A googol is a very, very large number. It is the number one followed by 100 zeros, or, for those scientists out there, 10 to the power of 100. That’s well more than a billion trillion, or even a million billion trillion. It’s one of those unfathomably large numbers, more than the grains of sand and stars in the sky.
So it shouldn’t come as a complete surprise that Google, the California-based Internet search engine that took its name from that wild number, is becoming a mind-bogglingly large company. Its mission is to “organize the world’s information and make it universally accessible and useful”. So far it has been tremendously successful in that endeavor.
If you are like most of the other 1.2 million internet users in Ireland, or 700 million around the world, you probably use Google nearly every day for finding information around the web, and you’ve probably never paid a single penny for the privilege. Yet in just three months, from October to December of 2004, Google turned over more than a billion dollars, and profited to the tune of $310 million (€244 million) before taxes. During all of 2004, they made a profit of $640 million on over $3 billion in turnover. There’s major money to be made in powering more than half of all the searches on the Internet.
It’s not making googols of dollars just yet, or even trillions, but it is making millions by the fistful, and growing fast. How is it, then, that Google has come by so much money?
The answer lies in matching customers with advertisers. From the birth of the consumer Internet advertising money (and pornography, but that’s neither here nor there) drove growth. Companies paid silly amounts of money for ‘banner ads’ that ran across the top of web pages, and tried all sorts of annoying gimmicks like pop-ups just to get us to look at one.
Google never played that game. Their philosophy guided the product, and their two founders, Stanford PhD students Sergey Brin and Larry Page, developed a simple, fast and remarkably useful search engine that lured millions away from the more cluttered sites like Yahoo and the once-powerful AltaVista. They wouldn’t accept graphic banner adverts (it slowed their service, they said), although later they began running small text-based adverts on the right-hand side of the page. Since they were delivering relevant information to their users, this fit their philosophy, and they stayed with it. AdWords was born.
What they stumbled across turned out to be a money mint. Because users were in the very process of searching for information, it turned out to be the perfect spot to place a targeted advertisement. Like an electronic, world-wide version of the familiar Yellow Pages, Google delivers advertising options just when users are looking for related information. The relevance is the key. Whenever someone submits a string of words to their secret algorithm, Google faithfully return links to what it considers the most relevant sites on the Internet, and a few related adverts on the right. The Yellow Pages never would have survived if they ran adverts for flower delivery in the middle of the pages for solicitors and refrigerator repair, and neither would Google.
The lion’s share of Google’s money comes through this text-based advertising. Each of these advertisements is linked to one or more keywords that you used in your search. So if you search for “car rental Dublin”, only those advertisers that bought those keywords would appear, and you would find a useful list of places to hire cars.
Advertisers learned their lessons from the heady days of the dot-com boom, and aren’t willing to pay much money just for getting an ‘impression’ on a webpage anymore. Google cracked this nut by not charging the advertisers until the users actually click on the advert. Advertisers have found this service well worth paying for.
For anywhere from a few cents (for terms like “canned peas”) up to several dollars (for more valuable words like “London hotel” and “online casino”), Google delivers a potential customer searching for the information they have to offer. Advertisers actually bid for placement, so market forces and Google’s algorithm combine to ensure that the adverts don’t waste the user’s time.
The average ‘cost per click’ Google collects is about 50 cents, but since they conduct more than 200 million searches every day, those small numbers quickly add up to very big numbers.
They have expanded their operation to include more than 100 Google-owned search sites (like Google.ie and Google.de), as well as a network of affiliate sites that host Google’s advertisements on their own pages. Google shares a large portion of this revenue with their partner sites (more than $1 billion in 2004), so they are actually helping to fund some of the rest of the Internet as well.
All the money flowing in through the door is allowing Google to do some creative things. They have developed an email service called Gmail which allows you to search through all your old email messages the same as you could on the Internet. It’s a tremendously useful program, but also delivers relevant, contextual and discreet adverts with every message in your inbox. Every email becomes another potential revenue opportunity, and every click delivers another few cents to the coffers.
They have also developed a desktop search product that lets you search your entire hard drive, and search inside all your files. If you had an important letter written to Mr White but can’t remember what you named the file or what folder you stored it in, simply type a line or two from the letter — like “Dear Mr White” — and voila, you’ve found your letter.
Another major project is to personalize the search, something that Google’s competitor Yahoo! has done more of. “Our priority is to have more information, delivered more personally, more globally, with more targeting of who the end users are and what they are looking for,” said Google’s chief executive Eric Schmidt.
Google is also funding a multi-million-dollar digitisation project with some of the world’s leading academic and public libraries. More than 15 million books of immeasurable academic and cultural value from the New York Public Library and the renowned academic libraries of Harvard, Stanford and Oxford will some day be scanned, digitized and available for search on part of Google’s network.
Specialist services like this may not always stay free, but they will most certainly make the information more useful and accessible, and will undoubtedly make Google millions along the way.