CHAPTER
FOUR
Prepping the Google
Rocket
(2001-2002)
While Google’s venture capitalists fretted that Page
and Brin were spinning their wheels and that the company cried out
for professional management, the Internet was growing and changing
at warp speed. January 2001 brought two innovations that profoundly
disrupted the existing order. Steve Jobs launched Apple’s iTunes
application, and within seven years, iPod owners had purchased and
downloaded five billion songs. Already reeling from piracy, the big
four music companies felt compelled to allow individual songs to be
sold at a price Apple chose (ninety-nine cents), inevitably
undermining the sale of entire CDs, the centerpiece of their
business model. That same January, Jimmy Wales and Larry Sanger
launched Wikipedia. Within seven years this nonprofit effort would
contain ten million entries in 253 languages, changing the way
people gathered information. Wikipedia and iTunes were reminders,
as if any were needed, that we had entered the dawn of a new
digital democracy that granted more power to
individuals.
Page and Brin were
convinced that Google would become an even more profound disrupter
of the existing order. Their philosophy, Page told a class at
Stanford, can be distilled into two words: Don’t settle. He
defended the exhaustive process of hiring at Google, and finding
managers who respected and nurtured Google’s engineer-is-king
culture. But there were too many kings. It wasn’t until January
2001 that Google finally hired its first vice president of
engineering operations, Wayne Rosing, who had held a series of
senior management positions at Apple, Sun Microsystems, and the
Digital Equipment Corporation. The process was laborious, but
eventually Rosing was hired. That was “the real turning point,”
said employee number 1, Craig Silverstein. “He brought a
professionalism to management we had not had before.” When he
stepped into the chaos at Google, a shocked Rosing found that one
senior engineer “had 130 direct reports.” Instead of doing what
most companies did by relying on financial management software made
by companies such as Intuit, Page and Brin had insisted that Google
engineers invent a new system.
DOERR WAS EAGER to
find a CEO for Google, and thought his friend Eric Schmidt might be
a perfect fit. Because Schmidt held a Ph.D. in computer
science—making him the rare professional manager who could speak
the language of engineers—and did not have an oversized ego, Doerr
assumed he could work with the founders. At the time, Schmidt was
the chairman and CEO of Novell, a computer networking and software
company then in the midst of a merger with Cambridge Technology. He
wasn’t thrilled with the job; the commute from his home in the
Valley to Novell’s headquarters in Provo, Utah, was arduous, and
Novell was underperforming. One night, Doerr and Schmidt were
chatting at a cocktail party. Doerr asked Schmidt what his plans
were, and Schmidt said he hadn’t thought deeply about
it.
“I think you should
look at Google,” Doerr said.
“I can’t imagine that
Google would be worth much,” said Schmidt.
“I think you should
have a talk with Larry and Sergey,” said Doerr.
As it happened, he
already had. During the process of vetting Wayne Rosing, Brin had
called Schmidt, a former colleague of Rosing’s at Sun, for an
opinion. The call lasted forty-five minutes and ended with Brin
inviting Schmidt to visit Google.
Schmidt visited
Google in December 2000. He knew Building 21 well, for he had
worked there when it was Sun’s headquarters. In the office Page and
Brin shared, he found two desks, a sofa, and the same lava lamps
Sun had had on display. In contrast to the carefully groomed
Schmidt, Page and Brin seemed to use their fingers rather than a
comb to tidy their dark hair; Page’s shorter hair is pulled down
and clings to his forehead, while Brin’s wavy locks are pushed back
and one sideburn is longer and slants more sharply than the other.
To his surprise, Schmidt saw his bio projected on the wall above
the couch. There was little foreplay. “They started going at it,”
Schmidt recalled. “They said I was mistaken in my business strategy
with regard to proxy caches, a method Novell was using at the time
to try to speed up Internet connections. Their thesis was that
there was so much bandwidth coming down that such proxy caches were
a bad business and would be unnecessary. I, of course, disagreed,
and disagreed violently. This was a forty-five-minute meeting that
went on for an hour and a half. I could not get them to accept the
brilliance of my argument. They started from the data they saw at
Google, and peppered me with questions. I hadn’t had that good an
argument in all my years at Novell.” Page and Brin were also
pleased. They appreciated Schmidt’s technical prowess, and he
passed the airplane test when he revealed that he, too, was a
regular attendee at Burning Man. How much of a suit could he
be?
Schmidt was born
April 27, 1955, in Falls Church, Virginia, and like Page and Brin
was raised in an academic family. Wilson Schmidt, his father, was a
professor of international economics at Johns Hopkins and worked
for a time in Richard Nixon’s Treasury Department; Eleanor, his
mother, received a master’s degree in psychology but stayed home to
look after Eric and two brothers. Eric attended public schools,
where he got hooked on time-share computers, which in those
prehistoric days still relied on punch cards. Another solo-sports
enthusiast, he earned eight high school letters as a distance
runner. After graduating, he was accepted at Princeton as an
architecture major, but switched to electrical engineering because,
he said, “I lacked creativity.” He became adept at programming.
“All of us never slept at night because computers were faster at
night,” he said. He worked summers at Bell Labs, where he was
skilled enough to write a software program called Lex, a code that
facilitated the writing of text. He received an electrical
engineering B.S. from Princeton in 1979 and an M.S. and a Ph.D. in
1982 from the University of California, Berkeley. Graduate school
summers were spent working at Xerox PARC, the famed lab that hosted
the creation of computer work stations, that forged the technology
that became the mouse, laser printers, and the Ethernet. After
completing Berkeley, he joined the research staff in the Computer
Science Lab at PARC, where he worked alongside such software
pioneers as Bill Joy (who became one of four founders of Sun
Microsystems) and Charles Simonyi (who would oversee the
development of Microsoft Word and Excel).
His first corporate
job was at Sun, which he joined in 1983. Over the next fourteen
years, Schmidt would demonstrate a repertoire of talents: as a
manager who hired and supervised ten thousand engineers, as a
scientist who nurtured the innovative programming language Java,
and as Sun’s chief technical officer. He left in 1997 to become CEO
of Novell. By his own admission, he failed to do proper due
diligence before he took the job. “When you grow up in a company
that is well run, it’s hard to imagine a company not well run,” he
said. Novell was not well run. When he arrived, Novell had a
$14,600,000 shortfall to declare in its quarterly report, and
executives there proposed they tap their reserves to cloak it.
Schmidt chose to report the shortfall, and Novell’s stock took a
dive. Chapter 11 was a real possibility. “Getting near bankruptcy
is a pretty good experience for being a tough CEO,” said Schmidt.
