2. Google Inc.

Revenues 2014: $ 66.001 billion (€ 49.681 billion)

Overview

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The students Sergey Brin and Larry Page developed the fastest search engine in the world. Google delivers relevant results in split seconds. Thanks to yet another of the founders' inventions – context-sensitive web advertising – Google Inc. managed to find its way into the league of the world's most profitable companies in media and online technology. Due to the sheer size to which the information pool has swelled on since then, the company is walking on a thin line between usability and spying out and subsequently processing private data. As of today, Google generates 96 percent of its revenue through advertising.

General Information

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Headquarters:
Google Inc.                
1600 Amphitheatre Parkway, Mountain View, CA  94043                 
Phone: 001-650-253-0000
Internet: www.google.com

Legal form: Public company 
Financial year: 01/01 – 12/31
Founding year: 1998

Table I: Economic Performance
2015201420132012201120102009200820072006
Revenues ($ Mio.)74,98966,00159,82550,17537,90529,32123,65121,79616,59410,605
Profit (los) nach Steuern ($ Mio.)16,34814,44412,21410,7379,7378,5056,5204,2274,2043,077
Stock price (end of year)759526,41.120707,38645,90593,97619,98307,56702,53460,48
Employees61.84853.60047.75653.86132.46724.40019.83520.22216.80510.674

Executives and Directors

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Executives:

  • Sundar Pichai, Chief Executive Officer, Google 
  • Larry Page, President, Alphabet and Co-Founder
  • Sergey Brin, President, Alphabet and Co-Founder
  • Eric Schmidt, Executive Chairman
  • Ruth M. Porad, Senior Vice President and Chief Financial Officer, Alphabet
  • David C. Drummond, Senior Vice President, Corporate Development and Chief Legal Officer
  •  

Board of Directors:

  • Eric Schmidt, Google Inc.
  • Sergey Brin, Google Inc.
  • Larry Page, Google Inc.
  • John Doerr, Kleiner Perkins Caufield & Byers 
  • K. Ram Shriram, Sherpalo Ventures
  • John L. Hennessy, Stanford University
  • Paul S. Otellini, Intel 
  • Shirley M. Tilghman, Princeton University 
  • Ann Mather, Central European Media Enterprises
  • Diane B. Greene, VMWare
  • Alan R. Mulally, Ford Motor Company

History

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According to the official take on Google's history, the two company founders  Larry Page and Sergey did not really warm to each other when they first met as students of computer sciences on the campus of the Stanford University in 1995. Page was a 24 year old graduate of the University of Michigan, who merely happened to spend a weekend in Stanford. Brin, 23, was one of the students, who were supposed to show Page around the university site. It quickly became apparent that the pair had differing opinions on every subject matter they were discussing. Their different points of view and philosophies only touched on common ground as far as one of the biggest challenges in the world of computers was concerned: The selection of relevant information from an online data-hoard that is growing exponentially.
 
In early 1996, Brin and Page started their collaboration. They developed the 'BackRub' search engine, the name of which is a play on its unique ability to analyse back links of any given website. Technology genius Page, who once allegedly built a printer out of Lego pieces, was responsible for creating a new server environment consisting of outdated machines, instead of expensive high-end computers. Due to the lack of funding, so typical for students of their age, they had to rummage around for new computers in their faculty, which they added to their network in order to increase server capacity. One year later, the unique approach of link-analysis resulted in Page and Brin enjoying a growing degree of prestige within the relatively young Internet community. The enthusiasm for the new search technology spread like wildfire and soon extended far beyond the realms of the campus.

Page and Brin never ceased to further refine the technology behind their search engine. They eventually made a decision that would turn out to be the key to the provision of exceptional search results. They acquired a terabyte worth of hard disk space at a discount rate and established a computer storage facility in Page's room in the student accommodation halls – Google's first ever data centre. All the while, Brin had opened up a business office and approached potential partners with the option of licensing the search engine - a search engine that delivered results way above the average rate of comparable technologies. Unlike the prevalent 'dot.com' – craze that was making the rounds at that time, the two inventors initially entertained no notion of founding a company based on their achievements.

