even their automobiles, people want information to come to them. Google’s innovations in this area include Google Number Search, which reduces the number of keypad strokes required to find data from a web-enabled cellular phone and an on-the-fly translation system that converts pages written in HTML to a format that can be read by phone browsers. This system opens up billions of pages for viewing from devices that would otherwise not be able to display them, including Palm PDAs and Japanese i-mode, JSky, and EZWeb devices. Wherever search is likely to help users obtain the information they seek, Google is pioneering new technologies and offering new solutions. 6. You can make money without doing evil. Google is a business. The revenue the company generates is derived from offering its search technology to companies and from the sale of advertising displayed on Google and on other sites across the web. However, you may have never seen an ad on Google. That’s because Google does not allow ads to be displayed on our results pages unless they’re relevant to the results page on which they’re shown. So, only certain searches produce sponsored links above or to the right of the results. Google firmly believes that ads can provide useful information if, and only if, they are relevant to what you wish to find. Google has also proven that advertising can be effective without being flashy. Google does not accept pop-up advertising, which interferes with your ability to see the content you’ve requested. We’ve found that text ads (AdWords) that are relevant to the person reading them draw much higher clickthrough rates than ads appearing randomly. Google’s maximization group works with advertisers to improve clickthrough rates over the life of a campaign, because high clickthrough rates are an indication that ads are relevant to a user’s interests. Any advertiser, no matter how small or how large, can take advantage of this highly targeted medium, whether through our self-service advertising program that puts ads online within minutes, or with the assistance of a Google advertising representative. Advertising on Google is always clearly identified as a “Sponsored Link.” It is a core value for Google that there be no compromising of the integrity of our results. We never manipulate rankings to put our partners higher in our search results. No one can buy better PageRank. Our users trust Google’s objectivity and no short-term gain could ever justify breaching that trust. Thousands of advertisers use our Google AdWords program to promote their products; we believe AdWords is the largest program of its kind. In addition, thousands of website managers take advantage of our Google AdSense program to deliver ads relevant to the content on their sites, improving their ability to generate revenue and enhancing the experience for their users. 7. There’s always more information out there. Once Google had indexed more of the HTML pages on the Internet than any other search service, our engineers turned their attention to information that was not as readily accessible. Sometimes it was just a matter of integrating new databases, such as adding a phone number and address lookup and a business directory. Other efforts required a bit more creativity, like adding the ability to search billions of images and a way to view pages that were originally created as PDF files. The popularity of PDF results led us to expand the list of file types searched to include documents produced in a dozen formats such as Microsoft Word, Excel and PowerPoint. For 21 806-105 Google Inc. wireless users, Google developed a unique way to translate HTML formatted files into a format that could be read by mobile devices. The list is not likely to end there as Google’s researchers continue looking into ways to bring all the world’s information to users seeking answers. 8. The need for information crosses all borders. Though Google is headquartered in California, our mission is to facilitate access to information for the entire world, so we have offices around the globe. To that end we maintain dozens of Internet domains and serve more than half of our results to users living outside the United States. Google search results can be restricted to pages written in more than 35 languages according to a user’s preference. We also offer a translation feature to make content available to users regardless of their native tongue and for those who prefer not to search in English, Google’s interface can be customized into more than 100 languages. To accelerate the addition of new languages, Google offers volunteers the opportunity to help in the translation through an automated tool available on the Google.com website. This process has greatly improved both the variety and quality of service we’re able to offer users in even the most far flung corners of the globe. 