Looking back on his tenure at Novell, Schmidt candidly said, “I did
an undistinguished job.”
Still, his skills and
temperament were attractive to Page and Brin. More conversations
ensued, and in February of 2001 they offered him the CEO job.
Schmidt could not accept until the Novell merger was completed; it
was in March that he was named chairman of Google. He assumed the
title of CEO in August, and Page was named president, products, and
Brin president, technology. According to SEC documents Google filed
when it went public, Schmidt was paid a salary of $250,000 and an
annual performance bonus. He was granted 14,331,708 shares of class
B common stock at a price of 30 cents per share, and 426,892 Series
C preferred stock at a purchase price of $2.34. LarryandSergey had
a partner.
THE APPOINTMENT WAS
GREETED with some skepticism. Schmidt’s critics said he was barely
escaping from Novell. They sneered at the Mercedes he drove, the
suits and ties he wore. They wondered whether he had the right
skill set. “No one from his previous jobs,” said one industry
insider who knows him well, “would say that Eric was an
inspirational leader, a great speaker or salesman, a take-charge
leader like Paul Otellini of Intel, Carol Bartz of Autodesk, or
John Chambers of Cisco.” Skepticism about Schmidt was reinforced by
the management structure announced by Google. Although Schmidt was
named CEO, there was an unusual division of power. He, Brin, and
Page would work as a team, and if there was a difference between
the two founders over routine decisions, Schmidt would act as the
tiebreaker. “We agreed that on any major decision, the three of us
must agree,” he said.
When Schmidt arrived
full time at Google there was some hissing that he was a stooge.
“Eric doesn’t have a huge ego,” venture capitalist and former
Fortune columnist Stewart Alsop told
GQ. “He’s willing to suffer the myriad small indignities of being a
pet CEO.” Reminded of this disparagement, Schmidt declined to take
the bait and after a pause said, “I think it’s inappropriate for me
to comment on myself.... Self-reporting is always suspect.” His
low-key demeanor; monotone voice; and round, frameless professorial
glasses were interpreted by some as signs of timidity. But over
time, detractors came to appreciate his competence and maturity.
His modesty also won converts. Instead of wearing his customary
suits, Schmidt soon donned the Google uniform: khakis and a white
or black golf shirt with the Google logo. He was building trust.
Schmidt was assigned a small office containing two desks, but
before he arrived an engineer looking for a place to park spotted
the empty office and moved in. According to Rajeev Motwani, who
continued to advise his Stanford proteges, when Schmidt arrived he
assessed the situation and quietly took the second desk. “They
became office mates. Can you imagine a company where an engineer
can move into the CEO’s office? That tells you a lot about Eric,
and about the company. He understood the company’s DNA, which is
that what you do defines your importance.”
While Schmidt did not
believe he had come to Google to fix a company that was broken, he
knew its management systems were dysfunctional. He also knew he
needed to go slowly in changing them. He saw that Page and Brin
wanted to stay focused on technology and products, and had an
aversion to intrusive bureaucrats. Schmidt set out to convince the
founders and the engineers that good managers would liberate the
engineers, reduce bureaucracy, provide an audited financial system
that would better allocate resources and provide more transparency, a word the founders often invoked.
“He found a way to bring the discipline of running a company but
not lose the magic,” said Omid Kordestani.
Deftly, Schmidt shed
old practices. The weekly free-for-all meeting of about a dozen
executives, recalled Craig Silverstein, “had outgrown its
usefulness. Yet it was hard to disinvite people.” So Schmidt simply
said the meeting was too unwieldy and canceled it. Because he did
not substitute another meeting, “no one felt excluded,” Silverstein
said. Only later did Schmidt establish his own weekly management
meeting.
There was an
adjustment period, particularly for Schmidt, to get used to his two
unusual partners. “Larry is shy, thoughtful, detailed, a linear
thinker,” he said. “Sergey is loud, crazy, brilliant, insightful.
Their personalities are so different. When I first came here I
didn’t think Larry could talk, because Sergey did all the talking.”
An unofficial part of Schmidt’s mission was to police the wildest
ideas of the founders.
On one occasion, Brin
proposed to Schmidt, “We should run a hedge fund.”
“Sergey, among your
many ideas, this is the worst,” Schmidt said.
“No, we can do it
better because we have so much information.”
Schmidt explained the
legal complications, and said he talked him out of it.
And Page, for all his
mania about efficiency, could be obsessive. A footnote buried at
the back of Battelle’s book on search provides an illustration. He
writes of seeking an interview with Page and receiving this weird
counterproposal:
In exchange for sitting down with me, Page wanted the right to review every mention of Google, Page, or Brin in my book, then respond in footnotes. Such a deal would have been nearly impossible to realize, and would have required untold hours of work on Page’s part. Page and I negotiated for weeks over his proposal.... In the end, Page relented.
Like the founders‘,
Schmidt’s background was fairly narrow. He was an engineer, with
management experience. He had little experience working with
advertisers or media companies, which would soon become apparent.
But what he did have was maturity and an even temperament. It was
said, sometimes by Schmidt himself, that he was brought in to
supply “adult supervision.” He was the friendly, wise man with a
touch of gray in his neatly parted sandy hair. Eventually, Schmidt
became Google’s facilitator, or “catcher,” as he likes to describe
his role. “I catch whatever the problem is.” (When I later asked
the decidedly non-sports-loving Brin if this description was
accurate, he said, “I don’t know what a catcher does.”) The more
serious answer, Schmidt added, is that he facilitates decisions
that need to be made, establishing management systems, meeting with
financial analysts and reporters, serving as Google’s chief link to
industry and government. To the founders these were odious tasks,
but increasingly important ones. He focused Google on outside
technological dangers. “He made us better understand competition in
the technology space,” said Marissa Mayer. Google once thought its
competition came from search engines like Alta Vista or Overture.
“Eric said, ’If we’re successful, Microsoft is going to jump in [to
search].‘ Larry and Sergey and I were surprised.”
What could a late
entrant like Microsoft do to impede Google? Schmidt, having spent
much of his career in opposition to Microsoft, and having supported
the government’s antitrust prosecution of the software giant,
explained how Microsoft could use its dominant Internet Explorer
browser or Windows operating system, on which search engines
depended, to cripple Google. Discussions like this, said Mayer,
helped persuade Google to build its own applications and,
eventually, its own browser, to ensure its
independence.
