This exact article has been now updated for 2009 to reflect some industry changes, name changes.. and overall directions the companies have been taking.
People always wonder how Google got where it is today. The history spans about a 30 years and is rich with history. The interesting part is that this is happening all over again, this time in the Advertising Agency world as Ad Agencies are taking the approach that IBM, Yahoo! and Microsoft have taken in the past, either ignoring the problem, or sending the work to a potential competitor.
We will start off with a VERY related history lesson, one that Microsoft taught IBM back in the early 1980′s.
When the IBM pc was being developed at the IBM Entry Systems Division in Boca Raton, Florida they needed an OS vendor, August 12, 1981 is a date for the history books and this date is what will prove to be key for the next several decades.
After IBM negotiations with Digital Research failed, IBM awarded a contract to Microsoft to provide a version of the CP/M operating system, which was set to be used in the upcoming IBM Personal Computer (PC). For this deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products, which IBM renamed to PC-DOS. Later, the market saw a flood of IBM PC clones after Columbia Data Products successfully cloned the IBM BIOS, and by aggressively marketing MS-DOS to manufacturers of IBM-PC clones.
Meaning that Microsoft was growing, flush with cash, and grew to be an established name in the industry. Microsoft continued to grow, pushing out new products such as Windows.
Years later Microsoft will launch MSN…. but more on that later in the article.
Yahoo! was founded by Jerry Yang and David Filo in January 1994 and was incorporated on March 1, 1995. The website was nothing more than a directory of sites. Literally a hand edited website that provided hyperlinks to other websites.
Yahoo! grew like wildfire during the initial .com boom and though acquisitions / partnerships and some inhouse coding eventually had a massive product offering and became the most visited website on earth.
It was one of the very first attempts at organizing the internet. It’s initial launch was primitive to say the least, but remember at the time these people were pioneers. They were not only figuring a way to organizing the internet, they were in essence paving the way for others to enter… literally…
Freeze time, move on to Google. (GOOGLE!) yes it’s true, they started with an exclamation point as well.
Google began in January 1996, as a research project by Larry Page, who was soon joined by Sergey Brin, two Ph.D. students at Stanford University in California. They realized that a search engine that analyzed the relationships between websites would produce better ranking of results than existing techniques, which ranked results according to the number of times the search term appeared on a page. The search engine was originally nicknamed “BackRub” because the system checked backlinks to estimate the importance of a site.
How these companies got to where they are today:
Remember earlier it was noted that Yahoo! partnered with companies to offer more services, eventually Yahoo! hired Google to provide search results in 2000, here’s the official release:
Yahoo! Selects Google as its Default Search Engine Provider
Yahoo! to Integrate Google’s Advanced Search Technology into Yahoo!’s Network of Properties
SANTA CLARA, Calif. and MOUNTAIN VIEW, Calif. – June 26, 2000 – Yahoo! Inc. (Nasdaq: YHOO) and Google Inc. today announced they have entered into an agreement that makes Google, one of the fastest growing search engines on the Web, Yahoo!’s® default search results provider. Under the agreement, Google will provide its underlying Web search engine to serve as a complement to Yahoo!’s popular Web directory and navigational guide (www.yahoo.com). Yahoo!, a global Internet communications, commerce, and media company, expects to integrate the services within the next 30 days.
That is the press release of death to Yahoo!.. Google was an unknown at the time. It had a dismal market share. No one knew of Google outside of the tech world.. this is comparable to the initial IBM/ Microsoft deal of the 1980′s for DOS. If Yahoo didn’t grow Google, Google would not of existed in it’s current dominate form today. Literally if this deal was not signed back in 2000, the entire landscape of search today would be wildly different. Especially if Yahoo poured resources to developing their own search at that time instead of outsourcing it to Google.
Users started to realize quickly that Google results were identical to Yahoo results, but without the onslaught of Advertising that Yahoo! threw at the users.
900 days later, Google.com was the 10th most visited website on the Internet. What adds insult to injury to this, Yahoo! paid Google to destroy their company.
By the time Yahoo! ended the relationship with Google, Google was armed to the teeth with millions of direct visitors, a valid revenue model and was growing at a geometric rate.
This was bad, but not nearly as bad as what Microsoft did. Microsoft initially ignored the internet.. literally.
