The Internet Is Not the Answer (9 page)

There already were technologies from well-funded startups like Lycos, AltaVista, Excite, and Yahoo, vying to build a winner-take-all search engine for navigating the Web. But Brin and Page beat them all to it with an astonishingly original method for determining the relevance and reliability of a Web page’s content. Just as Vannevar Bush’s Memex worked through an intricate system of “trails,” Page and Brin saw the logic of the Web in terms of hyperlinks. By crawling the entire Web and indexing all its pages and links, they turned the Web into what Brin, a National Science Foundation fellow at Stanford, identified as “a big equation.” The end result of this gigantic math project was an algorithm they called PageRank, which determined the relevance of the Web page based on the number and quality of its incoming links. “The more prominent the status of the page that made the link, the more valuable the link was and the higher it would rise when calculating the ultimate PageRank number of the web page itself,” explains Steven Levy in
In the Plex
, his definitive history of Google.
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In the spirit of Norbert Wiener’s flight path predictor device, which relied on a continuous stream of information that flowed back and forth between the gun and its operator, the logic of the Google algorithm was dependent on a self-regulating system of hyperlinks flowing around the Web. Page and Brin’s creation represented the realization of Licklider’s man-computer symbiosis. As an information map that mirrored the distributed nature of the electronic network, it was the opposite of a centralized Web portal like Yahoo—anything but
yet another hierarchical officious oracle.

“The idea behind PageRank was that you can estimate the importance of a web page by the web pages that link to it,” Brin explained. “We convert the entire web into a big equation with several hundred million variables, which are the PageRanks of all the web pages, and billions of terms, which are all the links.”
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“It’s all recursive,” Brin said, revealing the logic of his search engine, “it’s all a big circle.”
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And the real beauty of this virtuous circle is that it became more efficient the more the Web grew and the more Web pages and links there were. It was infinitely scalable. The more links the algorithm had to crunch, the more data it was fed, the more accurately the search engine could identify the relevant pages to a query.

“Google search really did feel like magic,” notes Levy about the reaction of the Stanford academic community to the search engine.
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By 1998, Google was dealing with up to 10,000 daily queries and hogging half of Stanford’s Internet capacity. Having begun as a possible doctoral dissertation, the project, like its technology, became a virtuous circle, acquiring its own momentum.
What next?
Brin and Page started to ask themselves in 1997.
Maybe this is real.
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Both Page’s and Brin’s fathers were university scientists and both had always intended to become academics themselves. They wanted to do “something that mattered,” which would change the world. In a different age, they might have had public careers like Vannevar Bush or J. C. R. Licklider, spent inside nonprofit universities and government agencies, working for the public good as the world’s librarians by organizing all its information. But this was the Stanford of the 1990s rather than the MIT of the 1940s. And that meant launching Google as a for-profit startup and becoming billionaires rather than electronic librarians.

Having raised a million-dollar seed round from investors that included Jeff Bezos, Page and Brin incorporated Google in September 1998 and began to build a team of engineers to transform their academic project into a viable commercial product. But they quickly needed more capital to invest in both engineers and hardware, which inevitably led them to KPCB’s John Doerr.

“How big do you think this could be?” Doerr asked them when they met in 1999.

“Ten billion,” Larry Page immediately shot back about a “business” that, at that point, not only didn’t have any revenue, but didn’t even have a coherent model for making money. “And I don’t mean market cap. I mean revenues.”

Doerr, Steven Levy noted, “just about fell off his chair” at Page’s boldness.
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But he nonetheless invested in Google, joining Michael Moritz from Sequoia Capital in a joint $25 million Series A round. But two years after the investment, in spite of Google’s establishing itself as the Web’s dominant search engine with 70 million daily search requests, the company—which by now had appointed the “grown-up” Eric Schmidt as CEO—hadn’t figured out a successful business model for monetizing the popularity of its free technology.

As always with Google, the solution was both totally obvious (at least in retrospect) and completely counterintuitive. Both Brin and Page—who took great pride in the fast-loading, minimalist aesthetic of the Google home page—had been hostile to the online advertising model pursued by portals like Yahoo that cluttered up the Web with CPM-priced (cost per thousand impressions) banner and interstitial advertisements. The solution was Google AdWords, a do-it-yourself marketplace for advertisers introduced in 2000 that enabled the placement of keyword-associated ads on the right-hand side of the search result page. Advertising thus became baked into search and Google, for all its technical brilliance, became an electronic advertising sales company.

Doing away with the CPM pricing, Google introduced the auction sales model to AdWords, which some of America’s leading academic economists later described as “spectacularly successful” and “the dominant transaction mechanism in a large and rapidly growing industry.”
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Rather than buying online advertising at a set price, advertisers were now able to bid in what Steven Levy calls a real-time “unique auction” that simultaneously made online advertising more effective and profitable.
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Alongside AdWords, Google also developed an increasingly successful product called AdSense, which provided the tools to buy and measure advertising on websites not affiliated with the search engine. Google’s advertising network was becoming as ubiquitous as Google search. AdWords and AdSense together represented what Levy calls a “cash cow” to fund the next decade’s worth of Web projects, which included the acquisition of YouTube and the creation of the Android mobile operating system, Gmail, Google+, Blogger, the Chrome browser, Google self-driving cars, Google Glass, Waze, and its most recent roll-up of artificial intelligence companies including DeepMind, Boston Dynamics, and Nest Labs.
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More than just cracking the code on Internet profits, Google had discovered the holy grail of the information economy. In 2001, revenues were just $86 million. They rose to $347 million in 2002, then to just under a billion dollars in 2003 and to almost $2 billion in 2004, when the six-year-old company went public in a $1.67 billion offering that valued it at $23 billion. By 2014, Google had become the world’s second most valuable company, after Apple, with a market cap of over $400 billion, and Brin and Page were the two wealthiest young men in the world, with fortunes of around $30 billion apiece. In vivid contrast with Amazon, Google’s profits were also astonishing. In 2012, its operational profits were just under $14 billion from revenues of $50 billion. In 2013, Google “demolished” Wall Street expectations and returned operational profits of over $15 billion from revenues of nearly $60 billion.
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Larry Page’s response to John Doerr’s question when they first met in 1999 had turned out to be a dramatic underestimation of just “how big” Google could become. And the company is still growing.

