Googler 13

Friday, January 28, 2011

The 3 most important things I learned from Google (part 3)

none of which are likely to be endorsed at Business School

This is the third of three posts.

3. Nice guys finish first

I’m going to get this out of the way up front. I get that with Google being the 800 pound gorilla now, alot of people may balk at this one, but the reality is that it is true- especially for a corporation. As for “customer service” complaints specifically, Id simply state that with 200 million monthly visitors, the expectation of response from an actual human should be pretty darned low. The online world is not like the physical product world and hey, with Google, you get the world....for free.

OK, so now for what I and those who built Google from the ground up believe:

From the very beginning, Google has believed that it had a “reason for being” and that reason was to deliver information to people. All information to all people. Our internal litmus test was always whether or not what we were working on was moving us toward that goal. With this in mind, it is not hard to understand that we believed that our users were our customers, not whomever was going to financially support the service (i.e. advertisers). We would simply be an efficient conduit between the two. There was never any question of this and all of the decisions we made, from UI (user interface- how everything looks to users) to new products launched followed this.

We were different than any other company we knew about. We were young. We were idealistic. We bought into the idea that Microsoft was “the evil empire” and we didn’t want to be anything like that. Its a powerful thing when you set an intention like this and everyone buys in. As my good friend Paul Buccheit now famously coined, our motto was “Don’t be evil”.

Internally, life was good if not hectic. Traffic served by Google grew a tremendous amount every month, and it was a daunting task to deal with such hyper-growth. Larry and Sergey’s intention within the company was to make it a place you wouldn’t want to leave...and many didn’t, for the majority of their waking hours. Larry and Sergey themselves didn’t plan on leaving campus so what they built reflected that. We hired an amazing chef and gave him a free reign to buy organic and top foods and feed us well. As much as outsiders spew remarks of wasted money and dot com frivolity, internally we knew that the time spent leaving campus to go to lunch would be reduced, camaraderie increased and healthy bodies equal more productive and happy employees. That’s also why we had a gym on site very early, played roller hockey together and otherwise kept active. When Google went public in 2004, in its S1 filing, it warned investors that it intended to increase, not decrease such things. Being at Google wasn’t a job. It was a lifestyle.

Even the way Google went public was an attempt at being good. The traditional IPO process is replete with built-in badness for companies and investors (at least the average individual investor). Typically a small number of investment banks get together and take on an allocation of the shares of stock that the company is going to sell to the world. This is called a syndicate. They then take the company public in a way that greatly prefers their biggest and best clients for either cheaper stock prices or easy quick profit flips. The stock goes up, the company itself doesn’t benefit from any of the rising price in the secondary market but the banks and their friends make lots of money. Its a zero sum game and the individual is almost always on the wrong end of the trade. Another issue is that the bank usually advises that the company split its stock as many times as it needs to to get the price per share down to around $10 before it goes public, logic being that people like to buy in round lots (100 share purchases) and $1000 is a workable number for most people.

Google wanted to take control from the banks and let the individual in right away and not have to pay more by having to buy from the bank’s preferred clients that got to buy before them. Instead of 2 or 3, Google split its shares among 19 or so banks and made it that individuals were allowed to register to buy the shares at IPO price. Also, Google refused to split the stock to lower the price because we wanted “investors” and not “traders”, and if the price was high, people would be less likely to just buy and flip. Google wanted people to buy our stock that believed in the future of the company and wanted to own part of it. Also, a mass of active “traders” of stock destabilizes it and we wanted to reduce that possibility. Google also used a “Dutch Auction” to price the shares in order to find true price at demand and not leave money on the table.

Being good is probably best seen in our user interface. Sites like Yahoo had a dizzying number of things to look at on the homepage and subpages with the intention of keeping you clicking (and not finding what you wanted quickly) in order to show you as many ads as possible (since Yahoo made money on each ad SEEN). There was seemingly no concern for user experience. Google’s philosophy was to get you off our site as quickly as possible- connecting you quickly with the right information. Larry’s earliest vision was that success meant seeing as FEW pages of Google as possible. That’s why the original school project “I’m feeling Lucky” button (which would take you directly to the first search result’s website- without you having you look at the page of results on Google) was kept. Larry knew that if we did our job well, people would simply come back more...which they did. That provided the page views that represented our opportunity to monetize the service. We didn’t need to maximize pages per visit at the expense of the user experience. You didn’t go to Google to be on Google. You went to go somewhere else. In a world of no switching costs, quality and user experience are the “lock-in” and control.