Schmidt also helped
focus Google internally. When he discovered that nearly half of
Google’s searches were coming from outside America, yet there was
no concerted effort to sell ads against these searches, he seized
the opportunity. He prodded Omid Kordestani to travel overseas,
jokingly saying, “I’ll call you Monday morning at the United
terminal and tell you what plane to get on.” Kordestani gained so
much weight from eating fast food while on the road that when he
returned from his successful trips abroad he would touch his belly
and laugh, “Body by United!” Among Schmidt’s signal
accomplishments, said Paul Buchheit, was that he kept Page and Brin
“focused” and “kept things on track.” Often at meetings, he said,
Page and Brin would suddenly change the topic at whim. “Eric would
say, ‘No, we need to come to an understanding right
now.’”
Soon after Schmidt’s
arrival, the troika was romanced by Yahoo’s new CEO, Terry S.
Semel, who had come to a Web business after twenty-four years as
co-chairman and co-CEO of Warner Bros. Semel came to Yahoo at a
time when Internet stocks had plunged; Yahoo’s stock had fallen
from a market value peak of $127 billion to $12.6 billion. His
arrival aroused the righteous anger of many in the Valley, who were
suspicious of “outsiders.” He was dismissed as a representative of
old media, as a troglodyte, a Hollywood suit. But the old media
warhorse knew how to calm an anxious company, handing out
backslaps, compliments. He was a self-proclaimed content guy, and
wanted Yahoo to create more of its own, not just license the
content of others. And he wanted to sell more ads. He brought in a
former ABC network executive, Lloyd Braun, to oversee new content,
and an experienced sales team led by Wenda Harris Millard. “Terry
brought two things,” said Bobby Kotick, now the CEO of the game
company Activision Blizzard, who served on the Yahoo board. Semel
was “genetically predisposed to making money,” and if he was
presented with one hundred ideas, he could spot the one or two that
would make money. “He brought that. And he just brought the
maturity and wisdom that comes from experience. He asked the simple
question: ‘How do we make money?’”
Semel had huge gaps
in his knowledge of the digital world and of Yahoo. He was shocked
to learn that Yahoo had lost ninety-eight million dollars the year
he arrived. Ron Conway recalled a dinner with Semel on his first
day at Yahoo. He said, “Semel did not know Yahoo owned part of
Google” in the form of the warrants it banked when it signed its
search engine contract with Google. An avid deal maker, Semel
became intrigued by Google, particularly after Jerry Yang and David
Filo, Yahoo’s founders, urged him, he recalled, to “go meet these
guys.”
Semel joined Page,
Brin, and Schmidt for dinner in the Google cafeteria. Semel began
the discussion: “Help me with something. We’re your biggest
customer in the world, right? We both know what we pay you for the
whole world is less than ten million dollars, right?”
“Yes,” they
concurred.
“So what’s your
business?” Semel asked. “You don’t really have a
business.”
“We love what we do,”
Page and Brin responded.
“Maybe we should buy
your company?” said Semel, who thought it was enough of a business
to throw out a billion-dollar purchase price tag.
“No, no. We don’t
really want to sell our company.”
Semel walked away
convinced “one hundred percent they did not want to sell.” He also
walked away with assurances from Schmidt that Google was working on
“their own technology” to monetize search. Later that year, when
Overture approached Yahoo with their patented monetization
technology and offered Yahoo a revenue guarantee, Semel signed a
contract for Overture to sell its ads. Google was upset, but Semel
said that in the first full year, Overture generated two hundred
million dollars of advertising revenues. By 2003, Overture
separately approached Yahoo and Microsoft with an offer to be
acquired. Microsoft declined to bid. (They later reversed course
and started up their own search engine.) In the end, Semel acquired
two search engines, Overture and Inktomi, and Yahoo dropped its
search license agreement with Google. (It was beginning to become
clear what a colossal blunder it had been for Yahoo to farm out
search in order to focus on building its portal traffic, relegating
Yahoo to a weak second place in search. By buying Overture, Yahoo
also inherited its April 2002 patent infringement lawsuit against
Google.)
Google was growing
fast, and the founders worried they’d divide into cliques and lose
their cohesive culture. Stacy Sullivan, who had been hired in 1999
as the first employee in human resources, and Joan Braddi, Omid
Kordestani’s trusted deputy, were asked to assemble a disparate
group of early Googlers to devise a coherent mission statement of
core principles the company could embrace. Twelve employees
gathered in the cafe, each from a different department. The
discussion went in circles for several hours, with Sullivan
dutifully writing cliches on a whiteboard. Some wanted the group to
enunciate a set of rules: Don’t mistreat people; Don’t be late;
Don’t lose user focus; Play hard but keep the puck down. The
engineers in the room weren’t interested in codified dos and don‘ts
because they reeked of corporate America and offended their sense
of efficiency. They also took too long to read. After hours of
exasperating discussion, Paul Buchheit blurted, “All of these
things can be covered by just saying ’Don’t be
evil.”‘
Within a day,
engineer Amit Patel, Google employee number 7, wrote the slogan in
impeccable handwriting on whiteboards all over Google’s offices.
The slogan became viral. When opposing an idea at internal
meetings, Googlers would proclaim, “That could be evil.” The slogan
became Google’s rallying cry, a way to distinguish itself from
other corporations and Microsoft in particular, a way to harness
the goodwill Google enjoyed as a free service bringing the world’s
information to everyone’s fingertips. To former Intel chairman and
CEO Andy Grove, the slogan was too vague to define a boundary, and
smacked of self-righteousness. “Do you think Hitler thought he was
evil?” Grove said he thought at the time. “It’s too vague, too
self-serving, self-defining. ‘I’m not evil, therefore I’m not
evil.’”
Eric Schmidt was
happy with the slogan, though, and happy with what he was
accomplishing at Google. Years later, he sat on one of three
canvas-backed directors chairs jammed into the closet-sized
conference room dubbed “the directors room” that is next to his
office in Building 42. The view from a narrow vertical window
overlooked a Google parking lot; the white brick wall to his left
held a whiteboard containing mathematical formulas; to his right
were several framed newspaper clippings, including one headlined
“The Grown-Up at Google.” He admitted to feeling that he had grown
as an executive since his days at Novell. “Most people who worked
with me ten years ago,” Schmidt said, “would have said, ‘He’s
smart, a nice guy, but he can’t lead.’ What is the distinction
between then and now? Toughness.”
Back in 2001, his
“toughness” was circumscribed. He did not issue orders to the
founders, he had to persuade, to prioritize his concerns, and pick
his battles. There were palpable tensions—the founders would
sometimes loudly explode in meetings that the company was becoming
bureaucratic, and Schmidt knew he was the target. These were three
strangers working together, and the founders were uncomfortably
ceding some management control over their invention, their baby.
