August 3, 2021

Google is 20 years old … and a lot of teeth

Google Inc. was born on September 4, 1998. The billions generated have transformed the search engine into a digital colossus … which has recently been uncovered from the ground up.

Twenty years ago, on September 4, 1998 exactly, Larry Page and Sergey Brin decided to officially create the Google Inc. structure and took the opportunity to cash their very first check. An investment of 100,000 dollars signed Andy Bechtolsheim, co-founder of Sun Microsystems and in fact the largest historical shareholder of Google. The duo, which already aims “to organize information on a global scale and make it universally accessible and useful”, leaves Stanford dormitories for a garage in the suburb of Menlo Park.

“We all really discovered what the Internet was with Google”

In the process, Google is developing as fast as the algorithms of its search engine. 1999 was the year of the first praise in the general press, a record raising of $ 25 million and the move to its final headquarters, the Googleplex in Mountain View. The search engine leaves its beta on September 9 of the same year. Google then manages three million searches per day. At the start of 2000, the company declined its product in 10 new languages, including French, and then attacked the Asian market. The Google revolution is underway and Paul Amsellem, CEO of the madvertise mobile network and early user, remembers it as if it were yesterday. “We discover a revolutionary and refined interface, confined to a tab where you type in your query, where Yahoo and Altavista worked at the time with directories. We really all discovered what the Internet was with Google.”

Google is also an economic model, at the time very disruptive but now become the norm and which enshrines the now famous formula: “if it’s free, then you are the product”. The Adwords advertising network was created in 2000. Since then advertisers have paid on a cost per click (CPC) basis to have their targeted advertisements displayed alongside the search engine results. Google will not cease to improve the model, by adapting it to partner sites via its Adsense network, mobile and email (its Gmail messaging service was launched in 2004). This advertising pillar still represents today more than 85% of its turnover (109.65 billion dollars in 2017 for 12.7 billion profits).

2004 marked a turning point, with an IPO on August 19, which saw Google raise $ 1.6 billion. Rebelote a year later when the company this time raises 4.2 billion to have a total “safety mattress” of 7 billion dollars. Then comes the time for “shopping”. Google is turning into an investment vehicle. “Google’s success is first and foremost the vision of the founders, which enables them to unearth the trends of tomorrow, and their ability to industrialize promising businesses”, summarizes Paul Amsellem. The best example is undoubtedly the takeover of Android, organized by the founding duo behind the back of Eric Schmidt (yet recruited in 2001 to chair the group), for “barely” $ 50 million in 2005. Larry Page gets his hands dirty and personally carries the development of a mobile operating system which today captures the overwhelming majority of the market. Enough to allow Google to cash without flinching the switch in uses from the fixed web to mobile (unlike a Microsoft). “It was far from being won when at the time Nokia and its Signal OS were the benchmark, remembers Paul Amsellem.

Google’s 5 biggest acquisitions (in billions of dollars)
Society Amount Sector Year
Motorola 12,5 Telephony 2011
Doubleclick 3,4 Publicity 2007
Nest 3,2 Automation 2014
Youtube 1,65 Video 2006
HTC 1,1 Telephony 2017

The other good move is the buyout in 2006 of Youtube for 1.65 billion dollars. “A record amount for Google which surprised a lot of people at the time,” recalls Paul Amsellem. The online video platform is not yet the giant it is today, but with 46% market share (ahead of the 21% of the late Myspace), it is a booming company. The Mountain View firm broke its piggy bank again in 2007 to buy the marketing solutions publisher Doubleclick for $ 3.1 billion. This time the group strikes the pawn of its big rivals Microsoft, AOL and Yahoo, also instantly. The undisputed giant of sponsored links (at the time 43% of the online advertising market), it is becoming just as ubiquitous in a growing format, display. The operation will be the subject of a highly commented investigation by the American competition authority, the FTC, and will complete the consolidation of Google’s hegemony in the online advertising market.

