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Google is so popular that the 2007 edition of Merriam-Webster's dictionary has included the verb "to Google": "to use the Google search engine to obtain information about (as a person) on the World Wide Web." How has Google managed to rise to the top in the search engine market? And how does it expect to stay there? It's mostly due to its company culture, and to its constant pursuit of innovation, says the report "Google. Organizando la información en la red" ("Google: Organizing Information on the Web") by IESE Professors Sandra Sieber and Josep Valor. To study the company's development, the authors go back to 1995 when search engine companies were all about the directory philosophy, and were largely responsible for categorizing web pages. But the vast amount of information available online made manual indexing unfeasible. In December 1995 came the first search engine based on automatic, exhaustive web search: AltaVista.

A few months earlier, Sergey Brin and Larry Page had met at Stanford University. Together, they would design an algorithm to search for information in large databases. The search engine they created would rank pages with similar content according to the amount of links pointing to them. In their opinion, the more links pointing to a certain page, the more popular it was, and thus the higher it should appear on the list of search results.

During the course of 1998, the Stanford students rejected numerous offers to buy their technology before finally deciding to create their own company with money put up by friends and family. That summer, the cofounder of Sun Microsystems, Andy Bechtolsheim, wrote them a check for the sum of 100,000 dollars, payable to Google Inc. And so the company was registered.

By 2000, Google had already surpassed AltaVista's search engine traffic, and in then 2002, AOL (America Online) chose it as the default search engine to be used by its more than 34 million members. In August 2004, Google went public at a price of 85 dollars per share and generated 1.2 billion dollars in total capital. After that, the company's stock price did not stop climbing until going over the psychological barrier of 500 dollars on November 21, 2006.

More Than Just Publicity
In the mid 90s, most search engines got their revenues from the ads they imbedded into their search engine results pages. Google decided to make a clear distinction between search engine results and paid advertising; thus, the search results on Google appear in a list to the left of the page, while the ads - brief texts with no images - are displayed on the right. These ads have a certain relevance for Internet users, given that they are related to the searches being performed. But Goggle's revenues came mainly from granting licenses for its search technology on third-party sites.

Soon after, the company launched AdWords, a "self-service" advertising program that can be activated online in a matter of minutes by using a credit card. The AdWords system is quite simple: The advertiser chooses which words to buy and the maximum amount it is willing to pay for each clicking of a particular word, as not all words are going to have the same value for each customer. Google only charges the advertiser when a user clicks on the ad, regardless of how many times it appears on the Google page.

Every time a person uses a particular word, Google decides which ad to place among all the advertisers that have signed up for that word. This decision is the result of bidding and estimating the chances of a click and, therefore, of its entry. AdWords makes it possible to create an ad campaign for as little as five euros, which has managed to attract small companies.

In 2003, Google introduced AdSense. The program lets any third-party web page place ads that Google has selected by using the AdWords philosophy. By becoming an advertising wholesaler, Google gives any sites with traffic the option to charge for advertisements, while taking a commission for itself. With its system for analyzing a web page's content, Google places ads that are most likely to be of interest to visitors, thereby maximizing the income for both parties.

Search engine marketing works so well that in January 2007 the cost of licensing Google's technology amounted to less than 1 percent of its total revenues, which in 2005 were already 6.139 billion dollars.

But Google has taken its business beyond just the search realm, reaching users' desktops with applications such as its Google Pack. This program includes such standouts as the Google Toolbar - which gets installed in web browsers and gives access to Google's search engine without having to navigate to its website - and Google Desktop, which performs lightning-fast searches for files stored on the user's computer. And, in keeping with its philosophy of not charging the user and that the money will come in time, these services are all free.

Another segment that Google has stepped into is that of services aimed at web designers, including tools that help manage advertising campaigns.

Getting Organized for Innovation
One of the keys to Google's success has been its ability to put innovative ideas into practice without faltering whatsoever in its position as the market's top search engine. That said, Google's corporate culture can be summed up in five points: 1) Reverse thinking. The company is convinced that business models will become apparent as they go along and it prioritizes technology over business; 2) Keeping everything in beta. This way, the customers become allies in the process of learning the product. 3) Constant innovation and fast execution, instead of absolute perfection; 4) Renouncing formal marketing; and 5) Creating its own rules, as it demonstrated with its online auction-based IPO.

With this philosophy, Google has created a number of ways to foster the creativity of its engineers, who are under constant pressure. To do so, it has institutionalized the 20 percent rule, which allows engineers to spend 20 percent of their time working on projects that are appealing or exciting to them. Products like Google News, Gmail and the social networking site Orkut have all come out of this.

Meanwhile, Google has set up a simple but effective framework for developing new projects, which is to keep the groups small, from three to five people. That way, there are myriad simultaneous projects whose resources need to be prioritized. That's where the 70/20/10 rule comes in: Google assigns 70 percent of the resources to the basic search-engine business, 20 percent to related projects and 10 percent to more distant projects. Despite its efforts at internal innovation, Google recognizes that good ideas often get developed in the market. This is why it has built up a keen sense for sniffing out small but promising companies.

The Future
Even with its extraordinary financial and stock market successes, some analysts predict an uncertain future for Google. First off, the company's invasion of sectors related to that of search engines has placed it in the path of such diverse powerhouses as Yahoo!, Microsoft, AOL, Amazon, eBay and even operators like Comcast. Furthermore, Google's businesses present few - if any - entrance barriers. And one must not forget that in the not-too-distant future Google will have to face a challenging hurdle: the arrival of metadata, particularly the adopting of XML classification standards, which will make all of the valuable content on the Web indexed from the outset and thus diminish the importance of search engines. It will be interesting to see whether Google is able to sufficiently diversify its sources of revenue before that happens.

This article is based on:  Google 2015
Year:  2007
Language:  English