One of the people Brin called up from his office was David Filo, the co-founder of the Yahoo! search engine. Filo acknowledged that their technology was quiet advanced but still encouraged the two to further expand their service and found their own search engine company. Back then, the majority of CEOs working at web companies failed to identify the huge potential of the product. They underestimated the advantages of the search function developed by Brin and Page. As they remained unsuccessful in winning over leading website providers, Brin and Page eventually decided to have a go at it themselves. All they needed was some venture capital in order to finance new rooms and cover the cost of bills and debt. The young inventors had already put a strain on their credit cards when they bought the terabyte of data space. They created a business plan and their prospects regarding graduation were put on ice for the time being. Brin and Page embarked on the search for an investor. Their first visit was to a friend of a fellow faculty member.

Andy Bechtolsheim, co-founder of Sun Microsystems, was well known for being a long-term strategist. One glance at the demo version sufficed to convince him that Google had an enormous potential.  Bechtolsheim neither wasted many words nor time and wrote a cheque, made out to Google, Inc. over 100.000$.
Bechtolsheim's investment created a slight dilemma. Due to the fact that no legal unit by the name of Google Inc. existed at that time, it turned out be impossible to cash in the cheque at the bank. Hence, the cheque was slumbering in a drawer of Page's desk for several weeks, during which he and Brin feverishly build up a company and recruited more investors amongst family members, friends and acquaintances. In the end, they managed to amass a starting capital of one million Dollar and Google Inc. opened its gates in the Menlo Park North, California in 1998. The door was controlled by a remote, because it turned out to be part of a garage, which a friend sublet to the company, home to three employees. Despite its size, the office sported a handful of special amenities, including a laundry machine and a whirlpool. Furthermore, the 'company grounds' included a parking space for the first ever employee: Craig Silverstein, who remains the head of the technological department to this day.

Google.com – still operating in its beta-Test-Version – processed up to 10.000 search requests per day. Not before long, international press outlets noticed the search engine that churned out relevant results and articles about Google were published in USA Today and Le Monde. The special interest magazine PC Magazine included Google in its ranking of the 'Top 100 websites and search engines'. Google took the world by storm. Open source giant Red Hat was the first company and commercial client to avail itself to the search service of Google.
 
On the 7th of June 1999, Google announced that a financing over 25 million dollars had been secured from two of the leading risk capital companies in Silicon Valley, Sequoia Capital and Kleiner Perkins Caufield & Byers. Both companies, fierce rivals up to that point, surprisingly agreed to invest in Google in equal measure and both were awarded the same number of seats in Google's supervisory board. Mike Moritz from Sequoia and John Doerr from Kleiner Perkins, joined by a third investor – Ram Shiriam, CEO of Junglee – gather around a table tennis table, which served as a piece of furniture in the google HQ and laid out plans for their cooperation.

From then on, key positions at Google were increasingly staffed with highly qualified experts from other companies, such as Omid Kordestani from Netscape , who was made the vice-president of management.  Urs Hölzle, computer scientist from the University of California, Santa Barbara, became the vice-president of the technology department.

The imminent collapse of an office that had become way too small to accommodate the company was prevented by moving into the 'Googleplex' in Mountain View,  the Google HQ to this day. The interest in Google retained its velocity. AOL/Netscape picked Google as the search engine for their site in 1999. The number of search requests grew by three million users per day. It goes without saying that Google had made big advancements. What began as a sheer university project had grown into an established company, offering a service satisfying an ever-increasing demand.

It was not before September 1999 when the 'Beta' sign was finally removed from the homepage. The test version had earned its laurels and was approved. The next step seemed logical – international expansion. Both the Italian Virgilio site and the British equivalent Virgin Net (Virgin Media today) became clients of Google. The Time Magazine included Google in its Cybertech-Top-Ten.