9. You can be serious without a suit. Google’s founders have often stated that the company is not serious about anything but search. They built a company around the idea that work should be challenging and the challenge should be fun. To that end, Google’s culture is unlike any in corporate America, and it’s not because of the ubiquitous lava lamps and large rubber balls, or the fact that the company’s chef used to cook for the Grateful Dead. In the same way Google puts users first when it comes to our online service, Google Inc. puts employees first when it comes to daily life in our Googleplex headquarters. There is an emphasis on team achievements and pride in individual accomplishments that contribute to the company’s overall success. Ideas are traded, tested and put into practice with an alacrity that can be dizzying. Meetings that would take hours elsewhere are frequently little more than a conversation in line for lunch and few walls separate those who write the code from those who write the checks. This highly communicative environment fosters a productivity and camaraderie fueled by the realization that millions of people rely on Google results. Give the proper tools to a group of people who like to make a difference, and they will. 10. Great just isn’t good enough. Always deliver more than expected. Google does not accept being the best as an endpoint, but a starting point. Through innovation and iteration, Google takes something that works well and improves upon it in unexpected ways. Search works well for properly spelled words, but what about typos? One engineer saw a need and created a spell checker that seems to read a user’s mind. It takes too long to search from a WAP phone? Our wireless group developed Google Number Search to reduce entries from three keystrokes per letter to one. With a user base in the millions, Google is able to identify points of friction quickly and smooth them out. Google’s point of distinction however, is anticipating needs not yet articulated by our global audience, then meeting them with products and services that set new standards. This constant dissatisfaction with the way things are is ultimately the driving force behind the world’s best search engine. * Full-disclosure update: When we first wrote these “10 things” four years ago, we included the phrase “Google does not do horoscopes, financial advice or chat.” Over time we’ve expanded our view of the range of services we can offer—web search, for instance, isn’t the only way for people to access or use information—and products that then seemed unlikely are now key aspects of our portfolio. This doesn’t mean we’ve changed our core mission; just that the farther we travel toward achieving it, the more those blurry objects on the horizon come into sharper focus (to be replaced, of course, by more blurry objects). Source: 22 Google 2005, www.google.com, corporate/tenthings.html, accessed January 10, 2006. Google Inc. Exhibit 7 806-105 Google’s Ten Golden Rules Google: Ten Golden Rules Getting the most out of knowledge workers will be the key to business success for the next quarter century. Here’s how we do it at Google. By Eric Schmidt and Hal Varian, December 2, 2005 At Google, we think business guru Peter Drucker well understood how to manage the new breed of “knowledge workers.” After all, Drucker invented the term in 1959. He says knowledge workers believe they are paid to be effective, not to work 9 to 5, and that smart businesses will “strip away everything that gets in their knowledge workers’ way.” Those that succeed will attract the best performers, securing “the single biggest factor for competitive advantage in the next 25 years.” At Google, we seek that advantage. The ongoing debate about whether big corporations are mismanaging knowledge workers is one we take very seriously, because those who don’t get it right will be gone. We’ve drawn on good ideas we’ve seen elsewhere and come up with a few of our own. What follows are seven key principles we use to make knowledge workers most effective. As in most technology companies, many of our employees are engineers, so we will focus on that particular group, but many of the policies apply to all sorts of knowledge workers. • Hire by committee. Virtually every person who interviews at Google talks to at least half-a-dozen interviewers, drawn from both management and potential colleagues. Everyone’s opinion counts, making the hiring process more fair and pushing