Schmidt knew the founders did not blame each other. There was
rarely a hint of tension between Page and Brin—“In all the years
I’ve worked with them,” said John Doerr, who is a Google director,
“I’ve never seen them get angy with each other.” But it was not
unusual, said another early investor, to witness emotional
outbursts by the founders aimed at others, and to see these
outbursts fielded and defused by the calm, self-effacing Schmidt.
The go-slow, relaxed way that Schmidt approached the founders or
changed the management meetings or eventually chased a squatter
from his office was at times exasperating to others. While
describing Schmidt as “the unsung hero” of Google, Shriram admits,
“He had a slow start.” The founders at first, he said, “challenged
everything,” and openly wondered: “Could they trust his judgment?”
Meanwhile, the VCs were pushing for a revenue plan. And Moritz was
skeptical that Schmidt was the right man to bully it through
Google.
Schmidt needed help
to lower the emotional temperature, and to upgrade Google’s
management. That help came in the form of Bill Campbell, then
sixty-one, a barrel-chested man known throughout Silicon Valley as
“the coach.” At one time Columbia University’s head football coach,
Campbell had also been a senior executive at Apple and a CEO of
several Valley companies, including the Go Corporation and Intuit,
the now-thriving online software company that provides financial
services to individuals and small businesses and where he worked
side by side with the founder. John Doerr knew that Campbell felt
an obligation to give back to a Silicon Valley that had made him
rich enough to own his own Gulfstream IV His discretion is
legendary, and part of his allure. Aside from a profile in the
magazine of his alma mater, the only other time he has ever been
profiled was in a superb 2008 Fortune
magazine piece by Jennifer Reingold titled, “The Secret Coach.” His
many friends offered tributes but Campbell would not sit for an
interview. A Google search retrieves very few Campbell press
mentions.
Doerr served on
Campbell’s Intuit board, and had called on him to mentor young
leaders of Valley companies. Regularly, Campbell would join fifteen
or so of Doerr’s dot-com CEO clients over dinner. The sessions are
dubbed Camp Campbell, “and I’m not allowed to attend,” said Doerr,
who described Campbell “as one of my two best friends.” In late
summer of 2001, Doerr reached out to his friend to help Schmidt and
the founders. “I felt it was an opportunity worth Bill’s time,” he
said. “Eric had not been CEO on a scale Google would become. Larry
and Sergey and Eric needed to be coached.”
In the Valley, Coach
Campbell is a magnet for friends old and new. Still the chairman of
Intuit, he is also the colead outside director at Apple, and one of
Steve Jobs’s few confidants. On weekends and evenings, when big
college or professional football and basketball games are
televised, Campbell can often be found with a group of buddies in
downtown Palo Alto’s Old Pro sports bar, a Stanford student hangout
he owns. He’ll have a table in the middle of the pub piled high
with hamburgers, French fries, pizzas, and his preferred drink, Bud
Lite. Just under six feet tall, Campbell is easily spotted, and not
just by the Kennedyesque thatch of gray hair that sprawls across
his forehead: he’s the guy in constant motion, moving about the
room dispensing high fives, fist pumps, hugs, and baseball caps. He
sports an oversized Columbia 1962 ring and weighs just three or
four pounds more than he did as a college linebacker. At the Old
Pro, he’s garrulous. Outside, he’s allergic to interviews with
reporters, and even with friends he sequesters conversations he has
with other intimates. His discretion is well known, and part of his
allure.
In a rare 2007
interview with two McKinsey & Co’s partners for the
McKinsey Quarterly, Campbell said
something that is music to engineers at places like Google:
“empowered engineers are the single most important thing that you
can have in a company.” He was talking about a tech company, and he
went on to say that to foster innovation “you’ve got to be careful
that you don’t make engineers beholden to product-marketing people.
For me, growth is the goal, and growth comes through having
innovation. Innovation comes through having great engineers, not
great product-marketing guys.” He also said that smart tech
executives should spend entire days “doing nothing but reviewing
projects. A whole day, with the whole management team, so that we
can clean up those projects, clean out the ones that aren’t going
to be good, and take the bodies that are recovered and put them on
the projects that look like they have the best
prospects.”
Explaining Campbell’s
role as a bridge builder at Google, Moritz said, “Bill’s
contribution has been to take the emotion out of decisions. He’s
more objective. He’s seen as a neutral source and a fair man.” The
objectivity was needed, he explained, because: “You had two
founders who were in their twenties and Eric was twenty years
older, and you had to make that relationship work between people
who did not know each other. It was natural that the founders would
be suspicious. There were bumps at the beginning that Bill helped
smooth over.” The biggest bumps, another Google insider said, were
not between Schmidt and the founders, but with two venture
capitalists on the board, Doerr and Moritz: “Eric had a busy-body
board. The impression the board had was that Larry and Sergey were
not focused. When they got Eric in, now they wanted to micromanage
him.” They wanted Schmidt to push harder to monetize search. Doerr
and Moritz “were both impatient,” said Shriram, who had served as a
bridge between the founders and the board and gratefully handed
this role to Campbell.
“I would sit with
Larry and Sergey and try to figure out the things they more or less
wanted from Eric,” recalled Campbell. Then he’d sit with Schmidt.
He performed this particular function for three years, until 2005.
Looking back over the life of Google, these sessions where Campbell
performed as both a psychologist and a coach loom especially large.
The company could have imploded. On Campbell’s shoulders rested a
complex problem. He had to earn the trust of the founders, Schmidt,
the board, and Google executives. He had to help put management
systems in place, recruit executives, suggest financial controls
and the structure of board and management meetings.
One would expect an
ex-football coach to be an in-your-face, blustery, and threatening
personality. And Campbell sounds like he would be, for he has a
deep, hoarse voice that seems the product of yelling all day. But
he is self-effacing, quick with a quip, more listener than talker.
Schmidt likens Campbell’s ability to listen to that of a shrink,
adding, “When he walks into a room, everyone smiles. I’ve never
seen that.” But he also said that “shrinks are seen as passive,”
which is why he believes the “coach” appellation is more accurate.
“A coach says, ‘Let’s go!”’
Campbell laughs when
told that some refer to him as Google’s shrink and offers this
modest explanation of his role: “Sometimes when you are in a big
and complex organization, your behavior is noted. And if your
behavior is sometimes out of line, sometimes it’s me that will say,
‘Move it a little bit in this direction or that direction. Not
much.’ Shrink would not be the right description. It’s more
coaching people into the right direction.”
