Internet Search

In this video, John Heilemann tracks the ups and downs of search engine development, and highlights where certain companies failed and how Google ultimately won out. He begins by chronicling the development of Yahoo!, which was started by Jerry Yang and David Filo when they were attending Stanford University. The two were looking up sports stats for their fantasy basketball league, and were frustrated by how difficult it was to find information. They decided to create a directory by categorizing websites themselves. They dubbed this “Jerry & David’s Guide to the Worldwide Web”. This then became Yahoo!

Michael Moritz invested in Yahoo! and was one of the first people to ever invest in a website on this scale. Up until this point, the Internet was not used for business or commerce, and people hadn’t quite figured out a way to monetize the web. Initially, Yang and Filo were weary of putting advertisements on their site because they were afraid of alienating users. They ended up placing banner ads on the site. In the end, consumers didn’t particularly care about the ads and continued to use the site. This began the web boom and the commercialization of the web.

Next, the video dives into the early website eXcite, founded by Joe Kraus. eXcite was Yahoo!’s competitor and actually utilized an automated search query instead of a manually maintained directory. It was an improvement on the formula Yahoo! was using at the time, but even these search engines weren’t particularly good at searching. They often redirected people to scam-ridden advertising sites or pornography. The founders of Google noted how poor and clunky sites like eXcite ran and sought to improve on them.

Google founders Larry Page and Sergey Brin were students when they innovated the search engine. They realized that they could build the engine around linking. Their famous academic paper read, “in essence, Google interprets a link from page A to page B as a vote by page A for page B.” Basically, it would determine a site’s relevance by how often it had been linked.

Vinod Khosla invested in eXcite and suggested they invest in Google’s technology. eXcite could have bought Google for $1 million but passed on the deal - in fact, multiple companies turned Google down because they didn’t understand that search engines could become profitable. Eventually, Andy Bechtolsheim acknowledged the power Google held and immediately invested. Then venture capitalist and Silicon Valley legend John Doerr invested. Google wasn’t immediately profitable, though. They didn’t want to clog their site with banner ads like Yahoo! did, so they worked to create a more user-friendly version of advertising.

Bill Gross from Idealab figured out that search queries could provide insight into what people would buy, and this is how personalized ads came to be. Google latched onto this idea and tried to make a deal with Gross but failed. They essentially stole Gross’s idea when they created AdSense. The only thing they changed was they made sure ads were separated from people’s organic searches. Gross sued Google and they eventually settled out of court.

Shortly after, Google went public on the stock exchange. Wall Street and financial media criticized Google’s initial public offering (IPO), but in the end, it was very successful. Anyone who bought Google shares in the beginning made a LOT of money. Google became the fastest growing company ever, and it showed that the web could make plenty of money.