Authors: Douglas Edwards
Despite the sexist overtones, the Honeyplex name fit, as the building was a hive of nonstop revenue generation that paid for more machines, more engineers, and more AdWords reps to harvest the sweet bounty of our collective labors. The revenue engine driving Google's profits now hummed with a power equal to the search technology behind the growth of its user base.
Advertisers began finding us by word of mouth, so AdWords reps shifted from approving ads (a process that was increasingly automated) to persuading advertisers to spend more with us. Once they were in the system, Sheryl's organization—divided into tiers based on the budgets of the advertisers they served—assigned optimizers to improve performance. AdWords reps suggested more relevant keywords, set up multiple accounts for different product lines, and helped advertisers improve the sites linked to by their ads. Our AdWords reps didn't acquire customers, they just showed the ones we had how to make more money for themselves and for Google. By the time Sheryl left in 2008 (to become chief operating officer at Facebook), the AdWords group had grown from four people to four thousand, with most of the ad approvers stationed at offices in India and Dublin.
By winning AOL, Google had proved beyond a doubt the superiority of our ad-ranking technology and the value of maintaining a clear separation between ads and search results. So what happened next surprised everyone, including me.
"Is this new?" asked KeyMaster, a poster on the WebmasterWorld bulletin board. "Usually, ads are placed on the top of the search result page or boxed on the right side of the page. Now I see ads mixed in with the other search results."
*
KeyMaster was correct. For some users, on May 9, 2002, a Google search returned a paid listing embedded in our supposedly objective results. The paid listing was identified with the label "sponsored link," but it was the first time Google had displayed ads directly in line with regular results. It was essentially a form of paid placement, the exact practice Google had railed against so vehemently when it profited others.
By four a.m., a Google engineer using Matt Cutts' nom de plume, "GoogleGuy," had reassured the group: "This is a bug. Our new ad-distribution code had a flaw. It is mostly fixed already. It should be completely gone soon."
Not everyone was convinced. A poster named 4crests replied, "There is nothing like this anywhere else that it could have been confused with ... was it a bug or a
test run?
Or is it something that is going to be served up to another search engine soon?"
Several other posters accepted the idea that Google was testing an interface for AOL and somehow it had slipped out onto Google itself. They weren't far off, but it wasn't AOL Google was conducting experiments for. It was Yahoo.
While our primary battle at AOL had been against Overture to provide advertising, we had also unseated Inktomi to provide AOL's actual search results. Inktomi wasn't ready to cede us the entire search market, however. Before taking AOL from them we had taken Yahoo, and they intended to win Yahoo back when their contract came up for renewal in June.
To Sergey's deepening frustration, I had been unsuccessful in finding third-party metrics to prove that adding Google search helped grow a partner's traffic. Without data to refute Inktomi's claim that we were stealing Yahoo's users, we had to look for other ways to show our value. Perhaps we could provide unique new sources of revenue? Inktomi didn't offer ads.
*
Overture didn't offer objective search results. Google could deliver both in potentially lucrative ways. The Overture contract prohibited Yahoo from running Google's ads where Overture's ads appeared, but left an opening for our ads to appear as paid placements in the search results. Setting aside the irony, we planned to show Yahoo how that could work. We would test pay-for-placement AdWords on sites that used our "free-search" service.
We let free-search sites put a Google search box on their pages, but they couldn't run ads around the Google results. Only we could do that. We provided them with search service for free, and in exchange we kept the revenue generated by their users. Hardly controversial, but rolling out the new pay-for-placement test might be, so Larry and Sergey decided to show the ads to one percent of users for half an hour in the middle of the night—just long enough to gather some data on how much revenue they might generate.
We had made no commitment to actually implement such a system, and clearly there was no way in hell we'd ever actually do this on our own
Google.com
results pages. Marissa had a bad feeling, though, and expressed her concern that our test would be noticed and brought to the attention of the press. The only way that would be likely to happen was if the pay-for-placement ads ran on
Google.com
itself, which was not the plan. But things didn't go according to plan.
The paid-placement ads began showing up in Google's own search results. There was a bug in GWS, Google's web server, and it caused the ads to spread outside the limited test zone. Webmasters whose livelihoods increasingly depended on reading the entrails of Google's ranking system couldn't miss such a significant change. We stuck by our explanation that a bug had unintentionally caused the test of a partner interface to appear on our own results pages.
Engineer Howard Gobioff later let me know that there were other instances when engineering was instructed to code ads into search results. I never saw them because, according to Howard, "someone always cared enough to make noise." He laid the blame at the feet of new PMs and business-development folks who argued that what we did on partner sites didn't matter and that, besides, the ads would still be marked as paid placements.
Howard said the engineers required to write the code buried some editorial commentary in its internal documentation. "This is evil but they made me do it," one engineer wrote. In Howard's opinion, the idea finally died because Sergey decided that it crossed into an ethically gray area and wouldn't play well in the press. We were willing to walk up to the edge of evil to get a closer look, but ultimately, Larry and Sergey were unwilling to cross certain lines. "Don't
be
evil" is not the same as "Don't consider, test, and evaluate evil."
On Friday, May 10, we celebrated the AOL deal with another company-wide luau catered by Charlie. Our executive team showed up in grass skirts. AOL sent over a giant blue lava lamp with their logo on it. Devin Ivester created a commemorative t-shirt with a traditional Hawaiian motif, but Larry made him change one element in the design: he insisted Devin remove the date. Larry didn't want anyone walking around wearing a reminder of when our AOL contract would be up for renewal.
Two months later, we took Ask Jeeves away from Overture. Overture CEO Ted Meisel remarked to the Associated Press, "We are still winning more deals than we are losing and I think we are winning all the right ones."