In the meantime, Googleplex developed an unique company structure. In order to increase the flexibility in the workplace, Swiss balls were converted into mobile office chairs. The office lacked partition walls, creating an open work environment and atmosphere. Even though the computers were bursting with state-of-the-art technology, the desks were partially made of old wooden doors, provisionally placed on saw-bucks. Lava-Lamps populated the office like mushrooms and numerous dogs strolled through the halls. The head chef for the canteen was none other than Charlie Ayers, who created a healthy menu of delicacies. Charlie already worked as a tour chef for the band 'Grateful Dead'. In regular intervals, the parking space outside the building was emptied in order to accommodate roller hockey tournaments. Every Friday, the famous TGIF (Thank God it's Friday) meetings would take place, held by the members of the board in the midst of the employees' desks, evaluating the week's work. Apparently, this unusual atmosphere had a positive impact on the productivity and creativity of all employees. It was probably due to the great atmosphere in the Googleplex that employees continued to optimise the efficiency of the search engine. Further expansions were created, including Google Directory and a service for wireless search requests. Google Inc. subscribed to a global business philosophy, as a result of which Google-versions became available in an increasing number of languages. The many aspects and services powering the search engine lured more and more users to the Google pages. In June 2009, Google officially became the largest search engine of the WWW, sporting a directory of more than one billion pages.

Because the company resources were administrated with care, there was no need for further outside investment. Reasons for the financial security were increasing user numbers, including many clients that integrated the Google search engine in their website(s) and the development of a keyword-based advertising program. Thanks to the increasing revenue through banner sales, the company ended up in the black numbers.

In mid-2000, the Google CEOs and the representatives of the main competitor Yahoo announced the beginning of a strategic partnership, further improving the standing and reputation of Google – not only from a technological point of view but also regarding economic power – with a daily intake of 18 million search requests. The worldwide victory march continued, when the Chinese portal market leader NetEase as well as the Japanese Bigglobe Service added Google to their sites. By the end of 2000, Google already processed approximately 100 million search requests per day. Brin and Page's ambition to stay true to their company philosophy and provide as many people as possible around the clock with as many information as possible remained in full swing. In what could be deemed a return to the academic roots, Google began to offer free and custom-tailored search services to students, lecturers, researchers, universities, schools and research institutes.

Soon, Google's market researchers and product developers in charge noticed that users do not always happen to sit in front of their desktops whenever a question would pop into their minds. Therefore, Google increased its efforts to provide wireless search options. Thanks to several partnerships with telecommunication companies (such as i-mode, Sprint, PCS, Cingular or AT&T), owners of mobile phone could now 'google' on their devices.

In order to further boost economic prosperity, Dr. Eric Schmidt was made the CEO in 2001. Schmidt is an experienced expert and arrived at Google via Novell, Inc. and Sun Microsystems. Google also did not fail to notice the increasing importance of the Internet outside the US-American and European markets and reacted promptly. In the new millennium, Google became the leading search engine in Asia and Latin-America, thanks to collaboraitons with Lycos Korea and the Brazilian provider Universo Online . In order to satisfy the growing international interest for advertising solutions on Google-pages, new offices were established in Hamburg and Tokyo. In the meantime, the efficiency of the search engine was still being improved on a point-by-point basis. The development of File Type Search, Google Image Search, Google Catalogue Search and later Google News, enabled the user to search for documents in specific formats, images, shopping catalogues and news reports. In total, the number of pages accessible through Google propelled to three billion. Another milestone in the history of Google was Google in a Box. Using plug & play functions as a tool for internal research, Google managed to find its way into the intranets of large companies, into university networks and eCommerce pages. AdWords, Google's customer-handled advertising system was subject to a profound renewal. Especially the CPC-Price model (Cost-Per-Click), serving as the basis for the advertising system, made advertising on the search engine attractive and liable for both large and small companies.

