Google

Google

Jun 30, 2025 219m

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Episode Description

We tell the story of the single greatest business ever created: Google search. From its origins as a Stanford research project called BackRub, Google became the front door to the internet. Today it’s an essential service for over half the world, and one that generates more profit than ANY other US company — more than Apple, Microsoft, or Berkshire Hathaway.

But it wasn’t always so obvious. When Larry and Sergey began working on BackRub in 1996, search was a backwater industry in silicon valley. Existing search companies were eking out a living as vendors to the then-dominant “portals” like AOL and Yahoo. Google’s come-from-behind success was the result of three massive step-function leaps forward in algorithms, infrastructure and business model… some invented by Google and some borrowed (and perfected!) by them.

Today, things are not so obvious once again for Google. Despite earning more profits than all of its big tech peers, its stock trades at significantly lower multiples — a $1 trillion or more discount to Apple, Microsoft and Nvidia. Investors are concerned that AI will render Google’s beautiful business model obsolete, even though Google also basically invented modern AI and continues to lead on many dimensions. This episode begins a multi-part series where we dive into the full history that led us to this point. Tune in and enjoy!

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‍Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

AI-Generated Summary

The Origins of Google Search

The podcast delves into the inception of Google Search, starting as a Stanford research project known as BackRub in 1996. The hosts discuss how, during this period, search engines were limited and underdeveloped in Silicon Valley, struggling as vendors to dominant portals like AOL and Yahoo. Larry Page and Sergey Brin's journey to creating a highly efficient and effective search algorithm through innovative approaches and a focus on user experience is highlighted.

From Stanford to Dominance

The discussion shifts to how Google, despite facing significant competition and skepticism, emerged to dominate the search market. This was achieved through a series of critical developments in algorithms, infrastructure, and their unique business model. The podcast emphasizes the importance of PageRank, which allowed Google to provide more relevant search results than its competitors.

The Growth Phase and Revenue Model

Google’s transition from a small player to a massive business is addressed. The hosts detail how the company navigated the challenges of the dot-com crash while developing their advertising model. The introduction of AdWords and the strategic decision to focus on user intent through search ads led to a substantial increase in revenue. They also discuss how Google’s ability to scale its business through innovative ad technologies set it apart from competitors.

Distribution Strategies and Market Expansion

The podcast outlines Google's aggressive distribution strategies, particularly through partnerships with portals and the integration of Google Toolbar. By partnering with various software creators and bundling the toolbar, Google significantly increased its user base and secured its position in the market. The hosts reflect on how this network effect and market liquidity contributed to Google's ongoing success.

AdSense and Diversification

The introduction of AdSense is presented as another critical step in Google's growth, allowing the company to monetize content beyond search queries. This innovative ad platform expanded Google's revenue sources and strengthened relationships with content creators across the internet.

IPO and Long-term Vision

The conversation wraps up with Google’s IPO in 2004, which was met with mixed feelings. Despite being a massive success by traditional sales metrics, criticisms arose regarding the pricing mechanism and market execution. The hosts explore how Google’s long-term vision and the structural choices made during its IPO process set the stage for future growth and adaptation.