Google: The Most Valuable Company in the World

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The battle for the title of most valuable company in the world is ongoing as Alphabet, better known as Google, and Apple continue to battle for the top spot on the list. The title has changed hands multiple times over the last decade and as of April 2016, Google is poised to reclaim to title it had conceded to Apple just two months earlier. The road to the top hasn’t always been easy and in Google’s history there have been some moments where the title seemed an impossibility. However, in just twenty years Google has managed to become a company that has mastered the art of innovation and continual improvement in order to earn its place amongst the top organizations in the world. 

Early Beginnings

Search engine technology was in its infancy when Google founder Larry Page was deciding on a dissertation topic for his Ph.D Program at Stanford University. Page’s supervisor encouraged him to explore his interest in the algorithmic properties which could potentially impact searches of the world wide web (Dougherty). Page brought on Sergey Brin as his partner in research and the two men went on to develop the PageRank algorithm in 1996, a method for ranking web content quality by utilizing its connections to other pertinent sites, instead of simply content word counts (Page and Brin). 

The project was a success and as they continued to grow their database of websites, Page and Brin registered the site name google.com in September 1997 ("Timeline – Company – Google"). Although they did not formally incorporate the company until September 1998, they secured their first financial support from Sun Microsystems co-founder, Andy Bechtolsheim, in the amount of $100,000 ("The Angel Investors Behind Google"). Within the next year, Google had secured an additional $25 million in equity funding and hired a tech industry veteran, Eric Schmidt, as their Chief Executive Officer. 

Under the guidance of Schmidt, Google continued to grow privately until the Initial Public Offering (IPO) was announced in early 2004. In the fall of 2004, the IPO brought in over $1.6 billion and making many of the original Google employees extremely wealthy (Russolillo). Throughout the next decade, Google would go on to develop into an extremely diverse organization with interests in multiple industries worldwide. These developments have been the core of what has made Google a top contender for the most valuable company in the world. 

Innovations

From the beginning, Google has been founded on the creation of new products and services which push the boundaries of science and technology. After the initial creation of the PageRank algorithm, Page and Brin didn’t stop there and instead continue to modify the equation to this day, launching the newest format in 2015 which drastically changed the way Google analyzes and ranks web search return results. Focused more on the future in mobile applications, organizations globally were forced to take notice of the new format in order to maintain their relevance in Google search results (Hall). In addition to their original goal of organizing the information online into an accessible format, Google continued to utilize its internal teams to innovate new products and services. Some of these were related to the core Google business, while some were explorations into completely new territory.

Web Search Technology 

Along with its initial innovation of the PageRank algorithm, Google has continued to revolutionize the web search industry as they develop new ways to aid consumers in finding the information that they need. Although it seems commonplace now, the introduction of the ‘autocomplete’ feature on the Google search engine was revolutionary at the time. This function allows people to input only a portion of their desired result and lets the search engine finish the phrase based on other search options, repetitive phrases, and previous history. Seemingly simple, it allowed people to search for things that they may not have otherwise been able to locate. 

The development of Google translation has also allowed people to access the information they may not have otherwise been able to utilize. Currently, Google is able to translate text into a total of 80 languages and according to Goldman, the function is utilized more than a billion times each day (“10 Innovations”). These translations can be accessed through performing a search function or the translation of a website for research purposes. Similarly, the Google voice application allows an individual to search utilizing voice commands in the same list of languages. The search potential is not limited to words, with the ability to upload pictures, videos, and applications content to Google in an effort to find a unique match somewhere on the internet. 

Life and Environmental Sciences

In 2013, Google backed the independent company California Life Company (Calico), the brainchild of Arthur Levinson (Miller). At the time, Levinson was the Chairman of Genentech and Apple, positions he retains to this day ("Arthur Levinson | Bio"). Calico’s main goal seems lofty: to extend lifespan through research in genetics, biochemistry, and physiology. It is a long way from search engine technology, but a great example of Google’s mission to change the world. It is also a good example of their commitment to invest money that they are almost certain to not see a return on with Calico’s own website noting that the project is a “long-term focus for which funding is already in place” (‘Calico’).  However, Google did not stop there. In hopes of reducing deaths due to traffic fatalities, Google commenced research on the now infamous self-driving car. Although regulatory hurdles on such an invention could be nearly impossible to surmount, Google continues to invest millions in the development and testing of the vehicle ("Google Self-Driving Car Project").