The new European central, a prime example of economic globalisation, was established in Dublin. Here, 150 employees from 35 countries communicate in seventeen languages. Nikesh Arora was made head of the new dependence, a former employee of T-Mobile. More offices in Sao Paolo and Mexico City followed in order to further boost the activities in South and Middle-America. Google China – with Kai Fu-Lee at its top – was founded in 2005. Kai previously held a leading position at Microsoft. When Fu-Lee took on his new job in the Beijing headquarters, he and his new employer were sued by the software giant, because Fu-Lee had allegedly signed a contract prohibiting him from accepting a position at a competitor. Microsoft's action was successful and they secured an interim injunction, which effectuated that Fu-Lee could not work for Google for the time being. A short while later, the verdict was mitigated. However, the new president of the China-department was not allowed to initiate new technological projects for the duration of a whole year. Google also welcomed another high-profile arrival with Vint Cerf, the new vice-president and 'Chef Internet Evangelist'. This particular recruitment choice was considered a homage to the infancy years of the Internet, during which Cerf established himself as one of the 'fathers' of the World Wide Web.

Arguably the most important expansions of Google was the acquisition of the YouTube video platform. The internationally popular entertainment service, which lured connoisseurs of moving imagery away from the TV and into the Internet, was bought by Google Inc. in October for 1.65 billion Dollars. The deal made the three YouTube founders, all former employees of PayPal, Chad Hurley, Steve Chen and Jawed Karim a trio of young stars, not unlike Brin and Page back in the day. The acquisition of YouTube was a necessary step for Google, as the in-house video portal Google Video was far from successful, with a market share of a mere seven percent.

In early 2008, Google was hit with a small shock-wave when a take-over offer worth billions by  Microsoft landed on Yahoo's desk. Google insisted that the merger had to be approved and examined by the Monopolies and Mergers division. Google and Microsoft both employ armies of lobbyists in Washington, who fight for their respective employer's interests and keep a close eye on the competition's activities. In his blog, David Drummond – 'Chief Legal Office' at Google, described the Microsoft offer as hostile takeover-attempt, endangering the freedom and open nature of the Internet itself. He continued to warn about Microsoft.  According the him, the company was in the process of gaining a monopoly position on the Internet, comparable to its market dominance when it comes to operation systems. Especially the combination of both companies' Instant Messaging Software (Yahoo Messenger and MSN Messenger) would create a market-dominating position in this particular sector. Over the course of the take-over negotiations, it became known that Eric Schmidt called the Yahoo-CEO Jerry Yang and offered his help. A cooperation with Yahoo in and online-advertising remained unrealised as of November 2008 due to reservations of the cartel office.

Despite opposing reassurances, Google already concluded its transformation from a search engine to an online based media company. The algorithms underlying the Google-Search have been adjusted in order to lead the user to high-quality media content instead of content-farms. YouTube, once the home to nothing but amateur productions, has become a global nigh-cable channel, offering catalogued & professional third-party content, exclusive sports videos, high-quality news content as well as complete films – some free of charge, some available against a small fee. Thus, Google is active in the field of traditional media business: The provision of content for users, which is in turn monetized through the sale of advertising resources. YouTube will invest hundreds of millions of US Dollars into the development of its own content in years to come. For this purpose, several artists, script writers and producers  – such as the former head of VH1 Michael Hirschhorn or NBC head of programming Ben Silverman were made part of the YouTube family. The next few years will witness the launch of at least one hundred new 'premium' channels, competing with traditional television.

Management

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Larry Page
Google co-founder Larry Page returned to the company as CEO in April 2011 and replaced Eric Schmidt at the top of the company. The reasons for the change, which created quite a stir in the industry, are thought to be related to disputes within the triumvirate of Schmidt, Page and Brin, especially in regards to the involuntary withdrawal from China.