Finally, I’d like to mention that doing what is good and right permeated the individual employee work ethic. My personal deal philosophy (negotiating 3rd party technology deals- where we were going to use someone else’s technology) was always to listen to the needs and wants of the other side and understand where they were coming from. I always negotiated very very hard, but worked to build relationships. I knew that if we integrated 3rd party technology into ours, it was likely to be a long term relationship. If I screwed someone now, when the contract was up and needed to be renegotiated, I was likely to be the one getting screwed. I never lied, cheated or misrepresented our intentions. I represented Google’s corporate philosophy at an individual level. When I left the company and was communicating who would be taking over the relationship for Google, I received myriad of responses telling me how great it had been to work with me and that even though I had driven a hard bargain, it was amongst the best experiences they’d had working with another company.

My take away:

integrity matters. You can and will be successful if you consider more than yourself in your actions and decisions. Being good and not evil pays off in the long run.

Wednesday, January 26, 2011

The 3 most important things I learned from Google (part 2)

none of which are likely to be endorsed at Business School

This is the second of three posts.

2) Operate as if you exist in a vacuum.

Most websites that make money do so by placing ads on their pages...and there’s a good chance that those ads are provided by Google. But it wasn’t always that way. Back when Larry and Sergey were at Stanford they wrote a paper called The Anatomy of a Large Scaled Hypertextual Web Search Engine, where they expressed their skepticism and concerns about monetizing a search engine with advertising.

Having come from Netscape, I was quite familiar with ad models on the web. Banner ads at 2% average click-thru rates and text links at 0.1%. These could be sold by category, but likely were mostly run of site ads (they show up wherever there is a free space regardless of what page it is). This was the era of the “punch the monkey” banner ad. Basically in 1999 advertising on the web was so untargeted that click-thrus began to tail off. The novelty of clicking on banners was largely over. The solution that creative folks came up with was to make them little games or colorful seizure-inducing flashing ads that you would click on just to get rid of them. Yes, the click occurred, but no transaction was going to happen at the offending advertiser’s website. Ads that cost money but don’t produce a sale are bound to drop in rates (price)... and that was what was generally happening.

I was the website bizdev guy so I was on the inaugural ad design team. I was one of the few people sitting around the conference room table when Larry [Page] walked in and declared that “ads can be as relevant as search results” and then basically walked out. I scratched my head a bit and remember thinking “what does that mean?”. What it meant was that we were in no hurry to make money from our website. It meant that we weren’t going to have graphical banners on our site. It didn’t matter that all of the advertisers of the world were used to hiring an agency, having a small number of creative banners produced and then distributed to the pages of the web. It didn’t matter that not only were our ads going to be different, but it was going to be an entirely different sale and require changing buyer behavior and a whole new process. We were not going to consider how the entire industry worked, we were just supposed to build this thing as if the rest of the world and its established practices didn’t if we were operating in a vacuum.

Larry was right on. The higher qualified/targeted an ad is, the better it will perform and the higher the rates will be. Better=more revenue. What he realized was that you can’t get any more targeting potential than someone explicitly telling you what they are looking for. That is what you do when you go to a search engine. If you have an advertisement that answers that question, it actually adds value to the user. The ad becomes relevant to the search and is a reasonable place to click. Of course there was a problem. Graphical banner ads are not customizable and no agency is going to produce a multitude of banners to match against individual keyword searches. Our solution was to use text ads instead of graphical banners (which had the added bonus of being very fast at a time when internet connections were still relatively slow). We created a very simple online interface which would allow advertisers to create as many custom text ads as they wanted and experiment with which keyword phrases to advertise to. We wanted them to be able to learn what keywords to buy which resulted in the most clicks, not only because it would mean more revenue for us, but because more clicks meant the ads were relevant to the searcher. Changing user behavior, in this case the entire advertising world is not easy. What what we knew and ultimately figured out was that we needed to economically incentivize advertisers to want to do a better job advertising to our users. All advertisers wanted the top ad positions on the page, but we made it that they couldn’t simply buy there way to the top. What we did was said that their position amongst all the ads was relative not only to what they bid for their ad, but cross referenced against the click-thru rate for each specific ad against each specific search term used by the searcher. You could pay less for a better slot if you had a better and better targeted ad. We also encouraged the advertiser to link to the relevant page within their own site that related to the search, not just to their home page (i.e. if you searched Google for "wedding china", an ad for William Sonoma might appear. A click on the ad would lead the searcher to the wedding china page, not the homepage, which is what used to occur). This type of thinking made the whole experience better. And the rest as they say, is history.

My take-away is that:

Google completely disregarded the way the entire advertising industry worked and came up with its own solution as if it existed in a vacuum. And ultimately, it worked. Sometimes to find the right answer you have to look at a problem and work out a solution which completely disregards current standard practices.

Tuesday, January 25, 2011

The 3 most important things I learned from Google (part 1)

none of which are likely to be endorsed at Business School

This is the first of three posts.