standards higher. Yes, it takes longer, but we think it’s worth it. If you hire great people and involve them intensively in the hiring process, you’ll get more great people. We started building this positive feedback loop when the company was founded, and it has had a huge payoff. • Cater to their every need. As Drucker says, the goal is to “strip away everything that gets in their way.” We provide a standard package of fringe benefits, but on top of that are first-class dining facilities, gyms, laundry rooms, massage rooms, haircuts, carwashes, dry cleaning, commuting buses—just about anything a hardworking engineer might want. Let’s face it: programmers want to program, they don’t want to do their laundry. So we make it easy for them to do both. • Pack them in. Almost every project at Google is a team project, and teams have to communicate. The best way to make communication easy is to put team members within a few feet of each other. The result is that virtually everyone at Google shares an office. This way, when a programmer needs to confer with a colleague, there is immediate access: no telephone tag, no e-mail delay, no waiting for a reply. Of course, there are many conference rooms that people can use for detailed discussion so that they don’t disturb their office mates. Even the CEO shared an office at Google for several months after he arrived. Sitting next to a knowledgeable employee was an incredibly effective educational experience. • Make coordination easy. Because all members of a team are within a few feet of one another, it is relatively easy to coordinate projects. In addition to physical proximity, each Googler e-mails a snippet once a week to his work group describing what he has done in the last week. This gives everyone an easy way to track what everyone else is up to, making it much easier to monitor progress and synchronize work flow. • Eat your own dog food. Google workers use the company’s tools intensively. The most obvious tool is the Web, with an internal Web page for virtually every project and every task. They are all indexed and available to project participants on an as-needed basis. We also make extensive use of other information-management tools, some of which are eventually rolled out as products. For example, one of the reasons for Gmail’s success is that it was beta tested within the company for many months. The use of e-mail is critical within the organization, so Gmail had to be tuned to satisfy the needs of some of our most demanding customers—our knowledge workers. • Encourage creativity. Google engineers can spend up to 20 percent of their time on a project of their choice. There is, of course, an approval process and some oversight, but basically we want to allow creative people to be creative. One of our not-so-secret weapons is our ideas mailing list: a companywide suggestion box where people can post ideas ranging from parking procedures to the next killer app. The software allows for everyone to comment on and rate ideas, permitting the best ideas to percolate to the top. 23 806-105 Google Inc. • Strive to reach consensus. Modern corporate mythology has the unique decision maker as hero. We adhere to the view that the “many are smarter than the few,” and solicit a broad base of views before reaching any decision. At Google, the role of the manager is that of an aggregator of viewpoints, not the dictator of decisions. Building a consensus sometimes takes longer, but always produces a more committed team and better decisions • Don’t be evil. Much has been written about Google’s slogan, but we really try to live by it, particularly in the ranks of management. As in every organization, people are passionate about their views. But nobody throws chairs at Google, unlike management practices used at some other well-known technology companies. We foster an atmosphere of tolerance and respect, not a company full of yes men. • Data drive decisions. At Google, almost every decision is based on quantitative analysis. We’ve built systems to manage information, not only on the Internet at large, but also internally. We have dozens of analysts who plow through the data, analyze performance metrics and plot trends to keep us as up to date as possible. We have a raft of online “dashboards” for every business we work in that provide up-to-the-minute snapshots of where we are. • Communicate effectively. Every Friday we have an all-hands assembly with announcements, introductions and questions and answers. (Oh, yes, and some food and drink.) This allows management to stay in touch with what our knowledge workers are thinking and vice versa. Google has remarkably broad dissemination