Sergey Brin
The son of Russian-Jewish emigrants is the quiet half of the Google-founder duo. Brin is married to Anne Wojcicki, who launched the 23andMe start up company, in which Google invested as well (amongst others). 23andMe gives private parties the chance to have their genetic details decoded by spitting into a plastic container and have the sample genetically analysed for the fee of 400 US-Dollar. The results include the susceptibility for illnesses and can be shared and compared on what resembles a social networking site with other interested parties. Both Brin and Page have managed to take over the majority of voting-power shares in the aftermath of an announced stock-split in April 2012 and therefore secured the ultimate, long-term decision power.

Eric Schmidt
Eric E. Schmidt served as the CEO of Google from 2001 to 2011. Together with the founders Sergey Brin and Larry Page, he was in charge of the company's daily business procedures. Schmidt, who previously worked for the hardware provider Sun Microsystems and the software company Novell, is widely considered to be the man who brought structure into the anarchic make-up of the company. In an article, the German newspaper FAZ called him the 'That's enough – man at Google'. The origin of the nickname goes back to the year 2005, when Brin and Page bought a Boeing 767, turning it into a company jet, complete with a separate a room for each of the three Google managers. When Brin insisted on having a king size'-bed installed in his room, a fight with his partner Page kicked off. It was not before Schmidt intervened (“Everyone can have whatever bed he wants in his room”) and put an end to the discussion. Schmidt also maintained a very good relationship with the Obama-Administration. He and other highly ranked Google managers donated more than 800.000 US-Dollar for Obama's successful presidency campaign. Only Goldman Sachs and Google's competitor Microsoft donated more money. 

Business fields

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The core competency and the most important product at Google Inc. is and remains the Google search engine, around which several other business fields have been created and established. Including (but not limited to) the following:

AdWords
Advertising software for advertising that is tied into the Google-search requests and results. Advertising constitutes Google's top source of income. The strict and visible separation of search results and adverts has top priority still. Both the advertisers and Google profit from each click on the advertising banner. No company can simply buy high placements in search results, instead, the placement(s) of the search results, according to Google, is merely based on the popularity of the link in question. For special search terms, Google auctions off the overlay of sponsored links. This way, the featured adverts are related to the content and therefore create an optimised point of contact between the advertiser and the users, resulting in an increased likeness of matching potentially interested parties with the product.

AdSense
Advertising program for website operators. It gives the operators of homepages the ability to include context-sensitive advertising on their homepage. The number of clicks determines the price the advertiser has to pay. The program is used by more than two million clients.

Google Analytics
Statistic instrument, which – combined with AdWords – measures the frequency of search requests.

DoubleClick
Google undertook the biggest acquisition in its company history, when the online-advertising market leader DoubleClick was bought in April 2007 for 3.1 billion US-Dollar. About a year later, the US-American regulation office FTC and the EU cartel office declared the acquisition to be legal. DoubleClick places adverts on websites and ensures advertising that caters for the user(s) in question. The business model of DoubleClick is based on the provision of solutions for RichMedia-, Banner- and search engine advertising. In the past, DoubleClick was subject to criticism and it was claimed the the company would save user data such as addresses, names and shopping habits. Ever since the take-over, Google has been the worldwide leading distributor of visual Internet advertising solutions.

Gmail/Google Mail
Google's web-mail service Gmail (Google Mail in Germany) sports a gigantic free storage capacity of up to 7.3 gigabyte. The result is that users don't have to delete their emails in order to create room for new ones. The emails can be accessed at Google and even deleted emails remain on the Google-servers for an unspecified amount of time. The problem here is, that the content of these emails can be scanned for specific keywords and furnished with relevant advertising. Hence, advertising in mails not only discommodes users of Gmail itself, but also users of other email-services, who happen to send emails to Gmail users, all of whom have never read (let alone accepted) the terms of service for Gmail. Google would also be in a position to create whole databases of email-addresses associated with specific keywords. Data protection lobbyists are concerned that such databases for advertising could be misused or handed over to the government to assist in criminal prosecution matters. In April 2004, 31 data protection and and consumer organisations in the USA launched a petition directed at Google, urging the company to modify Gmail and respect the privacy of its user base.

