The Birth of Google and the Technology That Made It Possible

On this day in economic and business history...

Google (NASDAQ: GOOGL  ) was incorporated on Sept. 4, 1998.

Founders Larry Page and Sergey Brin met at Stanford University in 1995, and a year later they had begun to collaborate on the technology for the Stanford Digital Library Project a year later. This work eventually led to the development of "BackRub," the pair's first attempt at a search engine that would return results based on algorithmically determined relevance. BackRub began to trawl the World Wide Web in March of 1996, and within a year it had discovered more than 75 million unique Web URLs hosting more than 207 gigabytes. These numbers seem quaint now, but when Page and Brin began their project there were only about 100,000 websites (most hosted more than one page, hence the greater number of URLs), and the average Internet user would have needed more than one and a half years of constant downloading to transfer 207 GB worth of content.

Google.com was registered in September of 1997, as Page and Brin were forced to expand beyond a Stanford-hosted site. The name was chosen based on the word "googol," which is mathematical shorthand for a one followed by 100 zeroes. By midsummer of 1998 the yet-unformed Google found its first investor when Sun Microsystems co-founder Andy Bechtolsheim wrote the pair a check for $100,000. This made incorporation a pressing matter, and within a month, Google was born. By the end of the year, Google was already attracting attention from industry publications -- PC Magazine gave Google top honors in its search engine category in its Top 100 Web Sites issue for 1998.

Google might have become part of another search engine on two separate occasions before finally going public in 2004. Two years before its IPO, Google turned down a $3 billion buyout offer from Yahoo! (NASDAQ: YHOO  ) at a time when the latter search engine was generating about 3.5 times the annual revenue of the former. Google was already growing its business rapidly by this point thanks to the canny integration of advertising functionality into its world-leading search engine, and it could justify the rejection, but there was a time when Page and Brin were willing to sell but were turned down. At some point between its incorporation and its first major round of funding, Google tried to sell itself to Excite for $1 million. Excite's CEO rejected the offer, but somehow Excite investor Vinod Khosla talked Page and Brin down to accepting a possible $750,000 buyout price. This, too, was rejected.

Today, 15 years after its founding, Google is worth $280 billion, and Excite is an obsolete relic -- a prime example of '90s irrational exuberance. The failed deal has been called a "stupid business decision," but that's being kind. Excite lost out on a company that has grown exponentially: Google's annual rate of return for Excite would have been 135% for 15 straight years, assuming that Excite would have made good use of it to begin with.

Light it up
When you think of Thomas Edison, you inevitably think about electricity. Few inventors had as great an impact on the early development of electric technologies as Edison, whose contributions ranged from the first light bulb to the first electric power plant. That latter development came online for the first time in a building on Pearl Street in Manhattan, not far from Wall Street, on Sept. 4, 1882.

The Pearl Street Station was ideally located to serve Edison's financial patron J. P. Morgan and his allies on the floor of the Stock Exchange. It initially served fewer than 100 customers with 400 electric lamps between them, using two custom-built coal-fired steam generators that would soon be upgraded as demand outpaced the fragile machinery.

Edison had studied the area in great detail, learning the monthly gas expenditures of every customer south of Canal Street and even sending out "spotters" to tally up the number of gas lights operating in his target customers' premises at any given hour of the day. Edison later told an interviewer, "[I] picked the Pearl Street location because I thought the property could be purchased for about $10,000 a lot as it was in a slum district. ... [I] was stunned when they quoted $75,000 a lot." Undaunted, the canny entrepreneur pressed forward with a high-density plan that resulted in pairing his two generators together, essentially back to back.

Within two years, Edison's customer base had grown more than fivefold, and his electricity was powering more than 10,000 lamps. However, this pioneering power plant burned down in 1890. Edison's Illuminating Company was already large enough to withstand the loss by this time, and it continued to operate until the turn of the century, when it was purchased by New York's Consolidated Gas. Today that company is known as Consolidated Edison  (NYSE: ED  ) , thanks to an overdue name change in 1936 that recognized the importance of Edison's electrical innovations. The utility now derives about two-thirds of its revenue from electricity use.

Oddly, despite the fact that electricity powers the products and services of every single company on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) , no electricity-generating utility has ever held a consistent place on the index. The only two companies called "Electric" -- General Electric (NYSE: GE  ) and Westinghouse Electric -- in the Dow's history have only been manufacturers of generators or electrically powered products. Westinghouse made its name shortly after Edison established the Pearl Street Station by producing the earliest alternating-current generating systems using Nikola Tesla's technical expertise.

GE, in which Edison remained active for years after selling out of his manufacturing interests, initially sponsored Edison's direct-current method of electrical transmission, but it quickly capitulated in the "war of the currents." GE remains highly active in the manufacturing of electricity-generating machinery. It produces roughly 12% of the world's wind turbines and about 40% of the world's natural-gas turbines.

One home-run investing opportunity has been slipping under Wall Street's radar for months. But it won't stay hidden much longer. Forward-thinking energy players like GE and Ford have already plowed sizable amounts of research capital into this little-known stock -- because they know it holds the key to the explosive profit power of the coming "no choice fuel revolution." Luckily, there's still time for you to get on board if you act quickly. All the details are inside an exclusive report from The Motley Fool. Click here for the full story!


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