Acquisitions

Although Google is known for its own innovative technology, they have not been shy about admiring the technology of others, and purchasing it if they believed it fit in their portfolio of web-based offerings. Over the last twenty years, Google has purchased nearly 200 companies ("Timeline – Company – Google"). The majority of these purchases have been integrated into current Google products and absorbed into the Google name. However, there are a handful of acquisitions that have maintained their identity during and after the ownership transition. The most public of those was the purchase of YouTube in 2006, costing Google $1.65 billion.

In 2011, Google began pursuing the production of tangible goods and in doing so, made the decision to make their largest acquisition to date. The $12.5 billion purchase of Motorola Mobility landed Google the production capability and accompanying patents to develop the Google TV, Android hardware, and Google tablets. Keeping with the trend of producing tangible goods, Google’s second largest acquisition was completed in 2014 with the purchase of Nest Labs (Tweed).  At the time of acquisition, Google paid $3.2 billion for the company despite the fact that Nest Labs only sold two things: thermostats and smoke detectors. However, they were not the ordinary household devices, these were smart devices. Not only were they Wi-Fi enabled, but they were able to be controlled via a cell phone application. 

Arguably the real benefit of the acquisition wasn’t digital thermostats, but the people that came with them. Nest Labs’ Chief Executive Officer Tony Fadell was a legend in technology circles due to his experience with Apple. Industry insiders jokingly refer to Fadell as “the Podfather” for his role in the development of the iPod and subsequently, the iPhone. Known for his knack for designing technology that aesthetically appeals to the masses, Fadell’s thermostat was simply the icing on the cake. In early 2014, Google purchased DropCam for $555 million to add security capabilities for Nest products. Later that same year, they added Revolv, a home automation company completing the Nest portfolio of home devices which service nearly every aspect of control in wireless control of home devices (Tilley).

Reorganization

In early 2015, Google announced its corporate structure would change to incorporate all of its acquisitions and concepts under a single umbrella. This facilitated the creation of work groups that would assist in managing future growth. The idea came from the newly appointed Chief Financial Officer Ruth Porat who recently replaced Patrick Pichette who had been in the post for nearly a decade. However, reorganizing for the sake of operations and management was not Porat’s goal. Investors and analysts were questioning Google’s overall performance and Porat believed it was due to the intermingling of core services and innovation. Most research projects inevitably lose money in the early stages (Cuthbertson).

As it turned, Porat was correct. The new structure highlighted Google’s core services in one branch and its other developing ventures as separate reporting items on the income statement. Although the restructure revealed the true cost of innovation, a $3.6 billion loss in 2015, it also highlighted the increasing revenue of the core services (Goldman, “Alphabet Earnings”). This presented a clearer picture to investors who previously may have thought that increasing sales of core services were a thing of the past. On his blog, Page indicated the move was a strategic one, made to encourage innovation and continue investing in new technology, noting:

From the start, we’ve always strived to do more and to do important and meaningful things with the resources we have. We did a lot of things that seemed crazy at the time. Many of those crazy things now have over a billion users, like Google Maps, YouTube, Chrome, and Android. And we haven’t stopped there. We are still trying to do things other people think are crazy but we are super excited about. (pp.1).

The Google Core Services group includes the traditional search business as well as the advertising offerings from AdSense. Many of the web-based content and services were combined into this group, including YouTube and the directional application Waze. Each of the operating businesses headed up by a carefully chosen Chief Executive Officer, such as Nest and Dropcam’s Fadell, Arthur Levinson with Calico, and Astro Teller heading up the Google X group.

Making the Difference

It is quite easy to see how Google has evolved into an innovative powerhouse, producing a multitude of products and services. However, its ability to do so in a vast array of industries, in such a short period of time, is truly unique. They are competing for the title of most valuable company in the world amongst companies that have been around twice as long and yet they are not backing down. As they continue to invest billions in technology that may, or may not, succeed, Google doesn’t seem to care. Page is famous for his quips about ambition and setting goals that are out of reach, stating succinctly that even failure, on that level, is phenomenal (Bock).

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