1. ‘Choosing a lawyer by a company is just like choosing a doctor by a patient, which requires lot of trust and clarity.’ What is the significance of this statement to business ventures?
2. Google began its operations in January 1996 as a research project by Larry Page and Sergey Brin during their PhD programme at the Stanford University in California. They theorized about a better search engine that analysed the relationships between Web sites. They called this new technology Page Rank , whereby a Web site’s relevance was determined by the number of pages, and the importance of those pages, that linked back to the original site ( Page 1997).
Page and Brin originally gave the nickname ‘BackRub’ to their new search engine, because the system checked backlinks to estimate the importance of a site ( Battelle 2005–2008). 2 Finally they changed the name to Google, that is, the number one followed by one hundred zeroes, which was meant to signify the amount of information the search engine was able to handle. The domain google. com was registered on 15 September 1997, and the company was incorporated on 4 September 1998. It was based in a friend’s (Susan Wojcicki) garage in Menlo Park, California. Craig Silverstein, a fellow PhD student at Stanford, was hired as the first employee. PC Magazine reported in December 1998 that Google ‘has an uncanny knack for returning extremely relevant results’ and recognized Google as the search engine of choice among the Top 100 Web sites for 1998.
The first funding for Google took place in August 1998, with a contribution of $1,00,000 from Andy Bechtolsheim, co-founder of Sun Microsystems. This initial funding took place even before Google was incorporated. On 7 June 1999, a $25 million round of funding was announced, with the major investors including the two venture capital firms Kleiner, Perkins, Caufield and Byers and Sequoia Capital.
The company shifted its offices to Palo Alto, California, in March 1999. The next year, against Page and Brin’s initial resistance to an advertising-funded search engine, Google began selling advertisements associated with search keywords. In 2000, on April Fool’s Day, Google announced the MentalPlex: Google’s ability to read your mind as you visualize the search results you look for. In June 2000, Google forged a partnership with Yahoo! to act as their default search provider. The company announced the first billion-URL index and became the world’s largest search engine. In June 2000, Google started offering search results in Chinese, Japanese and Korean languages, taking the total number of supported languages to 15. This had further increased to 26 languages in March 2001. In August 2001, Eric Schmidt became the CEO of the company, with Larry and Sergey being named the presidents of products and technology, respectively. Pyra Labs, the company that created Blogger, was acquired by Google in February 2003. The Google search index touched a new height of six billion items, including 4.28 billion web pages and 880 million images in February 2004.
Google’s IPO took place on 19 August 2004. The company offered 1,96,05,052 shares, at a price of $85 per share. A unique process of sale was adopted through the online-auction format using a system built by Morgan Stanley and Credit Suisse, underwriters for the deal. This public offering resulted in a market capitalization of more than $23 billion to the company. After the public offering, 271 million shares remained under the control of Google, and many Google employees became instant paper millionaires. Yahoo too gained from the public offering, as it owned 8.4 million shares of Google before the IPO took place.
The stock’s performance after the IPO was impressive as evident from the stock price touching $700 for the first time on 31 October 2007, mainly because of strong sales and earnings in the online-advertising market. The company was listed on the National Association of Securities Dealers Automated Quotations or NASDAQ stock exchange under the ticker symbol GOOG; and on the Frankfurt Stock Exchange under the ticker symbol GGQ1.
Since 2001, Google operated on the strategy of growth through acquisitions, that too mainly by focusing on small venture-capital companies. Google acquired Keyhole, Inc in 2004. The startup venture had developed a product called Earth Viewer that provides a 3-D view of the Earth. Subsequently, two years later, it bought the online video site YouTube for $1.65 billion in stock. Thereafter, it entered into an agreement to acquire DoubleClick for $3.1 billion. Then, it purchased Grand Central for $50 million. Google bought out its first public company, purchasing video software maker On2 Technologies for $106.5 million on 5 August 2009; it also acquired Aardvark, a social network search engine, for $50 million. Another major strategy of growth deployed by the company was to collaborate with other organizations, such as the Ames Research Centre of the National Aeronautics and Space Administration (NASA), Sun Microsystems, Microsoft, Nokia, Ericsson, News Corp., Myspace and so on, for everything from research to advertising.
The company announced a partnership with China Mobile, the world’s largest mobile telecom carrier, to provide mobile and Internet search services in China in January 2007.
Google developed a partnership with GeoEye to launch a satellite providing Google with highresolution (0.41 m monochrome, 1.65 m colour) imagery for Google Earth in 2008.3
1. Google received its first dose of funding even before the formation of the company. What is the significance of this from both legal and business perspectives?
2. When did the company become a public limited company? In what way did it change the character and the future growth path for the company?
3. What were the key implications of making a decision to go public for Google?
4. What has been the strategic thrust adopted for the growth of the company?