What’s So Special about Google?

by Rob Spiegel

An Internet company finally gets it really-really right without compromising its dorm-room culture and Grateful Dead chef. Google is one of only three or four companies that have figured out how to make piles of cash from the Internet. And the company is unapologetic about its dot com corporate culture.

You won’t find ties and suits at Google’s Mountain View, Calif. home. Inside headquarters you’ll find sofas, big balls, free lunches, on-site physicians, massage and day care, foosball, musical instruments, and roller hockey games twice a week in the parking lot. And best of all, Google’s development staffers are required – required – to spend one day a week, 20 percent of their time, on side projects of their choice.

Google first electrified the online world by creating the Web’s best search engine. The company’s lightning-fast and mostly accurate search results put Google at the front of the search engine race – no small feat considering that search is the second-most common activity on the Internet, right below email use. Internet users now conduct more than 200 million searches per day on Google.

Google figured out a way to cash in on its widespread use – the company monetized search. A couple years ago, Google started to place paid ads alongside the free search results. Searchers were fine with it. Marketers loved it. Google AdWords program has attracted 175,000 advertisers.

Paid search advertising has provided Google with a flood of cash. According to documents filed with the Security and Exchange Commission as part of the company’s preparation for its initial public offering (IPO) of stock, Google is quite profitable. In 2003, the company produced $962 million in sales. Profit on that revenue was $106 million. For the first quarter in 2004, the company posted $390 million in revenue, with profits of $64 million. Google will cruise easily into the billion-dollar club this year.

Google was launched in the Stanford University dorm room of graduate engineering students Sergey Brin and Larry Page in 1995. Like all good dorm-room launches, Google grew too big for the dorm, so Sergey and Larry moved into to a garage in Menlo Park, Calif. The garage was fully equipped with a washer and dryer, a hot tub and a parking spot for the company’s first employee, Craig Silverstein, now Google’s director of technology.

Sergey and Larry will see grown-up money when Google’s stock sale makes them billionaires. In full dot-com form, the founders are thumbing their noses at Wall Street even as they offer shares on the street. The company will put its shares up for bid so small investors can buy as easily as large players. The founders have also created two classes of stock, with the voting shares remaining with management. The move is designed to insulate management from the pressure of quarterly earnings.

Though its nine-year history, Google has doggedly stuck to non-businesslike principles. One of its company mottos is, "You can make money without doing evil." Another motto says, "You can be serious without a suit." Yet even with the nice-guy fuzziness, Google can be shrewd. With search now well-monetized, Google is looking to monetize the Net’s biggest usage, email.

Google started beta-testing Gmail on April 1. It’s a free email service that will open to the public some time this summer. Each user gets a gigabyte of storage – mammoth by free email standards. But the catch – a really big catch – is that Google’s spiders will crawl your personal email and place ads next to content. So if you mention that you’re headed to Vermont for a weekend, you’ll get a local bed and breakfast ad in your email. Innovative? You bet. Invasive? You bet. But heck it’s free.

You can also bet there will be plenty more odd ideas coming from this crowd. The SEC filing reveals that the company plans to plow a quarter-billion into capital spending this year – another poke in the eye of Wall Street players who shudder at deep capital spending. After Google buys a few more servers and big balls, the balance will go to developing the oddball projects that come out of the 20-percent play time.