Where Google Gets Its Billions

There must be something intellectually stimulating about garages. Google, the creator of the most popular Internet search engine in the world, is the latest in a series of successful technology companies, including Hewlett-Packard and Apple Computer, that trace their origin to a garage.

In September 1998, two Stanford University graduate students, Sergey Brin and Larry Page, sublet a friend’s garage in nearby Menlo Park and launched their company. When Google went public in 2004, Brin and Page became billionaires overnight.

Search Engine Magic
The success of the company rests on the power of their remarkable search engine. Google files the content of billions of web sites in an immense database that is capable of producing a list of relevant web sites for any search term in a fraction of a second. Even more impressive, the web sites it suggests are often helpful, thanks to a series of formulas that rank them by relevance. More often than not, you can find what you’re looking for on the first page of returns. Today, hundreds of millions of people use Google each month, drawn by its efficiency.

The Perfect Targeted Ad
Google’s popularity—it is by far the most popular search engine online—is only indirectly the source of its success. After all, it gives this remarkable service away for free. Google makes billions of dollars in revenue each year because Brin and Page, with assistance from CEO Eric Schmidt, made a critical connection: a person who has demonstrated an interest in a topic by searching for information is the ideal candidate for advertisements about related products and services. Google presents these sponsored links, which appear on the right side and top of the page, with the results of the search.

Google calls this system AdWords. Advertisers select keywords that will trigger their sponsored link, and they pay Google a fee only if someone clicks on the link and goes to their web site. The more money they are willing to pay Google for a click-through, the more prominently and frequently their ad will appear when someone searches on a keyword they have chosen.

Advertisers find the AdWords proposition very compelling—and they are spending freely for the privilege of having their sponsored links appear with search results. Brin and Page found more than old lawnmowers in the garage; they found a gold mine. What do you have in your garage?