Google

The Edge of Google
by Dimitris Bertsimas (with Robert M. Freund) c 2012 Dimitris Bertsimas. All rights reserved.

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Introduction and History of Google

Google was started in 1996 as a research project of Sergei Brin and Larry Page, who were both graduate students at that time in the Computer Science Department at Stanford University. They initially used their dorm rooms and a friend’sgarage for their fledgling business, but when it started to take off, they took a leave of absence from Stanford [1]. Their research project started when they observed that the internet is a large network of webpages connected with hyperlinks, links on webpages that readers can directly follow to another webpage. Using these hyperlinks, the internet can be viewed as a graph, a common mathematicalstructure that illustrates the relationship between several entities (vertices) by showing the various connections between them (arcs). With this observation, they set out to explore the properties of the internet from a mathematical perspective. To give each webpage a measure of importance, they developed the PageRank algorithm. Given a certain search string, the PageRank algorithm could returnresults that not only measured the number of times the search string appeared on a page, but also the importance of each page. Observing that this algorithm would make a better search engine than those currently in use (which just counted the number of times a search string appeared on the page), they started the search engine Google, whose name is a play on googol, the word for the number 10100 . Bythe end of 1998, Google had an index, a database of efficiently stored webpage information, of about 60 million pages and was already being recognized for returning extremely relevant results. Within two years, they dethroned AltaVista as the search engine with the largest index of webpages. The first funding for Google was $100, 000, given in 1998 by Andy Bechtolsheim, a co-founder of SunMicrosystems. By 1999, a $25 million round of funding was announced. Google’s initial public offering took place in 2004, when they offered 19,605,052 shares for $85 per share [2]. In 2001, Eric Schmidt, former CEO of Novell, became the CEO of Google. Since then, Google has acquired many companies, mainly small technology companies. Many of these companies have turned into Google applications, including GoogleEarth and Google Voice. Google also acquired the popular online video site YouTube in 2007. Additionally, Google has partnered with many other companies on various projects, including NASA and Sun Microsystems, as well as current partnerships with NBC and Amazon. Presently, Google is the most used search engine in the United States, with a market share of 65.6%. It is estimated that Google indexestrillions of webpages and receives several hundred million search queries each day. Additionally, Google has consistently ranked highly as one of the best places to work, attributed to their informal corporate culture [2].

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Financial Information and Growth

Since the use of a search engine is free and unlimited for any consumer with internet access, search engine companies must usevarious ways to make money. Some search engines charge webpages a fee to index their webpage faster. Most search engines sell user data to various companies, such as popular query words or types of searches. They can also sell their searching capabilities to other webpages. But the most common and profitable source of income is advertising, of which Google is a key player. In 2000, Google startedselling advertisements associated with search keywords. This allowed Google to not only gain respect as a search engine, but generate revenue as well. Ninety-nine percent of Google’s revenue is derived from its advertising programs. Table 1 shows the revenue, net income, and market capitalization of Google for the past nine years. [3].

Table 1: Financial Growth of Google Year 2003 2004 2005...