It did not take long
for Campbell to win over Schmidt and the founders. “Bill took me
under his wing,” said Schmidt, who refers to him as “my
consiglieri.” Campbell is so valuable at Google, Page said, because
“he has the unique ability to be a warm person, one that everyone
can relate to, but also has the experience of actually running a
company” Brin smiles when asked about Campbell and speaks of his
“especially high EQ,” emotional intelligence. A principal criticism
of Brin and Page is that they, like many of their engineers, lack
EQ. Did he, I asked, think they lacked
EQ? “We are ranked far below Bill Campbell,” Brin
conceded.
Two Campbell ideas
embraced by the troika were an executive management meeting with
their direct reports and Campbell that consumes several hours every
Monday, and project review meetings with engineers that occupy much
of Tuesday, Wednesday, and Friday afternoons. Campbell regularly
holds one-on-one sessions with other senior executives to offer
evaluations, mediate management disputes, hold hands. In other
companies, Brin said, politics become excessive when you get to be
large. “One of the reasons we’ve been able to avoid politics is
Bill Campbell. When issues arise, he’s willing to intercede.” One
day I’d scheduled an interview first with Brin and then Campbell.
But Brin had arrived late and we backed into Campbell’s allotted
time. We were in the small conference room a few doors from Brin’s
office in Building 43 and Campbell ambled in for his scheduled
interview. Brin smiled and instantly rose from his chair and the
two men hugged.
Campbell participates
in the Monday executive management meeting, discusses the agenda
that Schmidt sends out to participants specifying the decisions
they need to discuss at the meeting. He acts as envoy, visiting
YouTube headquarters with some frequency in the first half of 2008
to find ways to generate revenues from the popular video site and
improve communications between the two companies. Campbell is the
only outside person ever welcomed into Google’s inner sanctums. In
addition to executive meetings, he attends board meetings. “He’s
closer to us than the board,” said David Krane, director of global
communications and public affairs. “Eric said management is a
marathon, not a sprint. It’s stressful,” Page said. “Bill plays an
important role of keeping us all healthy and
interacting.”
Why does he volunteer
to spend approximately two full days a week on the Google campus?
“This is family for me,” he said, a catch in his voice. “These are
people I love dearly. I’ve been doing this since late 2001. I
probably get as much out of this as everybody gets out of me. The
joy of participating at a company that is at the leading edge of
anything going on in the personal technology space. It’s centered
here. There’s innovation daily. They think about changing the
world.” He refuses to be paid more than a dollar a year; in 2007,
his compensation was increased when he was given a reserved parking
space on a campus where spaces are usually filled by 10 a.m. Brin
said he and Page had to insist on compensating Campbell with Google
stock options. The fact that Campbell plays such an atypical role
at Google suggests that in addition to coach or shrink he can also
be described as a babysit ter. The fact that Google needs one is a
reminder of its youth.
TO BETTER UNDERSTAND
Bill Campbell, Jr., roll the reel back to Homestead, Pennsylvania,
the small steel town near Pittsburgh where he was born on August
31, 1940. His mother, Virginia Marie Dauria, was a home-maker while
his father, William V Campbell, worked the night shift in the steel
mill and taught high school physical education. He became the
basketball coach at Duquesne University, where he was a close
friend of the football coach Aldo T “Buff” Donelli, then the
principal of the local high school and finally the school
superintendent of the district. Bill’s mom stayed home to raise him
and his younger brother, Jim, who went on to become an All-American
wide receiver at the Naval Academy. Bill was an honor student at
the public high school, and though he weighed only 175 pounds, he
was voted All Western Pennsylvania as an offensive guard and
linebacker. What was his football talent? “Speed. And I would hit
ya!” he said with a laugh. “When colleges came around, I couldn’t
understand why guys who weren’t as good as I was were going to Penn
State and Pittsburgh. It pissed me off. So I got recruited by the
Ivy schools.”
Bill chose Columbia,
where Buff Donelli, who had gone from Duquesne to Boston
University, had just replaced Lou Little, the Columbia football
team’s longtime coach. Bill received a scholarship and played
middle linebacker on defense and offensive guard. He went on to
star and captain the 1961 Columbia team that tied Harvard for its
first, and only, Ivy League football championship. He hurt his knee
that year, which ended his playing career and earned him a 4-F
draft deferment. When he graduated in 1962 with a degree in
economics, he decided to stay at Columbia to get a master’s degree
so that he could stay involved with football. He was studying
economics, but “I wanted to be a coach,” he said. Donelli appointed
him assistant freshman football coach, and he doubled as a resident
adviser. His second year, he scaled back graduate studies to
part-time in order to serve as the offensive and defensive end
coach on the varsity football team.
His career goal was
to become a head coach. “My dad was a coach,” he said. “There was
nobody I admired more than my dad and Buff Donelli. These were the
two role models I had. I wanted to be Buff Donelli. I wanted to be
Bill Campbell, Sr. My dad was so respected in town. He had been the
coach, the superintendent. He just had this way about him. He could
unite anybody.”
Bill had a summer job
after his second year as a coach at Columbia and eagerly
anticipated year three, starting in September 1964. But he received
a notice from his Pennsylvania draft board to report for a
physical. Expecting to again be declared 4-F, he was surprised when
he passed. He was even more surprised that “they took me in the
service that same day.” He was swiftly dispatched by train to Fort
Knox and never got back to collect his belongings at Columbia. For
the next two years he was an army private stationed at U.S. bases,
landing at Fort Gordon, Georgia, where he ran the athletic program
and was both the assistant football coach and the
quarterback.
After being
discharged from the army, Campbell returned to Columbia as the
coach of the freshman football team, and studied for a master’s
degree in education. The next year, he became Donelli’s offensive
line coach and thought he was on his way to head coach—until
Donelli chose to retire. The new coach brought in his own assistant
coaches, and Campbell was out of a job. He found a new job as
linebacker coach at Boston College, where he stayed six years,
rising to defensive coordinator. He returned often to New York,
where he met his future wife, Roberta Spagnola, a Columbia
University dean, on a blind date. When Columbia called in 1974 and
asked him to return as head coach, Campbell jumped at the chance.
He and Roberta married in 1976, and would have a son and a
daughter.
Over his six years at
Columbia, Campbell had a record of twelve victories, forty-one
defeats, and one tie. He blames his losing record on his devotion
to the players as men rather than as athletes. He was a nurturer.
“I really felt like I committed to these kids. My view was more
father coun selor and adviser .... I wanted these guys to achieve.