of information within the organization and remarkably few serious leaks. Contrary to what some might think, we believe it is the first fact that causes the second: a trusted work force is a loyal work force. Of course, we’re not the only company that follows these practices. Many of them are common around Silicon Valley. And we recognize that our management techniques have to evolve as the company grows. There are several problems that we (and other companies like us) face. One is “techno arrogance.” Engineers are competitive by nature and they have low tolerance for those who aren’t as driven or as knowledgeable as they are. But almost all engineering projects are team projects; having a smart but inflexible person on a team can be deadly. If we see a recommendation that says “smartest person I’ve ever known” combined with “I wouldn’t ever want to work with them again,” we decline to make them an offer. One reason for extensive peer interviews is to make sure that teams are enthused about the new team member. Many of our best people are terrific role models in terms of team building, and we want to keep it that way. A related problem is the not-invented-here syndrome. A good engineer is always convinced that he can build a better system than the existing ones, leading to the refrain “Don’t buy it, build it.” Well, they may be right, but we have to focus on those projects with the biggest payoff. Sometimes this means going outside the company for products and services. Another issue that we will face in the coming years is the maturation of the company, the industry and our work force. We, along with other firms in this industry, are in a rapid growth stage now, but that won’t go on forever. Some of our new workers are fresh out of college; others have families and extensive job experience. Their interests and needs are different. We need to provide benefits and a work environment that will be attractive to all ages. A final issue is making sure that as Google grows, communication procedures keep pace with our increasing scale. The Friday meetings are great for the Mountain View team, but Google is now a global organization. We have focused on managing creativity and innovation, but that’s not the only thing that matters at Google. We also have to manage day-to-day operations, and it’s not an easy task. We are building technology infrastructure that is dramatically larger, more complex and more demanding than anything that has been built in history. Those who plan, implement and maintain these systems, which are growing to meet a constantly rising set of demands, have to have strong incentives, too. At Google, operations are not just an afterthought: they are critical to the company’s success, and we want to have just as much effort and creativity in this domain as in new product development. Schmidt is CEO of Google. Varian is a Berkeley professor and consultant with Google. Source:© 2006 Newsweek, Inc., © 2006 MSNBC.com, URL: http://msnbc.msn.com/id/10296177/site/newsweek/, accessed January 8, 2006. 24 Google Inc. Exhibit 8 806-105 Search Engine Attributes Valued by Users 25 806-105 Google Inc. Exhibit 8 (continued) Source: Note: 26 Jim Friedland and David Geisler, Internet & New Media, SG Cowen & Co., LLC, May 23, 2005, via Thomson Research/Investext, accessed November 20, 2005. Usage habits of 1,050 U. S. Internet users were surveyed. Google Inc. Exhibit 9 806-105 Selected Google Services and Initiatives Web Search • Local Search. In September 2003, Google launched Local Search. The service eventually integrated Google Maps and allowed a paid listing to be targeted a set distance from the advertiser’s location. Local search represented a huge opportunity: 15% to 25% of web searches The vast majority of the 10 million small and medium-sized targeted local content.a enterprises (SMEs) in the United States sold products or services to customers within a 50-mile radius. These SMEs spent $22 billion on local advertising, including $10 billion on print Yellow Page listings. • Vertical Search. Tailoring algorithms to specific domains could improve search performance. Google offered several specialized web search services, such as Google Linux and Google University Search, which allowed users to search specific schools’ websites. Google had not yet targeted vertical markets with significant commercial potential, such as health and travel. Several vertical search start-ups already served such markets, including LawCrawler, Kayak, and SideStep for travel; Kosmix for health; Simply Hired for job listings; and Oodle and Trulia for real estate. New Search Domains • Book Search. In December 2004, Google announced