Alphabet is worth over $600 billion. How'd they do it?
13 May, 2017ENTREPRENEUR.COM
If you’re an entrepreneur looking to amass wealth, then perhaps the best people to learn from would be the founders of Alphabet, Sergey Brin and Larry Page.
They started out as graduate students at Stanford University, where they began work on Google. Now they have become the owners of one of the largest internet conglomerates in the world, worth more than $600 billion. So how did they do it? Here's the blueprint.
It’s not like Google was the first search engine. It’s just that the other search engines weren’t very good. The Google duo had big ideas. The first was to search the web with a citation-ranking system used by academics to rate academic journals. The idea came naturally to them, given that they are the sons of professors. Their other idea was to base the search results on as pure a ranking system as possible, one that wasn’t tainted by the need to generate money that comes with every business. They believed providing a pure ranking system would make the results more trustworthy and encourage visitors to come back.
Alphabet isn’t the only company that has found success in an established industry that could use improvements. When billion-dollar essential oils company doTERRA launched, there were already companies offering essential oils, but it was able to bring the use of essential oils from the fringes into the mainstream.
Brin and Page believed that providing high-quality information to the world for free was their responsibility. By 2000, it was obvious that Google was never going to be big or profitable with simple, pure ratings. The boys had to devise a way to generate ad revenue without compromising the results of searches.
Their solution was the paid listings you can see alongside the search results in Google. The idea revolutionized the advertising industry. The ads were relevant and they were charged on a per-click basis. This move allowed Google to keep the primary search results free of paid listing that users wanted no part of. Although the decision did also get Google into some legal hot water. The company was litigated by GoTo.com, which said the idea for an auction-based pay-per-click advertising model was created by its team. The lawsuit was settled and GoTo.com was later bought out by Yahoo, once one of Google’s biggest rivals.
This lesson has been made very clear through the recent headlines on Travis Kalanick, CEO and co-founder of Uber. Page and Brin hired Eric Schmidt in 2001 to -- in their own words -- basically offer adult supervision. The company went public in 2004, with the company being run by the three men. Most of the vice-presidents would report to Schmidt, leaving Page to focus on engineering and product development while Brin also worked on engineering and securing new deals. Schmidt would help the entrepreneurs before allowing Page to become CEO in 2011.
The main HR executive of Google also serves as the chief culture officer, who basically ensures that Google lives up to their credo of “Don’t be evil." Former executives of the company have praised Google for plenty of things, including being progressive -- at least by the standards of Silicon Valley -- and promoting female executives, along with their ongoing series of programs and lectures offered at the Googleplex headquarters.
Another thing the company has been praised for is its policy of offering free food and massages. Combine the culture of the company with its near-infinite resources and it’s hardly surprising at all some 2.5 million people send in their resumes annually.
Brin and Page went public with the company in 2004, saying that it would be unconventional, that they were willing to forego short-term success for long-term growth. This was evidenced by some deals that were seen as bad at the time, but have become huge successes. This included the purchase of YouTube in 2006, which took a long time to justify its $1.6 billion price tag. Now the video sharing site brings in more than $10 billion annually and forms the heart of Google’s TV service.
Sometimes the team invests in an out-there project that could take years to become profitable. Sometimes they invest in projects that become flops in time but filled an important niche. Google Glass wasn’t a big hit with the public, but it has become essential to certain industries and inspired other augmented reality glasses.
The Alphabet team are willing to take an opportunity on the long term, even if it can cost them in the short term, and it’s given the company some major hits -- as well as a few misses here and there. While the stock price of Alphabet has been hit by these speculative bets, no one can deny that Page and Brin haven’t stuck to their initial promise of creating a company that looks at the future.