I wanted them to go to work for Procter and Gamble or IBM, if
that’s what they wanted. I took great pride in getting summer
internships for them at Merrill Lynch and Salomon Brothers. I was
more engaged with them. I often think that had I been less worried
about that and more dispassionate about playing, maybe I would have
been better.” If he had to do it over, though, he says, “I wouldn’t
change. I couldn’t change.”
After leaving
Columbia, he became a sales and marketing executive at J. Walter
Thompson, where he stayed until Eastman Kodak, a client, recruited
him to be its director of marketing. Then, in 1983, John Sculley,
recently appointed the CEO of Apple, heard about Campbell from a
relative and began courting him for the job of vice president of
marketing. He clinched the sale by demonstrating for Campbell the
revolutionary Macintosh computer, which Apple would introduce in
1984. “It would be pretty unusual today to hire a football coach to
be your VP of sales,” Sculley later told a reporter. “But what I
was looking for was someone who could help develop Apple into an
organization.” Campbell took over sales as well as marketing just
months after he joined Apple, and set about firing the consultants
and most of a sales force that “wore polyester pants and gold
chains.” He said he replaced them with recent college graduates,
half of them women, and all hungry to succeed. “What I learned from
coaching,” he said, “is that if your guys are not as big and fast
as the other guys, you’re fucked!”
Campbell’s boldness
appealed to the ever-rebellious Steve Jobs. The two men bonded. By
1984, said Campbell, “Sculley and Jobs were going at each other
already.” Although Jobs had recruited Sculley to bring professional
management to Apple, he came to think he was more interested in
marketing, including marketing himself, than in Apple products;
Sculley believed Jobs wanted an acolyte, not a CEO. Nevertheless,
Campbell earned the rare distinction of being able to both befriend
Jobs and command Sculley’s respect. Before Sculley succeeded in
pushing Jobs out of Apple in 1985, Campbell warned him it would be
a huge mistake. Tensions flared between Campbell and Sculley, and
in 1987 Campbell was put in charge of Apple’s Claris software
division, with the intention of spinning it off as a private
company with Campbell at the helm. But with Claris thriving,
Sculley changed his mind. Campbell left rather than remain as a
division head under Sculley.
At the recommendation
of John Doerr, the Go Corporation hired Campbell as their CEO. The
company was an early pioneer in pen computing—too early, it seemed,
and when the market didn’t respond, Campbell unloaded the Go
Corporation on AT&T, in 1993. He next became CEO of Intuit when
Doerr suggested to founder Scott Cook that Campbell would be a
great partner. Four years later, he moved up to chairman of the
board. On the eve of Steve Jobs’s return to Apple in 1997, he asked
Campbell to join his board.
Today Campbell serves
as a mentor to some of the Valley’s most successful entrepreneurs,
from Marc Andreessen to Steve Jobs, whom he walks and talks with
most weekends in Palo Alto, where they are neighbors. He estimates
that he spends about 10 percent of his time on Apple business,
about 35 percent on Intuit business, an equal amount at Google,
about 10 percent as chairman of the board of Columbia University,
and the remainder on assorted activities. He said he has donated
his Google stock to the foundation he established to make
charitable gifts to his hometown, among others. He donated money to
his Homestead high school for a new stadium, scholarships in his
father’s name for student athletes, a new gym named for his
brother, who died of lung cancer in 2006, and Apple computers for
the school. In the fall, he coaches sandlot football for
eighth-graders from St. Joseph’s School of the Sacred Heart in
Atherton, California; in the spring, he coaches the eighth-grade
girls in what’s called powder puff football.
He doesn’t have a lot
of enemies. Marc Andreessen said of Campbell, “He’s been incredibly
important in the Valley. Business is changing so quickly,” and less
experienced entrepreneurs turn to Campbell for guidance. “Bill has
been a model mentor. When he’s not in the room, he’s still there
because people ask, ‘What would Bill say?’”
IN SCHMIDT AND
CAMPBELL, Google had executives who could work with the founders
and mentors the whole organization to work together. Now it needed
to recruit senior executives. With an assist from Campbell, one of
Schmidt’s initial targets was Sheryl Sandberg, who had just
concluded her service as chief of staff to treasury secretary
Lawrence Summers. The Clinton administration was winding down, and
Sandberg, who was just thirty-one, was much in demand.
Sandberg has short
dark hair, an angular face that is softened by a bright smile, and
an engaging manner that makes strangers feel comfortable. She was
the first of three children born to Adele and Joel Sandberg, she
then a professor of English and other languages, he an
ophthalmologist. The Sandbergs moved to Miami from Washington,
D.C., when Sheryl was three, and although Sheryl was considered the
smartest student in her public high school, she wasn’t a bookworm;
from childhood, she has been popular. For college, she left Florida
and went to Harvard and in her junior year there took a course from
Lawrence Summers, then the rising star of the economics faculty. At
the end of the semester he invited his five best students to lunch
at the Harvard Faculty Club and offered to serve as their senior
thesis adviser. Sandberg accepted Summers’s offer—“He changed my
life,” she said—and went on to win the John H. Williams Prize as
the top graduating student in economics. When Summers was appointed
chief economist at the World Bank, he brought her in as his special
assistant.
Sandberg had a
particular interest in health care, and in the early nineties went
for a time with a team to India to work to alleviate leprosy and
AIDS. Shaken by the poverty and suffering she witnessed, she vowed
that she “was only going to do things that were good for the
world.” She wanted to work in nonprofits or government but felt she
required a broader education. She stayed at the World Bank two
years before deciding she would go back to school. “I come from a
Jewish family,” she laughed. “My dad’s a doctor. You had to have a
graduate degree!”
Accepted at both
Harvard’s law and business schools, she chose the latter, believing
she needed a better understanding of how organizations worked.
Between her first and second year she got married. Though the
marriage lasted only a year, she graduated near the top of her
class as both a Baker and a Ford scholar; with her former husband
in Washington, D.C., she fled to the West Coast, where she joined
McKinsey & Company in California, working on health care.
McKinsey gave her no more joy than her marriage. “You don’t do
anything,” she explained. “You just tell other people what to do.”
She left after one year.
Summers was then
deputy treasury secretary under Robert Rubin in the Clinton
administration. The two had kept in contact and, again, he
recruited her as his special assistant. For the next four and a
half years, she worked for Summers; when he was elevated to
treasury secretary she became his chief of staff. But when the
second Clinton term ended in January 2001, she had to move on.
Washington had taught her some surprising things. “Over the years,”
she said, “I got less naive. I no longer thought, The private sector is bad. The public sector is
good.” At Treasury, her most “exciting” meetings had been
with technology companies. In America, she believed, “economic
growth was all technology driven.” She decided she wanted “to go
and be an operational executive in a tech company, a
make-the-trains-run job.”
