made by Brin, who takes the lead in business negotiations: “He offered a number that was 40 percent higher than Yahoo’s. And he told us we had two weeks to get back to them.” There were, added a still stunned Miller, “no lawyers, no nothing.”
Google won the prize.
The second victory came a year later, in the fall of 2005. Tim Armstrong was attending meetings in Mountain View when Eric Schmidt entered and whispered, “We’re about to lose AOL to Microsoft.” The merger between AOL and Time Warner was not working; the touted synergies had not materialized. Into this chaos stepped Microsoft, determined to catch up in search. Back when Google was still headquartered in a garage, Gates and Microsoft had had it within their grasp to build a powerful search engine when it purchased an online advertising company, LinkExchange. Although the creator of LinkExchange, Ali Partovi, then twenty-six, told Microsoft that his partner, college dropout Scott Banister, had come up with a way to include ads in with search using keywords and that a search auction system would be “the next big thing,” Microsoft spurned the advice and declined to start a search engine. As first reported by Robert A. Guth in the Wall Street Journal, Microsoft believed the pot of gold lay not in tiny search text ads but in portals like their own MSN. But now Microsoft had launched its own search engine, Live Search, and with its deep pockets was seeking to replace Google as AOL’s domestic search engine.
Armstrong and others hammered out a counterproposal and showed it to Schmidt, before Armstrong flew back to New York to meet with Time Warner executives. Microsoft executives were on one floor, Google executives were on another, and Time Warner shuttled between them. At one point, Armstrong said, Microsoft left, “thinking they had the deal done. We stayed.” Schmidt flew to New York, as did Brin. In the end, Google and AOL reached agreement to become worldwide partners, with Google pledging to make more AOL content available to Google users, guarantee minimum annual advertising revenues to AOL, and invest one billion dollars to acquire a 5 percent stake in AOL.
Silicon Valley companies, accustomed to thinking of Microsoft as a foe, were now becoming uneasy about Google. When Yahoo executives read Google’s financial reports, they were punched in the nose with the realization of how much more successful and efficient Google was in selling search advertising. Google’s search business was growing twice as fast as Yahoo‘s, and was attracting more text ads. Yahoo poured engineering resources into a new automated ad-sales system, code-named “Panama,” vowing that it would help them catch up. Microsoft and Yahoo conducted talks to see if there was a way to slow the Google juggernaut. And eBay, which had long sold advertising on Google, grew alarmed that Google had started a classified-advertising service that competed with its listings, and had inaugurated Google Checkout, which competed with its PayPal online payment service. So fearful of Google was eBay that the Wall Street Journal reported on its front page in 2006 that eBay was holding secret talks with Microsoft and Yahoo about allying against Google. Bill Gates further stoked the fever of fear when he told Fortune magazine that Google was “more like us than anyone else we have ever competed with.”
GOOGLE’S MANEUVERINGS AND DEALS may have made it unpopular with various media companies, but these did not tarnish Google’s image with the public. What happened in China did. In 2002, a Chinese-language version of Google search was launched, and then Google News in 2004. As user traffic mushroomed, the Chinese government found some of the news politically objectionable. China didn’t want users to be able to search for news about “free Tibet” or for photos of Tiananmen Square protests. At first, Google refused to engage in any self-censorship. Often, the Chinese government banned Google searches. Senior Google executives believed they had to make a choice between denying Chinese citizens some political searches and denying them all searches. Google decided to comply with Chinese laws, stripped its news results of offending material and eventually, in 2006, created a separate search Web site, Google.cn, on which it would offer politically sanitized searches in China. If a user searched for a picture of Tiananmen Square on Google in London, The Guardian reported, the iconic picture of one man blocking a tank’s path appeared; if the same search was conducted on Google.cn, a picture “of happy smiley tourists” appeared.