How the World Got Wired · Search

What Was the Business?

For the first two years, Google had a wonderful search engine and millions of users — and almost no idea how to make money.

This was the central problem of the late 1990s internet. People loved the products. They didn’t pay for them. The dot-com companies you read about in Chapter 11 had all been struggling with the same problem, and almost all of them were dying or had died from it.

Page and Brin tried various things. They licensed Google’s search to other websites — Yahoo! itself, by 2000, was paying Google to provide the underlying search results for Yahoo’s portal. This brought in some money. But it wasn’t enough to build the kind of company they wanted.

Then, in 2000, they made the decision that would define everything.

They started selling advertisements.

Not the giant flashing banner ads that the dot-coms had used, which everyone hated and almost everyone had learned to ignore. Something else. Something small, quiet, and matched to what people had typed in.

When you searched for running shoes, alongside the regular search results, Google would show you a few small text ads — clean, simple, indistinguishable from the regular results except for a quiet label that said sponsored. The ads would be for running shoes. Advertisers had bid, in an automatic auction, for the right to show their ad to someone searching for running shoes. Whoever bid highest, and whose ads got clicked on the most, won that slot.

Google called the system AdWords. It went live in October of 2000.

I want you to stop and notice what this was, because it was not obvious at the time, and it changed the world.

For most of human history, advertising had been about shouting at strangers. A company that made running shoes would buy a TV ad, and the ad would be seen by everyone watching that TV channel — most of whom did not want, and were not thinking about, running shoes. The advertiser was paying to reach a million people in the hope that a few hundred of them might, eventually, want running shoes. It was incredibly wasteful. Almost everyone in advertising knew it.

What AdWords did was different. AdWords showed running-shoe ads only to people who had just typed the words “running shoes” into Google. Those people had announced, by their search, that they were actively looking for running shoes right that minute. They were not random strangers. They were people whose interest in running shoes was the most certain thing about them at that moment.

The economic value of this was almost unimaginable. The advertiser was no longer paying to reach a million strangers. The advertiser was paying to reach the specific people who were already looking for what they sold. The waste of traditional advertising had been almost completely eliminated.

Within a few years, Google was earning billions of dollars a year from AdWords. Within a decade, it was earning tens of billions. Within two decades, hundreds of billions. The company you and your family use every time you type a question into a search bar makes more money — many times more — than almost any other company on Earth.

The thing that made it all work, the thing that turned a research project into one of the most valuable businesses in history, was not the search engine itself. The search engine was just the bait. The thing that made Google rich was that people, when they searched, told Google what they wanted to buy. Google sold that information to advertisers, in real time, for enormous amounts of money. The free thing — search — was excellent, and it stayed excellent, because the better it was, the more people would use it, and the more information they would reveal about themselves, and the more valuable the advertising would become.

This is the business model of almost every “free” product you use on the internet today. Search engines. Email. Maps. Social networks. Video sharing. Almost none of those services charge their users any money. They are paid for by advertisers who buy access to those users’ attention, and to information about those users’ interests, gathered from how they use the free services.

When somebody offers you something valuable for free, on the internet, somebody, somewhere, is paying for it. Usually, what’s being sold isn’t the thing you’re using. It’s you.

I am not telling you this to make you angry. The trade is, in some ways, a reasonable one. You get search for free. The advertiser gets to find people interested in running shoes. The internet you grew up with — the one that has all this remarkable free stuff in it — exists because of this exchange. It is not, by itself, a bad bargain.

But you should understand it clearly, because it is the financial engine that powers a very large fraction of the modern internet, including the companies you’ll meet in the next few chapters. Once you see it, you can’t unsee it. You will notice, every time you tap an app on your phone, the small ways the system is paying attention to you so that it can show you the right ads, so that the people who built the app can keep making money, so that the app can stay free, so that you and a billion other people will keep using it, so that the cycle keeps going.

This system was invented, in its modern form, in a garage in Menlo Park in 1998 and 1999, by two graduate students from Stanford who had been trying to find a better way to rank web pages.

That is one of the strangest, and most important, sentences in this whole book.

In the next chapter, we meet the device that brought this entire system into our pockets, every minute of every day, all over the world: the iPhone.

That’s Chapter 15.

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