1) Reinvent the wheel

When I decided to go to work for Google in May of 1999, I heard time and again: “the world doesn’t need another search engine”. The search game was already in high gear. Alta Vista, Lycos, Excite, Infoseek, Inktomi, all the meta search guys...why did we need another? There was an answer, but it was one few could relate to at the time. The Internet was cool and all, but it was not quite indispensable. In 1999 the world had a tolerance for digging through pages upon pages of results to find what we were looking for, if we found exactly what we were looking for at all. The world did need a "better" search engine. It just didn't know it yet.

For those who don't know, when you go to a search engine and type in your query, the search engine doesn’t look at the entire web and bring you back results from it. What actually happens is that, periodically, the search engine sends out little computer programs called “spiders” which go out and look at pages on the internet and store a copy of what they see in their own database (this is called their "index"). When you search, the results you see are from that old database, not the web that exists at the time of your search. As long as the page in the index hasn’t been moved or deleted in between the time the index is built and your search, you end up at the correct page. Remember “Error 404 File Not Found”? That was from all the changes that occurred in between indexing and searching.

In 1999, indexes were compiled once per month and the largest search index was 100 million pages. Even then, that was only a fraction of all the pages on the web. And here was the real problem- millions of pages were being added to the web daily! When Google came on the scene, it matched Alta Vista’s index size. Alta Vista tried to increase their index to 250 million pages, but the quality of results (as measured by the number of pages you had to dig through before finding what you wanted) got so bad that they had to bring it back to 100 million. This happened because of the algorithm (the logic of how they decided what to return as search results) they (and all the other search engines of their day) used wasn’t able to scale, in addition, they were susceptible to webpage designers being unscrupulous to trick them into showing their pages even when the pages weren’t related to the search performed by the user. One way this happened is that a designer would put a popular word 1000 times in white on a white background. The search engines didn’t know the word was “invisible”, only that it occurred a lot on the page, so must be really relevant to that word. It wasn't. Google did things completely different. It looked at an dizzying array of variables when analyzing each page, not just word counts. This made it much more resilient.
If 1st generation search engines couldn’t scale their indexes without loss in result quality, they were eventually going to be rendered obsolete. Google went on to launch an “index size” war, since it believed that its mission was to make the world's information universally usable and accessible. To do that, it had to keep up with the growth of the web (as well as expand beyond just finding traditional web pages to serve as answers to queries). Google’s technology not only scaled well, but because of the specific way it looked at webpages, the results actually got better as the index grew. It also began to index more frequently so the freshest data was in its index, vastly improving user experience, which is a key, fanatical focus for the company. Ultimately, Google knew that the web would keep growing and that search would one day be akin to a utility and without it, the web was going to be useless. Google took a completely fresh look at the problem. In doing so, the quality increased (not to mention the speed gained by uncluttering the page), people searched more, relied on the web more to find things and the entire market grew.

So, my take-away here is:
Just because things are the way they are now doesn’t mean that its optimal or has to stay that way. Often today’s standard is the legacy of something that has long since changed or no longer serves the needs of those it was meant to. Regardless of if your market is dominated by large established players, if you look at how the world is evolving and to the needs of tomorrow, you may discover an opportunity to grow market share and the market itself by COMPLETELY rethinking the way things are done.

Wednesday, January 5, 2011

Steve's story- Googler 13

I was born in 1972 to a poverty-level family in suburban Chicago. During the first few years of my life, I shared a 600 sq ft, 1 bedroom cottage with my parents, older sister and dog. As a kid, I grew up helping my dad kill roaches and trap rats in his one-man pest control business.

Inspired by my architect grandfather who dabbled in the stock market, I started playing the market when I was 15 years old. In 1994 at age 21, I graduated Magna Cum Laude & Dean's List from Babson College, an undergraduate business college outside of Boston. Shortly thereafter, I moved to San Francisco to find the stark reality of an uninterested job market. After a period of trivial and unsuccessful undertakings, I took to the streets out of desperation to "make something happen." My thought at the time was: "if my resume falls on the floor, nobody will bother to pick it up".

It was September 1995. I had been in San Francisco just over a year and had nothing to show for it. I remember walking around the streets of San Francisco and seeing two individuals who made a profound impression on me. One was a panhandler who simply sat on a corner and directly asked for money. The other was a man standing on a milk crate wearing a sandwich board that said "Repent! The end of the world is coming." I was in a state of mind where I was open to anything. The things that struck me were that the first man had gotten to a point where his ego had been worn away and he was willing to simply and directly ask for what he wanted without beating around the bush. The second man believed so strongly in his convictions that he was willing to physically wear his message and present it to the world. By the end of the week, I had created a sandwich board expelling the virtues of my skills. One morning, I put on my best thrift store suit and boarded the 5am bus to the financial district with my sandwich board under my arm. I stood outside the Bank of America world headquarters, put the two-sided sign over my head and began passing out resumes. I was there for 12 hours. I passed out resumes as people rolled into work, when they went out for lunch and as they left for home. This was one of the most humbling moments of my life. I stood out, exposed, bluntly asking for help and displaying my convictions. The response was amazing and really helped renew my faith in people. In the back of my head, I think I was expecting people to throw tomatoes at me (which my friend in New York said would have happened on Wall Street). Instead, many people took my resume and talked to me. A news crew even came.