2015: a (evil) digital giant

Difficult today to recognize the “small” search engine of the beginnings. The metamorphosis is such that Larry Page and Sergey Brin made the decision, in August 2015, to overhaul their structure. Google has become a wholly-owned subsidiary of an umbrella brand called Alphabet which oversees a dozen other companies, in projects ranging from the autonomous car (Waymo) to the connected home (Nest) through access to Internet (Fiber) or health (Calico). A way for Larry Page and Sergey Brin to get out of the ruts of the Web by devoting themselves to subjects as crazy as they are disruptive, via the laboratory X for example, but also to defuse a situation which was becoming untenable by “bursting” their various assets.

Because the imprint of the Google octopus has become such that criticism of abuse of dominance is increasingly heard. “No doubt because the group was taking up more and more space and the digital world is a bit Manichean, Google went four or five years ago from the status of a cool company to that of a big bad guy”, analyzes Paul Amsellem. A shame for a group whose motto is none other than “don’t be evil” but which has taken the annoying habit of reserving a prominent place in its search results for in-house services (Google Shopping, Youtube, Google News and AMP, Google Flights) at the expense of the competition. Especially since the platform that likes to brandish its status as a host in the event of a dispute does not produce content. She borrows them from others, be it Wikipedia, the media or blogs, without necessarily paying them accordingly. Few are those who move. To refuse the rules imposed by Google is to risk depriving yourself of a huge source of traffic.

6.72 billion euros in fines imposed by the European Commission in two years

The tension is most palpable in Europe. A European Commission investigation initiated in 2015 led two years later to a fine of 2.42 billion euros for abuse of a dominant position via its price comparison Google Shopping. In 2018, it is “the use of Android as a vehicle to consolidate the dominant position of its search engine” which earned Google a further fine, of 4.3 billion euros this time. Not enough to waver the Google model (which calls every time) so far. “What can Europe do if not tax?” Asks Paul Amsellem. “While it is undeniable that the entire advertising ecosystem is suffering from the power of Google, it is difficult to attack a company whose products are so popular because they are often the best.”

2018: what’s next?

Google apparently has the controls of the Internet well in hand… But it is still not immune to getting off the road. While Eric Schmidt has been claiming for years that the most serious competitor of Google’s search engine is Amazon, a study carried out among 2,000 American buyers by BloomReach proved him right in 2015. 44% of respondents claimed to carry out their research directly on Amazon versus 34% on search engines such as Google. Amazon is not the only player likely to disintermediate the Mountain Views firm. How many go directly to Booking or Airbnb to find accommodation? The threat is all the more real as web research is set to become vocal with the emergence of intelligent assistants. Google is already in place with its Google Home, but the battle with the Amazon Echo and Apple’s Homepod is going to be tough.

The end of net neutrality in the United States is another specter that hangs over Mountain View and a big snub for a company that spent no less than $ 18 million lobbying Congress in 2017. Without neutrality Internet, an access provider may decide to withdraw Youtube from its offer on the grounds that it consumes a lot of bandwidth. Or ask Google to sign him a (big) check to continue to distribute it optimally. Here again, Google has prepared the ground with its project to build an Internet network infrastructure using the “Google Fiber” optical fiber. But we are still far from the service deployed on a large scale.

“The social media part is Google’s Achilles heel. The group has had a series of crashes there”

There remains one last subject: social networks. Arguably the biggest erasure in the beautiful copy written by Google in the past 20 years. “It is really Google’s Achilles heel and a subject on which the group has had a series of crashes,” recalls Paul Amsellem. Launched in 2004, the Orkut social network only emerged in Brazil, while Google +, a project in which Larry Page was personally involved, quickly became a digital desert. The group also let slip nuggets like Instagram and Whatsapp in the hands of Facebook, when Evan Spiegel, the founder of Snapchat, has repeatedly pushed back his advances. Google offered him up to $ 40 billion but was rejected.

While instant messaging services reign supreme in the mobile world, the group is now miles behind in this area compared to a Facebook (Messenger, Instagram, WhatsApp) or Chinese BATX. The five most downloaded mobile apps in 2017, App Store and Google Play Store combined, were Facebook Messenger, Snapchat, WhatsApp, Bitmoji and Instagram. The only Google service in the top 10 was its Waze mapping app. Obviously worrying when we see how messaging services are spreading in a sprawling way, by launching new payment, reservation or entertainment services, so as to capture as much time as possible from the Internet user. Like Google in its day.

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