*
Now Overture had backhanded both AOL and Ask Jeeves. Not the way to make or keep friends.
Analyst Safa Rashtchy declared that the battle for audience share was over and that "Yahoo would probably accurately claim that they won, with something like 200 million worldwide users."
†
Yahoo must have felt far enough in the lead to keep working with us. In November 2002, they renewed their contract with Google. In fact, they expanded Google's presence, making us the primary source of their search results instead of delivering results from their own directory first. That came at a cost.
Miriam Rivera, the Google attorney who had worked herself to exhaustion on our AOL deal, also worked the Yahoo renewal. She remembers Yahoo being wary of Google to the point of paranoia and hesitant to strengthen us as a competitor. As a result they put the screws in. Hard. "I would not have done the deal," she said, reiterating what she had told Larry, Sergey, and Eric at the contract-review meeting. "They wanted an open kimono from us, where we would alert them to all the technology we had in development. They wanted parity—everything we developed, they would get too." Miriam didn't think it wise to constrain ourselves that way. Besides, our billion-dollar deal with AOL made the tens of millions Yahoo offered seem insufficient compensation for all they sought in return.
In the end, Omid's friendship with Udi Manber at Yahoo and Larry and Sergey's desire to stay on Yahoo's good side won out. Keep your friends close, went the strategy, and keep your enemies closer. We accepted the offered terms. From that point on, we had to notify Yahoo before we launched any new feature. When Miriam went on vacation, she carried a copy of the contract with her and took calls day or night about product-disclosure issues. Given Google's aversion to process, it upset everyone that we now had to check with our competitor before moving ahead on new technology.
The relationship began on rocky terms—a marriage of convenience that bound the partners together so neither could run too far ahead of the other. It was a relationship between a fading name and a rising star and destined to fall apart. Just a month later, in December 2002, Yahoo bought our competitor Inktomi and began working to replace Google's search results once and for all.
T
HERE," CINDY SAID
to Jonathan Rosenberg, pointing toward the parking lot. "That's my car." As she spoke, a stretch Hummer rounded the corner, impossibly long and large. It had once been white, but now it was coated with mud from hood to trunk. We had added that finishing touch at Cindy's request, and she was pleased with our efforts. It was a complete and utter mess. Jonathan looked stunned for a moment, then laughed and picked up a bucket and a sponge and began swiping at the mud-covered windows. That's when we unleashed the water balloons.
Jonathan Rosenberg came to Google to bring structure to product management. He arrived none too soon. By the spring of 2002, the PMs were driving me nuts. In one twenty-four-hour period, I found myself in the middle of disputes between PMs and engineering, PMs and advertising support, and PMs and other PMs. Communication among our swelling groups kept slipping into darkness and dragging marketing along with it.
Jonathan had the unenviable task of corralling not just the new hires but also big-name old-timers like Susan, Salar, and Marissa, all of whom now ostensibly reported to him. They didn't always act that way. It was a classic syndrome of a startup becoming a real company—old-timers refusing to acknowledge that there were new rules to play by. One of those rules for every engineering and product-management employee was filing snippets, the weekly reports of projects currently under way and the progress that had been made on them since the previous week. Snippets were compiled and distributed automatically, and the software that did this had been written to insert snide comments about those who failed to file.
Jonathan wanted his product-management group to improve its compliance, and being extremely competitive, he decided the best way to encourage his staff and bond them together as a team was to challenge Cindy and her corporate marketing group to a contest. The head of the group ending the quarter with the lower percentage of snippets filed would have to wash the other manager's car while the winning team assaulted the loser with water balloons. We became the first group in the company to attain a one hundred percent filing rate, an eventuality that Schwim, who had coded the system, had never anticipated.
When the day of reckoning arrived, we came prepared with Super Soakers, a blender churning out margaritas, and a boom box belting out carwash tunes. Jonathan was soon sopping wet and making little progress on the task at hand. He looked mortally betrayed when members of his own team joined in the assault against him. Cindy, sensing things were getting out of hand, stepped in and grabbed a sponge, putting an end to the deluge.
We had wanted to see Jonathan share our pain. Our lives had changed with his structured approach to product management. In July 2002, he reorganized his division and introduced the roles of APM (associate product manager) and PMM (product marketing manager) and promptly went on a hiring binge.
*
There were suddenly many more flavors of PMs, and they all needed more from me and my marketing colleagues. It was convenient to blame Jonathan for the hailstorm of their demands and for their apparent belief that we had no projects on our plates other than theirs.
It was all part of a shift that Eric Schmidt had outlined at our first mid-quarter ops review back in May, a meeting held at a restaurant adjacent to the municipal golf course just down the road. Lunch was lasagna. Forty of us—mid-level managers and execs—had gathered in a low-tech conference room that was sunny and hot. We kept the door open, despite the threat of ducks wandering in off the putting green and the irritating "beep—beep—beep" of golf carts backing up just outside. Sergey sat at the front wearing a spandex biking shirt and shorts. Every few minutes he would launch a tiny remote-controlled flying saucer/hovercraft and send it careering around the room or try to make it hover over Larry's head. Susan coordinated the meeting, keeping time on presentations to ensure we stayed on schedule.
*
Eric kicked off the meeting by laying out the "Google Great Company Five," the areas we needed to get right in order to become a great company: global sales, strong brand and ethics, great financials, a good hiring process, and innovation.
No major initiatives resulted directly from the get-together, but it marked, as Eric called it, "a phase change in our evolution." We were consciously leaving behind our startup days and becoming a big company that made plans, communicated them to key managers, and then reviewed them on a scheduled basis. Eric established a mailing list called "VIPs" for directors and vice-presidents to keep us informed and to solicit input. And he offered a few directives of his own.