In early 2001, she
moved out to San Francisco. Her sister lived there, and it was the
technology capital of the world. She took time to clear her head,
and in any case, with the dot-com bust still reverberating, it was
a difficult time to seek a job. She signed up for cooking classes
and relished her free time. She was offered an executive position
by eBay, but she had her sights set on Google. “When I came out of
the government, I wanted to do something that I believed in,” she
told me. “I went to Google because Google had a higher mission,
which is to make the world’s information freely available. But they
weren’t offering me a job.”
Schmidt talked to her
in the fall of 2001, and like all top applicants, she met with Brin
and Page as well. When Schmidt offered her a position in late 2001,
she was excited, but on closer inspection wasn’t sure it was a real
job. “I was supposed to be a business unit general manager, but
there were no business units, and therefore nothing to be managed,”
she said. Schmidt “called me every week and said, ‘We’re profitable
this week too!”’ Friends advised her to “work for a real company,”
one that earned steady profits. “I met Eric and said there is no
job. He looked at me and said, ‘You’re looking at this the wrong
way. None of this matters. Growth matters. Get on a rocket ship and
all things take care of themselves.’”
She was employee
number 268. Her title was business unit general manager, even
though, as she had noted, there was no business unit. There was
also no CFO, which is perhaps why Eric Schmidt assigned her a top
secret mission, kept even from their venture capitalists, to
investigate a potential round of private financing to pump money
into a four-year-old company that had yet to have a profitable
year. Among the people Sandberg spoke with was Mary Meeker, the
author of the seminal Internet report at Morgan Stanley. Their
discussions, Meeker said, made her take greater notice of Google.
“Before Sheryl arrived,” said Meeker, “they were so quiet and
private. She was part of a push to bring people in.” Months and
many meetings later, Sandberg made a PowerPoint presentation to the
founders and Schmidt. The consensus of the people Sandberg
consulted was that Google should be valued at one billion dollars.
The consensus of the founders and Schmidt was that they would not
pursue more investment capital because this valuation was, she
said, “a total insult.”
The project was
shelved. “I needed another job. I knew I wanted to work for Omid
Kordestani, who runs all business and operations. We were launching
AdWords CPC.” Kordestani planned to expand the AdWords staff from
four to eight. “Omid said to me, ‘I need a tractor. You’re a
Porsche. Why do you want this job?’”
She thought their
ideas for selling ads were innovative. If they worked, they would
be efficient—by cutting out sales teams—and bold, giving
advertisers an incentive to make the ads more relevant. Advertisers
would rank higher on the search results page based not just on the
price they bid per keyword, but on the number of clicks their ads
received. The more clicks, the lower the price, and the higher they
would rank.
Advertising, Schmidt
said, had not been viewed “as a priority” by the founders—nor,
according to Doerr, by Schmidt. And, indeed, Schmidt had become
convinced that since Google had succeeded in building the best
search engine, the money would follow. But by 2002, at the helm of
a four-year-old company that had yet to have a profitable year,
Schmidt knew it was time to focus on money. But he also knew Page
and Brin had definite ideas about what was “evil.” Senior software
engineer Matt Cutts recalled that a credit card company (it was
Visa) offered five million dollars to put a link to their credit
card logo on the bottom of Google’s home page. But Page and Brin
wouldn’t budge, nor would they relax their strictures against
advertisers paying for search results. “Google was really trying to
do right by their users,” said Benjamin A. Schachter, then the
senior Internet analyst for UBS. But they weren’t building a
profitable business.
Moritz was becoming
restive, openly wondering if Schmidt was tough enough. A Google
insider with direct knowledge said that in 2002, Moritz pressed for
Schmidt to be fired. Another insider said the unhappiness with
Schmidt was at first shared by others who also worried that he
wasn’t tough enough, that he was moving too slowly to galvanize a
management team, to challenge the founders, and most especially, to
find a revenue stream.
Schmidt remained
calm, at least outwardly. By late 2001, he knew of the effort at
Google that Sandberg was now working on to devise the new version
of AdWords, the advertising program associated with search. In
AdWords as it worked through 2001, advertisers paid Google the
old-fashioned way, based on a cost per thousand (CPM) whether the
searcher clicked on their ad or not. What Google was quietly
exploring was switching to a cost-per-click model, an idea that
built on the Overture model. In addition to Sandberg, Omid
Kordestani assigned Salar Kamangar, the author of the original
Google business plan, to serve as a bridge between the engineering
and the sales team as they improvised.
This began a long and
intense period of brainstorming. The team liked the idea of
charging by the click, thinking it was a way they could farm out
not just search, as they had done with Netscape and Yahoo, but also
advertising. “We knew we needed a lot of ads, and to have a lot of
ads we also had to syndicate,” Kamangar said, performing the search
function for sites like Yahoo but also selling ads for them. He
knew that Page and Brin would resist allowing advertisers to pay
for placement within search results. He also knew advertisers were
wary. The CPC model was associated with low-quality ads that were
harder to sell and were known as “remnant advertising.” Advertisers
like to determine where and when their ads appear, and if they
allowed a company like Google to put their ads on other Web sites,
and allowed the Web sites to choose the times they would appear,
the advertiser would lose control. Was there a system to serve both
users and advertisers?
For months they came
up empty. Members of the team remember Kamangar walking about with
two fingers pressed to his lips, muttering, “I’m thinking, I’m
thinking.” One day, he said, a “lightbulb went off.” What if Google
combined the cost-per-click model with a measurement of whether
users found the ad relevant? Google engineers could come up with an
algorithm to measure the quality of the ads, he thought, assuming
that more clicks meant users liked the ads. To sell them they could
use what economists call a Vickery Auction, an idea suggested by a
colleague, Eric Beach. In a Vickery Auction, named after William
Vickery, the twentieth-century Canadian economist and Nobel
laureate, after Google set a minimum bid price per keyword, the
advertiser bids, say, fifteen dollars for a keyword. If the next
bid is ten dollars, the winner only pays one cent more than the
second highest bidder, saving nearly five dollars; the second-place
bidder pays a penny more than the price bid by the third, and so
on. The advantages for Google were many. By charging per click,
Google could syndicate its ads—sell them on other Web sites as well
as on Google search. The more ads it sold on different platforms,
the more data Google collected, and thus the more reliant on Google
advertisers became. And Google could automate the entire system,
minimizing the size of its sales force.
