January 2005

What's Next for Google

Continued from page 1

By Charles H. Ferguson

The Prize and the Contestants
Eric Schmidt and Microsoft's Bill Gates will be competing against each other for the third time. For both men, the contest is personal as well as financial.

Gates's philanthropic ambitions depend on Microsoft's continued health. And like a rock star who yearns to be admired for his brains, Gates wants to create new technology. Only by doing so can he overcome his reputation as the college dropout who built his empire by turning other people's ideas into mediocre products. "Bill Gates is desperate to prove that he can innovate," commented a Microsoft executive who prefers to remain anonymous. "And it just might kill us." He pointed to the ambitious goals and long delays that have plagued Longhorn, Microsoft's future (and search-centric) version of Windows.

By contrast, the three men who run Google have impeccable technology credentials. Schmidt has a PhD from the University of California, Berkeley, did research at Xerox PARC, and became chief technology officer of Sun Microsystems, where he oversaw the development of many impressive technologies. In business, however, Schmidt has twice been beaten by Gates. The first time was at Sun; the second was at Novell, where Schmidt was CEO. Both firms made enormous mistakes. Schmidt wasn't entirely responsible, however, because his hands were tied by his superiors at Sun and by his predecessors at Novell. At Google, Schmidt must once again share power -- with Larry Page and Sergey Brin, Google's brilliant but young and possibly overconfident founders, both "on leave" from Stanford University's PhD program in computer science. Page and Brin still call many of the shots, and the company's unusual capital structure gives them about 30 percent of the voting shares.

Google seeks to become the gatekeeper for not only the public Web but also the "dark" or hidden Web of private databases, dynamically generated pages, controlled-access sites, and Web servers within organizations (estimated to be tens or even hundreds of times larger than the public Web); the data on personal computer hard drives; and the data on consumer devices ranging from PDAs to cell phones to iPods to digital cameras to TiVo players. Google's founders understand the scale of the opportunity. Larry Page recently said, "Only a fraction of the world's information is indexed on our computers. We are continually working on new ways to index more.... Thirty percent [of our engineers] are devoted to emerging businesses." And Sergey Brin once told Technology Review's editor in chief, "The perfect search engine would be like the mind of God."

Until now, competition in the search industry has been limited to the Web and has been conducted algorithm by algorithm, feature by feature, and site by site. This competition has resulted in a Google and Yahoo duopoly. If nothing were to change, the growth of Microsoft's search business would only create a broader oligopoly, similar, perhaps, to those in other media markets. But the search industry will soon serve more than just a Web-based consumer market. It will also include an industrial market for enterprise software products and services, a mass market for personal productivity and communications software, and software and services for a sea of new consumer devices. Search tools will comb through not only Microsoft Office and PDF documents, but also e-mail, instant messages, music, and images; with the spread of voice recognition, Internet telephony, and broadband, it will also be possible to index and search telephone conversations, voice mail, and video files.

All these new search products and services will have to work with each other and with many other systems. This, in turn, will require standards.

The emergence of search standards would encourage tremendous growth and provide many benefits to users. But standardization would also introduce a new and destabilizing force into the industry. Instead of competing through incremental improvements in the quality and range of their search services, Microsoft, Google, and Yahoo will be forced into a winner-take-all competition for control of industry standards. Steve Jurvetson, a venture capitalist at the firm of Draper Fisher Jurvetson in Menlo Park, CA, says, "This is something of a holy war for Microsoft, and one they can't bear to lose."

In short, the search industry is ready for an architecture war.