By 2014, Google had joined Amazon as a winner-take-all company. It was processing around 40,000 search queries each second, which computes into 3.5 billion daily searches or 1.2 trillion annual searches. The leviathan controls around 65% of search globally, with its dominance of some markets, such as Italy or Spain, being higher than 90%.
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Google’s domination of the Internet reveals the new power laws of this networked economy. Idealists like Kevin Kelly and Nicholas Negroponte believed that the “decentralizing” architecture of the Web would result in a “thousand points of wealth” economy. But the reverse is true. By mimicking the distributed architecture of the Web itself, Google has become a monopolist of information. So when thinkers like Moises Naim describe “the end of power”
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in our digital age, they are wrong. Power hasn’t ended. It’s simply changed its form, going from a top-down to a recursive, circular structure.

Google’s power is increased every time we use it. As a symbiosis of human and computer intelligence, the Google search engine becomes more knowledgeable and thus more useful the more it is used. So every time we make a Google search we are, in a sense, “working” on improving the product. Even more valuable, from Google’s point of view, is what Google learns about us each time we make that search. Like Vannevar Bush’s Memex, the Google trails never “fade” and Google, for better or worse, never forgets.

All our digital trails are crunched into statistical products like Google Analytics, which provide both Google and its corporate clients with our so-called data exhaust. As
Big Data
authors Viktor Mayer-Schönberger and Kenneth Cukier note, Google has become the “undisputed leader in the data exhaust business. It applies the principle of recursively ‘learning from the data’ to many of its services,” they explain. “Every action a user performs is considered a signal to be analyzed and fed back into the system.”
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We shape Google’s tools and thereafter those tools shape us.

Data Factories

Google changed everything. Among the earliest people to recognize this was Dale Dougherty, a Web pioneer who had founded the Global Network Navigator (GNN), the world’s first commercial website, back in 1993. In a brainstorming session with the media mogul Tim O’Reilly a couple of years after the bursting of the dot-com bubble, Dougherty came up with the term “Web 2.0” to describe the new networked economy that Google was ushering in. The term stuck and has become the standard shorthand for describing the radical rebirth of the Web after the NASDAQ crash in the spring of 2000.

In his seminal article “What is Web 2.0,”
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Tim O’Reilly describes Google as the “standard bearer for Web 2.0.” Using Netscape as the equivalent model of what he calls a Web 1.0 company, O’Reilly argues that Jim Clark’s startup saw itself in the “old software paradigm” of leveraging its dominance of the browser economy to “give Netscape the kind of market power enjoyed by Microsoft in the PC market” and then make money through the licensing of its software. Netscape’s framing of itself as an aspiring Microsoft, O’Reilly writes, is reminiscent of the way the automobile industry first marketed its products as “horseless carriages” to ensure familiarity for consumers. In contrast, O’Reilly writes, Google, as the paradigmatic Web 2.0 Internet company, presented itself as anything but a reassuringly familiar horseless carriage.

So what exactly is Google? “Much like a phone call, which happens not just on the phones at either end of the call, but on the network in between, Google happens in the space between browser and search engine and destination content server, as an enabler or middleman between the user and his or her online experience,” is how O’Reilly describes the virtuous circle powering Google. By being simultaneously invisible and ubiquitous, by being an
enabler
and a
middleman
, he suggests, Google represents a new category. It is the first truly native Internet product because its economic value lies in the network itself.

In the first fifteen years of the twenty-first century, the Internet has been dominated by enabling products and middleman services like Google. In this period, participatory Web 2.0 sites have superseded traditional top-down Web 1.0 publications. Web 1.0–style portals like AOL or Yahoo have been overshadowed by personalized 2.0 social networks such as Facebook, Tumblr, and the Birches’ Bebo, a social network founded in 2005 that at its 2007 zenith was the most popular network in the United Kingdom, with more than 10 million members, and by 2.0 self-publishing platforms like Reddit, Twitter, SoundCloud, and YouTube. Professional 1.0 resources such as Kodak’s photo processing Ofoto service,
Britannica
online, and
Monster.com
have been replaced by collaborative 2.0 equivalents like Yelp, Instagram, Wikipedia, and LinkedIn.

Most of these Web 2.0 businesses have pursued a Google-style business strategy of giving away their tools and services for free and relying on advertising sales as their main source of revenue. “The best minds of my generation are thinking about how to make people click ads,” one of Facebook’s engineers dryly notes.
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Like Google, networks such as Facebook and YouTube have become big data companies able to target their users’ behavior and taste through the collection of their data exhaust.

While none of the other Web 2.0 companies, even Facebook, have had quite the same stratospheric financial success as Google, many have created significant wealth for their founders and investors. Facebook’s 2012 $100 billion IPO might have been overvalued both in terms of its economics and hype, but it was, nonetheless, the largest in Internet history. Bebo’s $850 million sale to AOL in 2008 enabled Michael and Xochi Birch to finance the Battery. Google bought YouTube for $1.65 billion in 2006, Facebook acquired Instagram for $1 billion in 2012, and Yahoo purchased Tumblr for $1.1 billion in 2013. By the summer of 2014, both the publicly traded LinkedIn and Twitter had market caps of around $20 billion.