Google News
Multi-language, automated aggregation service for news and a search engine for news articles. The constant criticism voiced by media managers and publishing houses regarding Google News and its counterproductive effect on the survival of traditional newspapers, was counter-attacked by CEO Eric Schmidt in an Interview from October 2009. He reassured that he was a strong supporter of newspapers and Google understands itself to have a moral responsibility to support the continuation of professional journalism in print and online sources. Referring to the numerous agreements between Google and US-newspaper publishers, Schmidt argued that his company could help newspapers to retain its relevance in the digital age and that Google is everything but an enemy of the newspaper industry.

Google Chrome
In September 2008, Google launched its attack on the market leader Microsoft  and the Internet Explorer by releasing its own browser software called Google Chrome. The beta-Test-Version was offered as a free download in more than 100 countries, accompanied by a Comic , authored by Scott McCloud, explaining the functions of the new browser.

Google Android
Google joined forces with the Open Handset Alliance, a conglomerate of more than 34 mobile phone manufacturers and mobile service providers (including HTC, Motorola and T-Mobile) and developed the Android mobile phone operation system. Using a so-called 'Software Development Kit', every hobby-programmer can create software for Android mobile phones. As of today, Android is the market leader amongst the mobile operation systems.

YouTube
The video platform was bought back in 2006 for 1.65 billion US-Dollar. The founders Chad Hurley, Steve Chen and Jawed Karim, who previously helped in building the Internet-payment solution service PayPal, came up with the idea for YouTube in 2004, when they noticed how difficult it was to send small films to each other over the Internet. After the company was founded in 2005 and the financial start-up help by Sequoia Capital secured, who already helped Page and Brin at an early stage of their career, YouTube was officially launched in December 2005.
Due to exclusive partnerships with content providers such as the Al Jazeera English News channel, the US-Basketball-League NBA or the Lions Gate film studios, YouTube has become somewhat of a global TV channel, the popularity of which is bound to skyrocket due to the increased distribution of Internet-ready televisions.

Google+
A social network that saw the light of day 2011 with which Google seeks to snatch away market shares from its direct competitor Facebook. By the end of 2011, a total of 600.000 users registered with Google+. More than 400 million members could potentially find their way into the new social network by the end of 2012.
 
Zagat
Restaurant guide founded by husband and wife team Tim and Nina Zagat in 1979 and bought for 151 million US-Dollar in 2011. Zagat gives customers the option to review and rate restaurants, hotels as well as other public institutions. Available online, as a mobile app or in book format.

Further reading

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  • Assange, Julian 2014: When Google Met Wikileaks. OR Books.
  • Auletta, Ken 2009: Googled: The End of the World as We Know It. London: Penguin Press.
  • Girard, Bernard 2009: The Google Way: How One Company Is Revolutionizing Management As We Know it. San Francisco: No Starch Press.
  • Jarvis, Jeff 2009: What Would Google Do?. New York: HarperBusiness.
  • Vaidhyanathan, Siva 2011: The Googlization of Everything (And Why We Should Worry). Princeton: University of California Press.
  • Vise, David A. 2008: The Google Story: Inside the Hottest Business, Media and Technology Success of Our Time. Surrey: Delta Publishing.

Links

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» Financial Information

» David Carr: The Evolving Mission of Google (NYT, March 20, 2011)

Content

Institute of Media and Communications Policy

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Media Pluralism in Europe

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Partners

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Mediadb.eu is funded by medienboard Berlin-Brandenburg,

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the Open Society Foundations' Media Program,

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Germany's Federal Agency for Civic Education,

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the Rudolf Augstein Foundation,

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the city of Cologne, Germany,

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and the State of Thuringia, Department of Commerce.