agreements with several prominent libraries to digitally scan their collections so that users could search them and view content snippets. Google’s failure to secure publishers’ permission for this initiative led to lawsuits over copyright infringement. A separate initiative, also part of Book Search, allowed searching of book contents with publishers’ permission. As of early 2006, Book Search was monetized through paid listings and through affiliation agreements with online retailers selling books identified in search results. • Video. In January 2005, Google launched Google Video, which facilitated search (based on closed-caption text and other file data) of a database of video programming. After content owners objected to the fact that Google Video’s beta version had digitized their programs without permission, Google clarified that it would only aggregate videos supplied by rightsholders, offering them free storage and bandwidth.b As of January 2006, Google Video had not incorporated paid listings, but users could buy videos offered for sale by Google’s partners. Google retained 30% of video sale proceeds.c Advertising-Related Initiatives • Click Fraud. Google constantly refined its analytical techniques for detecting click fraud, which occurred when companies clicked on a competitor’s paid listings to raise their rival’s marketing expenses, or when “sploggers”—spam bloggers—registered dummy sites as paidlisting network affiliates and then hijacked third-party PCs (“zombies”) to repeatedly click on the dummy site’s ads. Estimates of the frequency of click fraud varied widely; one source suggested that between 10% and 50% of all paid-listing click-throughs were fraudulent.71 27 806-105 Google Inc. Exhibit 9 (continued) Selected Google Services and Initiatives Software Products • Talk. Launched in August 2005, Google Talk enabled instant messaging and voice over Internet protocol (VoIP) phone calls. Talk, which carried no ads in its beta version, was integrated with Gmail, which meant that a user’s contacts could be pre-loaded. • Earth. Google’s 2004 acquisition of the start-up Keyhole formed the basis for Google Earth, a free software application that displayed satellite images of the entire planet, searchable by address. Google Earth images could be overlayed with road names, restaurant and hotel locations, etc. • Maps. Supported through paid listings, Maps was introduced in mid-2005. The service provided navigational assistance and location information, displaying either a traditional map or, using Keyhole technology, a satellite view. Google published an application programming interface for Maps, which spawned thousands of entertaining and useful “mash-ups” of Google Maps with third-party databases. HousingMaps.com, for example, mapped real estate offered on Craigslist. • Picasa. Acquired by Google in 2004, Picasa was a free digital photo management application. Picasa was integrated with Gmail, allowing users to easily share their photos. • Web Accelerator. Using caching technology—both on Google’s servers and on a user’s PC— Web Accelerator sped up the delivery of web pages. Pages were pre-fetched based on analysis of links that the user was predicted to click on next. Source: Casewriter research. Notes: a. Data in this paragraph are from Greg Sterling, A closer look at local search, The Kelsey Group, December 22, 2003. b. Scott Kirsner, “Big Picture Still Hazy in Video Search,” Boston Globe, August 22, 2005, E1, www.factiva.com, December 30, 2005. c. “Google announces video expansion,” Associated Press, January 6, 2006, http://www.cnn.com/2006/TECH/biztech/01/06/google.video.ap/index.html, accessed January 12, 2006. 28 Google Inc. Exhibit 10 806-105 Search Engine Click-Through Rates (April 2004-September 2005) Source: comScore, from Robert S. Peck, Alexia Quadrani, Vincent B. Anthony, and Julia Choi, Google Cubes, Bear Stearns, December 19, 2005 via Thomson Research/Investext, accessed January 6, 2006. 29 806-105 Google Inc. Endnotes 1 Spencer Wang, Adam Holt, and Imran Khan, “AOL: Belle of the Ball?” North American Equity Research, JPMorgan, October 24, 2005, p. 1, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 15, 2005. 2 Time Warner Inc., November 2, 2005 10-Q (New York: Time Warner, 2005), 61, http://www.shareholder.com/Common/Edgar/1105705/950144-05-10977/05-00.pdf, accessed January 4, 2005. The annual amount was extrapolated with the assumption that the percentage would remain constant through Q4. 