Google Notes (April 2006)

Google File Storage: http://www.baselinemag.com/c/a/Infrastructure/How-Google-Works-1/4/

Book Recommendation:

“The Search, How Google and its Rivals Rewrote the Rules of Business and Transformed our Culture” by John Batelle

Following notes are based on the book:

Business Model

Google was well known as the best search engine for years but was not successful as a business until they managed to stumble upon a “scalable” business model.  First pass was selling the engine technology.  Second pass was selling sponsored links.  But the sales cycle and support required for both was too long and labor intensive.  It was not until they arrived at an automated mechanism for companies to sign themselves up that things took off.  Like Overture, Ebay, Amazon and other viable Internet companies they have created a self-sustaining marketplace that they own

Engine as Can Opener

For years Google sold its search engine … but that was a limited growth opportunity.  The exploding value they have tapped in recent years is a result of finding more and more content sources (e.g. Google maps) that they can “open” to the public by indexing them for search and add value by packaging them as end-user ready applications.

Scalable Data Center as core Asset

While the PageRank algorithm (patent owned by Stanford University, Google is the sole licensee until 2011), and the Search Engine have been key in the evolution of Google, the book identifies Google’s scalable data center as it’s core asset.  The ability to process billions and billions of web pages, and respond efficiently to millions of requests around the world is an engineering feat that others are unable to duplicate.  No engine indexes as many pages. They are able to add new applications on a continuous basis (e.g. Google Maps).  To make a similar point, scalability of data center was one of the reasons Microsoft was willing to pay $800 million for HotMail. (And Google Mail competes effectively in that space even though they entered years late because they are able to give users one 1Gig of space).

Context as a core Asset

While the scalable data center is key, CONTEXT is the gold that Google is tapping.  This is the critical component of their business model.  The words you type when you enter a search into Google reveal a lot about your context (and in particular the context you would like to be in).  By typing “Parrot Food” to a google search engine (or a geographic location to Google Maps), a lot of information is revealed about one’s context … information that is incredibly valuable.  It is by marrying context to scalable data center to packaged applications that Google generates value for end users AT NO CHARGE.  But it is by selling the information from that Context that Google cashes in…

Advertising

Google’s revenues are based on integrating openness to advertising into the services they provide to end users.  Advertisers pay to have their links appear when certain search terms are typed.  But note, the advertisers only pay when a user actually clicks on the link.  As a result, advertisers are willing to pay a fair amount of money for that link to appear.  Google shows the links in the order that is most profitable to them (e.g. ranked by volume * price per link).  I can also tell guarantee that because it has its own data center, Google is also selling aggregated data that is of interest to businesses (how many people from an IP address in Texas are searching on Parrot Food … and what else are they searching on)…

Silicon Valley VC money

Silicon Valley was a huge factor in the growth of Google.  When Google started out as 2 graduate students (Sergei Brin and Larry Page), they were introduced to a VC (by their graduate supervisor Prof. Terry Winograd) who wrote them a check for $100,000 10 minutes into their conversation.  They raised $50 million very quickly after that …