The advantages for
advertisers were manifest. They knew they were not being gouged,
because they only paid a penny more than the next highest bidder.
They benefited by being charged only when the user clicked on the
ad. This gave them an incentive to produce a better ad because
better ads produced more clicks, which lowered their cost per
click. And by charging per click, Google opened online advertising
to many small businesses who normally had nowhere else to turn but
the Yellow Pages. By allowing Google to syndicate ads, advertisers
were achieving the online equivalent of one-stop shopping offered
by network television, whereby ads appeared on hundreds of local
stations. And because the system was automated, advertisers were
spared the expense of a monitoring system. They would simply
transmit to Google their keywords, their bid per keyword, their
monthly budget, and their billing information. And then using
Google Analytics, they could monitor the results
online.
Page and Brin made a
major amendment to the new AdWords before it was inaugurated in
February 2002. At the annual technology, entertainment, design
(TED) conference in Monterey, they engaged in conversation with the
Israeli entrepreneur Yossi Vardi. Vardi is a bear of a man with a
walrus mustache and a friendly, even impish manner. His company
started ICQ, the Internet’s first instant messaging system, and
sold it to AOL for four hundred million dollars. He and the Google
founders discussed search ads—how to make them unobtrusive and yet
relevant to users. Vardi suggested that they could use two-thirds
of the page for search results and wall off the text ads from the
search content the way a newspaper walls off ads. They could do
this by placing a thin blue line between the search results and a
smaller gray box on the right-hand side of the page containing the
text ads and links to the advertiser. Users could either click on
the link or not. Vardi’s idea, Brin recalled, was the genesis for
the way ads were displayed. Page and Brin decided the ads should be
small, a couple of lines long, imposing a limit of ninety-five
characters, and insisting that they be informational.
It was unclear when
the new AdWords was introduced that it would be what it became: a
Google money machine. “The AdWords is brilliant because it allows
you to scale the advertising solution to what you need,” said
former Microsoft executive Nathan Myhrvold. It democratizes
advertising, allowing Google to use it for either small or large
advertisers. It was also, Myhrvold believes, pirated from Overture.
The rival search engine thought so too, and later that year filed a
patent infringement lawsuit against Google.
A year later, a
second money gusher—AdSense—would spring from the CPC model. At the
time, Paul Bouchet was developing Gmail and working on software to
match words sent in an e-mail with keywords selected by
advertisers, allowing small text ads to instantly appear. Brin
wondered why they couldn’t apply this innovation to a new program
that would help bloggers and any Web site make money. This idea
would be called AdSense. If a reader was looking at an analysis of
computers on a Web site like Engad get, an HP or a Dell ad could
appear. Similarly, readers of a story about the law in an online
newspaper might see a law firm’s ad, while people looking at a Web
site devoted to pancreatic cancer could see ads for
pharmaceuticals. Google would serve as the matchmaker, delivering
the advertising and sharing the revenues. As with AdWords, the
advertiser would pay only when the ad received a click. And as
AdWords democratized advertising, luring small advertisers online,
so AdSense would become a way for Web sites to generate income. The
effort was led and architected by Susan Wojcicki, vice president,
product management, who later received the prestigious Google
Founders Award—paying about twelve million dollars—to honor her
efforts. AdSense, Danny Sullivan told USA
Today, “basically turned the Web into a giant Google
billboard. It effectively meant that Google could turn everyone’s
content into a place for Google ads.”
Eric Schmidt recalled
how Brin lobbied him for money to market the program. “He and an
engineer developed a system of showing ads on people’s blogs or Web
sites. They came to show this to me. It was not an exciting demo.
And Tim Armstrong’s sales guy is assigned to help them out. Now
we’ve got three people out of control! So Sergey comes in and said,
‘I need to buy inventory to make this happen.’”
“How much?” asked
Schmidt.
“I need a million
dollars,” said Brin.
“We don’t have a
million dollars!” said Schmidt.
“Sure we do,” said
Brin.
“I didn’t give a
precise answer”—a couple of hundred thousand dollars, said Schmidt,
chuckling. (Susan Wojcicki remembers that he alloted them a
marketing budget of two hundred thousand dollars.)
Weeks later, Schmidt
asked Brin, “Sergey, how much money did you spend?”
“A million and a half
dollars,” said Brin.
“Sergey, you said one
million!”
“No, you didn’t give
me a precise figure!” said Brin.
“What does that tell
you about them?” Schmidt said of the founders. “He had the idea. He
assembled the activity. He figured out who his opposition was—which
was me, in a friendly way. He told me about it because he wanted my
support. And he evaded my guidance. And as a result, built a
multimillion-dollar business.” (By 2004, AdSense would produce
about half Google’s revenues.) Schmidt paused to chuckle again,
then said, “You see why I work with these people!”
The chuckle is
appropriate, for Google would not have succeeded without a measure
of luck. As Larry Page confessed to a Stanford class, discovering
the advertising formula that would work “probably was an accident
more than a plan.” A reminder that timing, serendipity, luck—not
just a smart strategy or brilliant execution—sometimes determines
success. With programs like AdSense, Google did not aim to build a
huge Web-based political constituency, but it did. As its
advertising dollars rained on Web sites, Google was hailed as a
benefactor. Not only was Google not evil, it was beneficent. Google
would call these content Web sites partners, and give them about
two-thirds of the ad dollars, with Google pocketing the rest. Many
small businesses would be discovered and thrive. It was largely
overlooked at the time that automated AdSense cut out the
advertising middleman. Or as Wojcicki told me, “It changed the way
content providers think about their business. They know they can
generate revenues without having their own sales team.” In the
online world, Google was potentially dis-intermediating not just
the media buying agency but the sales forces of content
companies.
AdWords and AdSense
would solve the mystery of how Google could monetize its search
engine. For the first time, in 2001, Google turned a profit: $7
million on revenues of $86 million. The next year, revenues more
than quadrupled to $439 million, and profits jumped to $100
million. Google’s search index included three billion Web
documents. Not surprising, among the top ten searches on Google in
2001 were these: World Trade Center, Osama Bin
Laden, anthrax, and Taliban.
In 2002, Urs Hölzle,
who is now Google’s senior vice president of operations, was
undecided whether to return to his tenured faculty position at the
University of California at Santa Barbara. AdWords made that
decision simple. Google had finally found a way to make money. “Now
we could fund all these things we couldn’t fund before,” he said,
“2002 was when we said, ‘We can afford to spend more on machines!’”
This was also the year Google discovered, as Eric Schmidt would
tell me several years later, “We are in the advertising business.”
Ignited, the Google rocket took off.