History of Google - Growth

Growth

In February 2003, Google acquired Pyra Labs, owner of Blogger, a pioneering and leading web log hosting website. Some analysts considered the acquisition inconsistent with Google's business model. However, the acquisition secured the company's competitive ability to use information gleaned from blog postings to improve the speed and relevance of articles contained in a companion product to the search engine Google News.

At its peak in early 2004, Google handled upwards of 84.7% of all search requests on the World Wide Web through its website and through its partnerships with other Internet clients like Yahoo!, AOL, and CNN. In February 2004, Yahoo! dropped its partnership with Google, providing an independent search engine of its own. This cost Google some market share, yet Yahoo!'s move highlighted Google's own distinctiveness, and today the verb "to google" has entered a number of languages (first as a slang verb and now as a standard word), meaning "to perform a web search" (a possible indication of "Google" becoming a genericized trademark).

After the IPO, Google's stock market capitalization rose greatly and the stock price more than quadrupled. On August 19, 2004 the number of shares outstanding was 172.85 million while the "free float" was 19.60 million (which makes 89% held by insiders). In January 2005 the number of shares outstanding was up 100 million to 273.42 million, 53% of that was held by insiders, which made the float 127.70 million (up 110 million shares from the first trading day). The two founders are said to hold almost 30% of the outstanding shares. The actual voting power of the insiders is much higher, however, as Google has a dual class stock structure in which each Class B share gets ten votes compared to each Class A share getting one. Page says in the prospectus that Google has "a dual class structure that is biased toward stability and independence and that requires investors to bet on the team, especially Sergey and me." The company has not reported any treasury stock holdings as of the Q3 2004 report.

On June 1, 2005, Google shares gained nearly four percent after Credit Suisse First Boston raised its price target on the stock to $350. On that same day, rumors circulated in the financial community that Google would soon be included in the S&P 500. When companies are first listed on the S&P 500 they typically experience a bump in share price due to the rapid accumulation of the stock within index funds that track the S&P 500. The rumors, however, were premature and Google was not added to the S&P 500 until 2006. Nevertheless, on June 7, 2005, Google was valued at nearly $52 billion, making it one of the world's biggest media companies by stock market value.

On August 18, 2005 (one year after the initial IPO), Google announced that it would sell 14,159,265 (another mathematical reference as π ≈ 3.14159265) more shares of its stock to raise money. The move would double Google's cash stockpile to $7 billion. Google said it would use the money for "acquisitions of complementary businesses, technologies or other assets".

On September 28, 2005, Google announced a long-term research partnership with NASA which would involve Google building a 1,000,000-square-foot (93,000 m2) R&D center at NASA's Ames Research Center, and on December 31, 2005 Time Warner's AOL unit and Google unveiled an expanded partnership—see Partnerships below.

Additionally in 2005, Google formed a partnership with Sun Microsystems to help share and distribute each other's technologies. As part of the partnership Google will hire employees to help in the open source office program OpenOffice.org.

With Google's increased size came more competition from large mainstream technology companies. One such example is the rivalry between Microsoft and Google. Microsoft had been touting its Bing search engine to counter Google's competitive position. Furthermore, the two companies are increasingly offering overlapping services, such as webmail (Gmail vs. Hotmail), search (both online and local desktop searching), and other applications (for example, Microsoft's Windows Live Local competes with Google Earth). In addition to an Internet Explorer replacement Google designed its own Linux-based operating system called Chrome OS to directly compete with Microsoft Windows. There were also rumors of a Google web browser, fueled much by the fact that Google is the owner of the domain name "gbrowser.com". These were later proven when Google released Google Chrome. This corporate feud is most directly expressed in hiring offers and defections. Many Microsoft employees who worked on Internet Explorer had left to work for Google. This feud boiled over into the courts when Kai-Fu Lee, a former vice-president of Microsoft, quit Microsoft to work for Google. Microsoft sued to stop his move by citing Lee's non-compete contract (he had access to much sensitive information regarding Microsoft's plans in China).

Google and Microsoft reached a settlement out of court on December 22, 2005, the terms of which are confidential.

Click fraud has also become a growing problem for Google's business strategy. Google's CFO George Reyes said in a December 2004 investor conference that "something has to be done about this really, really quickly, because I think, potentially, it threatens our business model." Some have suggested that Google is not doing enough to combat click fraud. Jessie Stricchiola, president of Alchemist Media, called Google "the most stubborn and the least willing to cooperate with advertisers", when it comes to click fraud.

While the company's primary market is in the web content arena, Google has also recently began to experiment with other markets, such as radio and print publications. On January 17, 2006, Google announced that it had purchased the radio advertising company dMarc, which provides an automated system that allows companies to advertise on the radio. This will allow Google to combine two advertising media—the Internet and radio—with Google's ability to laser-focus on the tastes of consumers. Google has also begun an experiment in selling advertisements from its advertisers in offline newspapers and magazines, with select advertisements in the Chicago Sun-Times. They have been filling unsold space in the newspaper that would have normally been used for in-house advertisements.

During the third quarter 2005 Google Conference Call, Eric Schmidt said, "We don't do the same thing as everyone else does. And so if you try to predict our product strategy by simply saying well so and so has this and Google will do the same thing, it's almost always the wrong answer. We look at markets as they exist and we assume they are pretty well served by their existing players. We try to see new problems and new markets using the technology that others use and we build."

After months of speculation, Google was added to the Standard & Poor's 500 index (S&P 500) on March 31, 2006. Google replaced Burlington Resources, a major oil producer based in Houston that had been acquired by ConocoPhillips. The day after the announcement Google's share price rose by 7%.

Over the course of the past decade, Google has become quite well known for its corporate culture and innovative, clean products, and has had a major impact on online culture.