3 Mark Mahaney, “GOOG: Increased Conviction in Google,” Citigroup Global Markets, Citigroup, December 8, 2005, p. 9, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 12, 2005,; and Mary Meeker, Brian Pitz, and Brian Fitzgerald, “Google: Good News in AOL Relationship,” Morgan Stanley Equity Research, Morgan Stanley, p. 1, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 17, 2005. 4 John Battelle, cited in Saul Hansell and Richard Siklos, “Time Warner to Sell 5% AOL Stake to Google for $1 Billion,” The New York Times, December 17, 2005, B1, via Factiva, www.factiva.com, accessed December 17, 2005.. 5 Mahaney, December 8, 2005. 6 Casewriter estimate: Google’s U.S. 2005 ad revenue of $3.7 billion divided by total U.S. search marketing spending of $6.4 billion (from Exhibit 5). 7 Mahaney, December 8, 2005. 8 Jason McCabe Calacanis, “CES analysis: Why I know Google will do an office suite and a desktop OS in 2006,” calacanis.com, January 7, 2006, http://www.calacanis.com/2006/01/07/ces-analysis-google-will-do-anoffice-suite-and-a-desktop-os-in/, accessed January 11, 2006. 9 Battelle, cited in Hansell and Siklos, December 17, 2005. 10 Large portions of this section are drawn from Thomas R. Eisenmann, Smita Bakshi, Sebastien Briens, and Shailendra Singh, “Google Inc.,” HBS Case No. 804-141 (Boston: Harvard Business School Publishing, 2004). 11 Google, “Overview,” Google Web site, http://www.google.com/press/overview.html, accessed January 4, 2004. 12 Chad Bartley and Steve Weinstein, High growth in search creates opportunities for niche players, Pacific Crest Securities, November 4, 2003, p. 11. 13 “Worldwide Web Domination,” Industry Standard 4 (August 6, 2001). 14 Bartley and Weinstein, 2003, 5. 15 Catherine Waters and Heath Terry, “Overture Services,” CSFB Equity Research, Credit Suisse First Boston, April 8, 2002, 16. 16 Waters and Terry, 2002, 16. 17 David Card, “U.S. paid search forecast,” Jupiter Research, August 1, 2003. 18 Bartley and Weinstein, 2003. For number of advertisers, see p. 2; for reach of affiliate network, see p. 13. 19 Bartley and Weinstein, 2003. For cost-per-click, see p. 5; for click-through rates, see p. 14. 20 Bartley and Weinstein, 2003, 6. 21 Safa Raschty, “The golden search,” Equity Research, US Bancorp Piper Jaffray, March 2003, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 17, 2005. 30 Google Inc. 22 Bartley and Weinstein, 2003, 2. 23 Bartley and Weinstein, 2003, 2. 806-105 24 John Battelle, The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture (New York: Penguin Group, 2005), p. 213. 25 Larry Page and Sergey Brin, “Letter from the Founders: ‘An Owner’s Manual’ for Google Shareholders,” Google Inc., Form S-1 Registration, April 29, 2004, p. 1, via Thomson Research/Investext, http://research.thomsonib.com, accessed December 16, 2005. 26 Thomas R. Eisenmann, “Betting on Google’s Future,” Wall Street Journal, August 24, 2004, p. B2. 27 Eisenmann, August 24, 2004. 28 Page and Brin, 2004. 29 Page and Brin, 2004. 30 See Battelle, The Search, (2005) and David Vise and Mark Malseed, The Google Story (New York: Delacorte Press, 2005), amongst several. 31 Battelle, The Search, 2005, 148. 32 “Playboy Interview: Google Guys,” Playboy, September 2004. Appeared also in Google Inc., Amendment No. 9 to Form S-1 Registration Statement, filed August 18, 2004, http://sec.gov/Archives/edgar/data/ 1288776/000119312504142742/ds1a.htm#toc59330_25b, accessed December 9, 2005. 33 John Battelle, “The 70 Percent Solution,” Business 2.0, December 2005, pp. 134–136. 34 Server estimate cited in Fred Vogelstein, “Gates vs. Google. Search and Destroy,” Fortune, May 2, 2005, pp. 72–82, 79. See also “The Power of Google,” transcript from NewsHour with Jim Lehrer, November 30, 2005, http://www.pbs.org/newshour/bb/cyberspace/july-dec05/google_11-30.html, accessed December 2, 2005; and “How Google Works,” The Economist, September 16, 2004, www.economist.com, accessed December 3, 2005. 35 Page and Brin, 2004. 36 Google, “What it’s like to be a Google engineer?” Google Web http://www.google.com/support/jobs/bin/static.py?page=about.html, accessed January 6, 2005. 37 Battelle, The Search, 2005, 245. 38 Vise and Malseed, 2005, 255. 39 Vise and Malseed, 2005, 256. 40 Battelle, The Search 2005, 141. 41 Battelle, “The 70 Percent Solution,” December 2005. 42 Page and Brin, 2004. site, 43 Thomas Rizzo, Microsoft Corporation, “WinFS 101: Introducing the New Windows File System,” March 17, 2004. Microsoft Developer Network, referencing IDC data, http://msdn.microsoft.com/library/default.asp?url=/library/en-us/dnwinfs/html/winfs03112004.asp, accessed January 12, 2006. 44 Robert Peck, Alexia Quadrani, Victor Anthony, and Julia Choi, “Google Cubes,” Equity Research, Bear Stearns, December 19, 2005, p. 3, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 30, 2005. 