In the end, this seemingly crazy idea lead to me getting a job as an associate equity analyst covering high-tech companies in downtown San Francisco. In my job, I was able to use my stock experience and education, but it did not take long to realize that I did not like analyzing companies. What I really wanted was to be involved with starting one.

In October of 1996 at age 24, I left my job in order to write a business plan for an idea I had relating to the relatively new phenomenon known as the commercial Internet. The idea revolved around creating a platform for pooling individual investor dollars to provide angel funding for fledgling companies and create a secondary trading market for these shares.

Unfortunately, after a few months I ran out of money and needed to look for a steady job again. I found a job opening for an entry-level, market research analyst at a small Internet company in San Francisco. Over a two-week period, I left messages on every single voice mailbox I could get at that company. I was never able to get a human on the phone or get a call back. One day, I randomly entered an extension off the main number and heard the message "Mark Goldstein's pager number is....". I knew from the website that Mark was the CEO of the company. What had started two weeks prior as a timid, pump myself up "you can do this" pep talk turned into a "somebody is going to talk to me, damn it!" When I got that pager number I called it immediately. Soon after I got a call asking "who is this?" I explained that I wanted the job his website had listed, but had not received a call back. He said that the reason nobody was there is that a few weeks earlier he had sold the company and its technology. He said he was downtown at a conference and to meet him at lunchtime. I ran over and he preceded to tell me that he was a serial entrepreneur that would be starting another business at some point soon and to stay in touch...He emphasized that he was impressed that I was sitting across from him given the situation.

Time passed and Mark had yet to start his new company, and I was flat broke. I went to him yet again and asked for help. He simply picked up the phone and called a Venture Capitalist friend of his. The next day I was at breakfast with a VC. Two days later I was working at Netscape Communications (one of the companies responsible for the commercial Internet taking off) doing business analysis and portal deal modeling.

It was there that I honed my skills relating to understanding business models and became an expert in the Internet itself. I also proved my worth to the Netscape executives and built a reputation for myself there.

(Netscape CEO Jim Barksdale, Steve Schimmel, VC John Doerr, 1999)

In 1999, America Online purchased Netscape and many executives left the company. One in particular was the Vice President of Business Development. He had decided to go to a very small company that was looking for venture funding so it could afford to try and build a company out of some very good technology it had developed. The company had been incorporated by two Computer Science Ph.D. candidates at Stanford University a few months prior. It only had the two founders and a few engineers working there. The Netscape VP joined the start-up in March of 1999 as employee 12 and hired me to help him build the business. In May of 1999, I joined the founding business team as lucky number 13. That company got its first and only round of Venture Capital, $25 million, a month or two later. The company was a Search Engine company that had only a few hundred thousand searches performed on it per day by at most a million users per month, mostly academics. The company had no revenue at the time. That company, now widely recognized as Google is the world leader in search technology, bringing in billions of dollars in revenue per quarter by aiding many millions of users all over the world find information on a daily basis.

During my career there, I negotiated our first $100k and $1million deals; was on the design team for the original ad program; ran a cross-functional external technology evaluation team; negotiated 3rd party technology licenses; was an all around go-to guy to just about every department that needed business help...and I founded and ran the Google Wine Club :-)

(Steve Schimmel, Google Co-founder Sergey Brin, 2000)

I could not have imagined a better job for myself. I was not constrained by any specific job description and was free to to add value wherever it was needed. I truly got to be a Business Development Renaissance man.

(Steve Schimmel, Vice President Al Gore, 2001)

When Google went public in 2004, it was one of the most successful IPOs in history. For me, that was a defining moment. I felt that I had made my impact, left my personal mark and accomplished everything I had set out to do there. I left shortly after IPO to pursue other interests.

My confidence and follow-through, along with the chances awarded me by individuals who saw something in me and believed enough to give me a "shot", took me from poor kid to successful businessman "retired" by 32 years old. At no point did I ever compromise my integrity. I do things that I can be proud of. My colleagues and I lived by the motto of "don't be evil". It’s not a gimmick. It’s a philosophy of doing what's right and letting the money follow.

Having reached a level of financial success that awards me the freedom and flexibility that it has, I am now looking to share some of my knowledge and experience to benefit the next wave of those who aspire to do as I did.

...and that is my story.