The net differentiator

7 Dec 2004

On a brisk and cold Tuesday afternoon in November, some of the Californian ingenuity that has created global brand names such as Apple, Cisco, Sun and Google shone on a little side street of Dublin.

“I’m a technical person, not a finance person,” deadpans Google vice-president of operations, Urs Hoelzle (pictured), commenting on the factors that led a Stanford University research team to become a globe-straddling internet powerhouse that floated on the New York Stock Exchange in August, achieving a US$27.2bn valuation that puts it on a par with blue-chip stalwart General Motors.

Indeed, Hoelzle’s reticence to liken himself to the suits of the business world couldn’t have been more apparent. Long hair and beard, diamond earring and not wearing any shoes, Hoelzle is a cross between a professor of philosophy and a long lost member of the Grateful Dead.

Hoelzle was in Dublin last week to conduct interviews with prospective management for Google’s recently opened operations centre, which it is envisaged will employ 240 people within three years. He was one of Google’s original dozen or so employees and is rumoured to have maxed out his credit card at the time in efforts to acquire the servers needed to power what is today the world’s number one search engine.

“Apart from [Google co-founders] Sergey [Brin], Larry [Page] and myself there were only three other people in Google’s engineering department. My business card read ‘search engine mechanic’. On the maxing credit card thing, well, that was due to the fact that we had no money and were extremely cost focused. That was one of the things I really liked about the company then. The internet bubble was in full swing and everyone was throwing around money, except for us.

“When we eventually got US$25m venture capital money in 1999 the first thing we did was spend it on the cheapest servers you could get. Even from the beginning we had a focus on making good use of money in order to get to a point where we could offer a viable service. We made money on every deal from day one but it was only exactly four years ago (Q1, 2001) when we had our first profitable quarter.”

Google didn’t go the initial public offering (IPO) route like many of its counterparts in the dotcom sector in the frenzy of 2000 and, says Hoelzle, this was for a good reason. “We waited until we got the product right. Our corporate motto is: ‘Organising information to make it useful and accessible’ – the organising, being useful and accessible are the hard parts.”

Hoelzle cites Google’s foray into news with its service (allowing web surfers to have news presented to them in the context they require) as a critical dimension of being useful and accessible. “The strength of the web is what’s out there. Without it being accessible it wouldn’t be useful to the average person. We are not a news site, yet we pull streams of information together to make it more comprehensive and therefore more valuable.”

Hoelzle says Google’s forthcoming move into ‘searchable desktop’ technology – an area also being eyed by Microsoft – is also about getting information to people in a way that is organised, accessible and useful. “It’s the same principle; there’s a lot of information on people’s desktops and laptops that they could use but can’t find, whether it’s text or photos. Why not have it organised to be useful, even years after the files were created?” asks Hoelzle.

“A lot of people asked us why it is easier to search the web than it is to search the hard drive on their own personal computer.” It was a similar principle that drove Google to create the Gmail email service, which was an industry first with more than 1GB of storage as well as spellchecking and auto-complete technology.

In many ways Google can also be credited with reigniting the floundering online advertising sector, which lost its way in 2001 due to the unpopularity of banner ads, by developing its Adsense business. The company was central to the introduction in the past few years of the ‘sponsored search’ element that is driving internet advertising today – effectively pushing advertising to web surfers based on the context of their search.

After three steady years of marked decline the online advertising business is understood to be projecting major growth this year. The internet advertising market will be expected to triple over the next three years and will be worth €4bn by 2008.

Hoelzle warms to this particular subject. “There are many major sites that dominate the web, but also many micro sites that drive traffic. Many of these sites had no way to make money before Adsense came along because they were too small to attract the interest of the advertising agencies. Now that’s changed,” Hoelzle says, citing one US site called – dedicated to people who want to talk about seats on particular airplanes – which is reeling in US$10k a month in advertising, although “this is the exception rather than the rule,” he points out.

Although Google is one of the best known brands in the world of the web, the company employs only 2,400 people, and endeavours to keep a small company mentality, a factor Hoelzle says is central to driving innovation. Since Google’s multi-billion dollar IPO in the summer, however, many of these workers are now millionaires, which begs the question – how will the company hold on to these people?

Hoelzle contemplates the question. “We worry about that because it’s a part of handling growth but people would work at Google for free if they could afford to because it’s a great job. That’s the kind of employer we’d like to be. We had a number of employees who came to us and were already millionaires.

“If you can work for a company that makes products that meet millions of users, that’s satisfying for people such as engineers. Also, we’re closer to our customer base than most people realise. If we add a new version of spellchecker, within five minutes we’d have feedback from the outside world. Now that’s phenomenal,” he concludes.

By John Kennedy