31 806-105 Google Inc. 45 Saul Hansell, “Your Ads Here (All of Them),” New York Times, October 30, 2005, p. B1, via Factiva, www.factiva.com, accessed December 30, 2005. 46 Hansell, 2005. 47 Stephen E. Arnold, The Google Legacy (no location: Infonortics, 2005), 18. 48 “Playboy Interview: Google Guys,” September 2004. 49 “Playboy Interview: Google Guys,” September 2004. 50 Charlene Li, “Google Wallet Musings,” Charlene Li’s Blog, June 21, http://blogs.forrester.com/charleneli/2005/06/google_wallet_m.html, accessed December 20, 2005. 2005, 51 Stephen Shankland, “Google throws bodies at OpenOffice,” CNET, October 31, 2005, http://news.com.com/Google+throws+bodies+at+OpenOffice/2100-7344_3-5920762.html, accessed December 30, 2005. 52 Martin LaMonica, “OpenDocument format gathers steam,” CNET, November 10, http://news.com.com/OpenDocument+format+gathers+steam/2100-7344_3-5942913.html?tag=st.prev, accessed December 13, 2005. 2005, 53 Om Malik, “Free WiFi? Get ready for GoogleNet,” Business http://money.cnn.com/magazines/business2/, accessed December 30, 2005. 2005, 2.0, 54 Robert Cringely, “Google-Mart,” PBS.org, Nov. http://www.pbs.org/cringely/pulpit/pulpit20051117.html, accessed December 30, 2005. September 17, 1, 2005, 55 Greg Jarboe, “A ‘fireside chat’ with Google’s Sergey Brin,” Searchenginewatch.com, October 16, 2003. Brin’s comment addresses Thomas Friedman’s “Is Google God?” in The New York Times, June 29, 2003. 56 Battelle, The Search, 2005, 146. 57 John Heilemann, “Journey to the (Revolutionary, Evil-Hating, Cash-Crazy, and Possibly Self-Destructive) Center of Google,” no date, http://men.style.com/gq/features/full?id=content_422, accessed December 9, 2005. The Eurocentric search engine, called “Project Quaero” from the Latin “to seek,” was being developed by France’s Thomson and Deutsche Telekom; see David Litterick, “Chirac backs eurocentric search engine,” The Telegraph, August 31, 2005, http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/ 08/31/cnsearch31.xml, accessed November 30, 2005. 58 Kevin Kelleher, “Who’s Afraid of Google?” Wired, December 2005, pp. 233–236. 59 Lanny Baker, “YHOO: 2005 Sets Up as a Showcase Year,” Citigroup Global Markets, Citigroup, January 24, 2005, via Thomson Research/Investext, http://research.thomsonib.com, accessed January 6, 2006. 60 Battelle, “The 70 Percent Solution,” 2005, 239-240. 61 Imran Kahn, Internet Technology: Online Advertising, Search, eCommerce, Online Travel, JPMorgan, January 20, 2005, p. 13, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 30, 2005. 62 Ben Elgin and Arik Hesseldahl, “Google’s Grand Ambitions,” BusinessWeek, September 5, 2005, p. 36, via Factiva, www.factiva.com, accessed December 30, 2005. 63 Quoted in Brier Dudley, “Putting Microsoft brand on a new breed: Longhorn,” Seattle Times, February 28, 2003, via Factiva, www.factiva.com, accessed December 30, 2005. 64 Ray Ozzie, “The Internet Services Disruption,” Memo from Microsoft Chief Technical Officer to Executive Staff and direct reports, October 28, 2005, CNET, http://news.com.com/Ozzie+memo+Internet+services+disruption+-+page+2/2100-1016_3-59422322.html?tag=st.prev, accessed December 30, 2005. See also http://www.scripting.com/disruption/ ozzie/TheInternetServicesDisruptio.htm, accessed December 30, 2005. 32 Google Inc. 806-105 65 Robert S. Peck, Victor B. Anthony, and Kunal Madhukar, “eBay—Peer Perform, Global Weekly Listings Update,” Equity Research, Bear Stearns, December 19, 2005, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 30, 2005. 66 For fee structure, see Mary Meeker, “eBay: Results in Line; Customer Growth Strong,” Morgan Stanley Equity Research, Morgan Stanley, July 27, 1999, 6, via Thomson Research/Investext, http://research.thomsonib.com/, accessed December 30, 2005; for “surrender” timing, see Eric Jackson, The PayPal Wars: Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth, (Los Angeles: The World Ahead, 2004), 185–187. 67 “eBay to acquire Skype,” eBay press release, September http://investor.ebay.com/downloads/eBay_PressRelease.pdf, accessed January 9, 2006. 12, 2005, 68 Eric Schmidt, cited in Kevin J. Delaney and Brooks Barnes, “Image Control: For Soaring Google, Next Act Won’t Be As Easy As the First—Moves to Search Video, Books Raise Hackles As Owners of Copyrights Complain—An Angry Letter From NBC,” The Wall Street Journal, June 30, 2005, A1, via Factiva, www.factiva.com, accessed December 30, 2005. 69 Battelle, “The 70 percent solution,” December 2005, 136. 70 Battelle, “The 70 percent solution,” December 2005, 136. 71 Charles C. Mann, “How Click Fraud Could Swallow the Internet,” Wired, January 2006, 138–141, 149–150. 33
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