Google Inc.

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Industry Two—Internet Companies

CASE

12

Google Inc. (2010): The Future
of the Internet Search Engine
Patricia A. Ryan

Google began with a mission: to create the ultimate search engine to help users tame the unruly and exponentially growing repository of information that is the Internet. And most would agree that when the word “Google” became a verb, that mission was largely accomplished.1

IT HAD BEEN NEARLY SIX YEARS SINCE GOOGLE’S ATTENTION-grabbing initial public offering and, despite overall stock market weakness, Google remained strong. Although the stock moved with the market in general, the company returned significantly higher returns to its shareholders than did the S&P 500 (Exhibit 1). Founders Sergey Brin and Larry Page had created a huge empire in which they now faced challenges of continued growth and innovation. These challenges would carry them through the second decade of the new millennium.

Background2
Google was founded in a garage in 1998 by Larry Page and Sergey Brin, two Stanford computer science graduate students, based on ideas generated in 1995. The name Google was chosen as a play on googol, a mathematical term for the number one followed by one hundred zeros. It is thought the term was appealing to the founders as it related to their mission to organize an exponentially growing web. Founded on $100,000 from Sun Microsystems, Brin and Page were on their way to creating an Internet engine giant. Google immediately gained the attention of the Internet sector for being a better search engine than its competitors, including Yahoo!

This case was prepared by Professor Patricia A. Ryan of Colorado State University with the research assistance of Ryan A. Neff. Copyright ©2010 by Patricia A. Ryan. The copyright holder is solely responsible for the case content. This case was edited for Strategic Management and Business Policy, 13th Edition. Reprinted by permission only for the 13th edition of Strategic Management and Business Policy (including international and electronic versions of the book).Any other publication of this case (translation, any form of electronic or media) or sale (any form of partnership) to another publisher will be in violation of copyright law unless Patricia A. Ryan has granted additional written reprint permission.

12-1

SECTION D
EXHIBIT 1

Cumulative Returns
on Google (red line) vs.
S&P 500 (blue line)
(2004–2010)

Industry Two—Internet Companies
200%

150%

100%

50%

0%

−50%

10/11/2004
12/13/2004
2/14/2005
4/18/2005
6/20/2005
8/22/2005
10/24/2005
12/27/2005
2/27/2006
5/1/2006
7/3/2006
9/5/2006
11/6/2006
1/8/2007
3/12/2007
5/14/2007
7/16/2007
9/17/2007
11/19/2007
11/22/2008
3/24/2008
5/27/2008
7/28/2008
9/29/2008
12/1/2008
2/2/2009
4/6/2009
6/8/2009
8/10/2009
10/12/2009
12/14/2009
2/16/2010
4/19/2010
6/21/2010
8/23/2010

12-2

Date

−100%

By 2000, Google was in 15 languages and gaining international acclaim for its web search services. The Google toolbar was first released in late 2000. Current Chairman of the Board Eric Schmidt joined Google in that capacity in March 2001. In 2002, Google released Adwords, which was a new cost per click pricing system for advertising. In August 2004, Google went public with 19,605,042 shares at an opening price of $83 per share. Exhibit 1 traces the growth of Google stock to over $600 per share at the end of 2009. Gmail, an instant messaging and free e-mail service, was released in 2006, just a few months before the announced acquisition of YouTube. In that announcement, CEO Eric Schmidt stated: The YouTube team has built an exciting and powerful media platform that compliments Google’s mission to organize the world’s information and make it universally accessible and useful. Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a...
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