There was plenty of lip service from Microsoft, but no action on their part. They viewed desktop Software as the solution, it’s what has worked for them for years prior… and in their view it would be what will work for them for years to come. They even ignored the browser market initially, even though it is a desktop application. Allowing Netscape to become the dominate browser
In 1994, Microsoft didn’t even realize they had their own domain name (the Microsoft.com domain name was registered in May of 1991), directly from Microsoft.Com
Mark Ingalls recalls that when he first typed www.microsoft.com into a Web browser to ensure it hadn’t already been claimed, he was surprised to find a site already there. He traced the site to pioneering Microsoft developer J Allard, who had claimed the server name to test out his new TCP/IP networking stack. The first recorded Microsoft Web server was situated at the end of a hallway in one of the older buildings on campus. Allard agreed to pass the server to the product support group, and it was eventually relocated to a lonely corner of the Microsoft corporate data center.
Microsoft didn’t take the Internet seriously at the time, it was a toy. They only took notice when these companies that launched online were growing at huge rates and their market cap valuations were skyrocketing during the first .com bubble.
The Microsoft Network (MSN) debuted as an online service and Internet service provider on August 24, 1995. They never even thought of being a search engine, they wanted to become an AOL.
At the time most people still used dial up, broadband usage was minimal at best for home use and the vast majority of individuals used a dial up account.
MSN’s marketing approach was to throw up an icon on Windows 95 linking to their MSN network.. and hoped the money would roll in.
That isn’t what happened however.. the adoption rate was far lower than expected.. leaving MSN as a virtually unused ISP whereas Google and Yahoo were developing themselves as a way to organize the internet.
Meaning at this critical time, Microsoft missed the boat.
By the time Microsoft developed their own internal search.. it was really late. Google didn’t have a foot in the door regarding search.. it had both arms, feet, and virtually it’s entire body inside the doorway.
Microsoft launched MSN with their own search technology around 2003 but still using LookSmart for many of it’s listings… almost a decade after Google and well after Yahoo! handed massive traffic levels to the upstart Search Engine.
The search technology was of course inferior and MSN just couldn’t drop the “AOL / Yahoo” look and feel (massive numbers of busy ads) and still plagued with poor search results.
The end result was similar to the initial launch of MSN’s ISP… a virtual failure. Their approach to advertising the search engine was backwards. They spent resources developing advertising campaigns to attract visitors to a horrific search engine, rather than spending those resources fixing the problem… that the search results were overall low quality.
They launched MSN’s $300 Million Ad Campaign then another $100 million dollar ad campaign and then a few various smaller campaigns over the past 4 years.. roughly half a billion dollars spent, even though they were losing $1 billion dollars a year.
What a terrible waste of resources.
The problem wasn’t their marketing or advertising, their problem was their search. It was still horrific. It’s equal to spending big dollars marketing an website that doesn’t work. (As Subway found out)
Microsoft faced a host of problems such as poor search results, poor market share, and poor overall image. Their solution was to spend more money on advertising to tell even more people how bad their search engine was. Hence the problem.
Their approach was so backwards that Microsoft shareholders even mentioned in one meeting that they should “replace” the whole MSN division. The solution was simple however, and they have yet to take it.
The reason MSN’s results are so bad is that it’s subjected to gaming by even years old outdated SEO techniques. They hired way to many PHD’s and not enough SEO backgrounded individuals to point out where their flaws are.
Meaning that if they spent a fraction of that half billion dollars buying SEO firms and retasking them to working on cleaning up MSN by pointing out how they can “game the results” MSN would of been viable as a search engine to market.
However as it stands now, many are reporting Microsoft’s search market share at under 5% for most industries… any action now would be a long, uphill battle against Google. It’s not that it’s impossible, but Microsoft would have to retask the entire mission of the search engine, practically fire the existing team, and replace them with people that have an SEO background.
The problem isn’t advertising, its search.
Updated for 2009, Microsoft is now on their 3ed iteration of MSN. First it was called MSN, then Live.Com and now Bing.com. The results are identical to the previous two, with no substantial changes to search engine itself. In other words Microsoft has now allocated another quarter of billion dollars for advertising just like they did for MSN, just like they did for Live.Com … and now they are doing the same failed policy for Bing. Historically this has proven to fail within 9 months after the money is exhausted from the campaign and this one is already losing steam only 3 months into the campaign. Already some industry experts are calling it “a complete failure”. The old adage “3ed time is a charm” doesn’t seem to apply in this case.
Some other related tibits of information:
* Years ago a hosting provider I worked for acquired the IBM Boca location, my personal office was in the same building as where the IBM PC was developed.
* I interviewed with Microsoft in 2003 to help develop MSN, they didn’t like my predictions (that came out true)