INTERNET SEARCH

Jerry Yang and David Filo came across the idea for Yahoo while they were still in Stanford University. The idea came across their minds when they wanted a sneaky way to use the internet to win a Stanford fantasy basketball league. They needed to quickly access data from real games, but it was very difficult to find this data in a single site. Yahoo was originally called “Jerry and David’s Directory To The World Wide Web”. It was a directory to show new internet users where to find the information they were looking for. This is because when the internet first came out, it was just a bunch of random web pages with nothing to link them. It was a crude list of websites sorted by categories and sub-categories Jerry and David’s Directory To The World Wide Web was later renamed to “YAHOO!” when millions of users flocked to their directory/website Sequoia Capital was a venture capitalist firm that was partnered with Michael Moritz, who was interested in investing in Yahoo. However, Jerry Yang and David Filo did not have a business model to make any money.

At this moment in time, nobody else had figured out how to make money off the internet, but Yahoo would be the first; they realized that advertising was the key to making profit off internet sites because media has always been supported by advertising. Jerry Yang and David Filo were skeptical about putting up advertisements on their website because they thought it would discourage their loyal users from coming back, but since they were desperate for a business model, they had no choice. When Yahoo began posting ads on their site in late 1995, they observed that users didn’t mind the advertisements and kept scrolling; more users kept joining, (which meant more companies wanted their ads on Yahoo). Yahoo singlehandedly proved it was possible to make money off the internet, starting an online gold rush.

In late 1996, Yahoo’s biggest competitor was a similar online search engine company called “Excite”. Excite had software that would take a query and search the internet for pages that were relevant for the query entered. Yahoo, Excite, and other similar search engines were competing while turning themselves into portals (one-stop destinations that had diversions such as chatrooms, emails, stock-tickers, etc). As time went on and new developments were made on the search engine websites, the companies forgot about the search engine aspect of their websites. This created a problem: the user couldn’t find enough information or webpages related to their query. A company that would later be known as “Google” noticed this problem and took advantage of it. Google was a search engine website made by Larry Page and Sergey Brin, who were both attending Stanford at the time. Larry Page recognized the fact that the amount of times a webpage was linked to other sites was directly related to its relevance and usefulness; therefore, Google was built around this idea: it sorted links by the amount of times they were referred to, meaning Google was a search engine that cared about the search aspect.

Although Larry Page and Sergey Brin had devised a unique and effective software, it was not enough by itself to make any money. Venture Capitalists didn’t want to invest in Google at first because they thought of it as just another search engine like Yahoo or Excite. Vinod Khosla was a venture capitalist that introduced Google to Excite, hoping that Google would license their software to Excite so that Excite can finally have the upper hand on Yahoo. Khosla set up a meeting between representatives of both companies in which the Excite representatives were intrigued by Google’s search results and liked their software. The representatives reported back to the Excite CEO; however, he didn’t want to buy Google’s software because he was confident that Excite could also figure out a similar way to have better search results. After Excite, every other search engine company in Silicon Valley turned down Google. With no luck, Brin and Page turned to an old professor they knew, David Cheriton. Cheriton introduced them to an angel investor, Andy Bechtolsheim, who liked Google’s idea and instantly wrote them a $100,000 check. After Bechtolsheim, other angel investors also invested in Google; Google eventually received investments totaling $1million.

As time went on and investments from the likes of John Doerr (one of the biggest venture capitalists in Silicon Valley) were getting spent on maintaining the Google search engine, Google still had no business model to make them any money for months because they did not want to put up any advertisements on their site. So, Google stole their business model from Idealab founder Bill Gross. The business model was to sell “keywords” to advertisers; keywords are the words that a user would type into a search engine to find what they were looking for. These keywords are valuable to advertisers as it helps them with market research. Also, companies would pay for placement in Google’s list of pages if their website was relevant to a user’s query.

Bill Gross first gave this idea to a website called Overture.com, and Google saw that this business model gave Overture a lot of success. Google decided to have a string of meetings with overture, but ultimately did not make a deal with them. After this string of meetings, Google released Adworks, a service that was suspiciously similar to Overture. Bill Gross sued Google because of Adworks, but then agreed to take a significant share in Google instead. Google had website links sorted by relevance on the left side of its page and had paid advertisements on the right side, creating a great user interface. On August 19, 2004, Google had its IPO on the NASDAQ stock market; this led Wall Street to criticize Google heavily and claimed it wouldn’t make money because the creators were arrogant and unforthcoming. However, Google’s IPO was a great success.