“Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious.” ~ Google founders Sergey Brin and Larry Page
The founders, Sergey Brin, 31, and Larry Page, 32, launched Google in September 1998 in a friend’s garage in Menlo Park, Calif., naming the company after the mathematical term “googol,” which stands for a 1 followed by 100 zeros. They met in 1995 when they were doctoral students in computer science at Stanford. Both were enthralled with information retrieval and artificial intelligence. The two collaborated in 1996 on a search engine called BackRub, Google’s precursor, which gained notoriety on campus for its ability to analyze the “back links” pointing to a given Web site.
In 2004, Google generated 95 percent of its revenue from advertising. Advertisers buy keywords that launch tiny text ads alongside search results each time someone types those words into Google’s search box and clicks “Google Search.” Advertisers pay the amount they bid for the terms, but only if someone clicks their ads.
In 2004, Google founders Sergey Brin and Larry Page issued a letter to investors called an “Owner’s Manual for Shareholders.” The seven-page letter was an organizational manifesto crafted by the co-founders to map out Google’s credo as a public company.The letter outlines the company’s goals, warning investors that as a public company, Google will not follow the usual path.
The letter outlines everything from the triumvirate leadership between the co-founders and CEO Eric Schmidt to its promise not to be “evil” by sacrificing its ideals for short-term financial gains. It promises more spending on employee perks such as free meals, a separate voting structure for executives, and avoidance of making financial predictions for Wall Street. Instead, the company will focus on long-term priorities that do not have an immediate effect on earnings.
“If opportunities arise that might cause us to sacrifice short-term results but are in the best long-term interest of our shareholders, we will take those opportunities,” the letter read. “We will have the fortitude to do this. We would request that our shareholders take the long-term view.”
The pair have created a corporate environment that fosters individual creative pursuits while pampering employees with free meals and regular beer bashes.
Here are several Google’s promises and processes as outlined in the owner’s manual:
Managing Wall Street: “Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.”
Risk vs. reward: “As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small. We encourage our employees, in addition to their regular projects, to spend 20 percent of their time working on what they think will most benefit Google. Most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses.”
Executive decision-making: “To facilitate timely decisions, Eric, Sergey and I meet daily to update each other on the business and to focus our collaborative thinking on the most important and immediate issues. Decisions are often made by one of us, with the others being briefed later. This works because we have tremendous trust and respect for each other and we generally think alike.”
Dual class voting: “While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there. The New York Times Company, the Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers frequently point out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results.
Googlers: “We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long-term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time.”
Kumbaya: “We aspire to make Google an institution that makes the world a better place. And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1 percent of Google’s equity and profits in some form.”
“As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same,” the letter states.
“In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes, this pressure has caused companies to manipulate financial results in order to ‘make their quarter.’ In Warren Buffett’s words, ‘We won’t smooth quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.'”
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