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- Google began as a project by Larry Page and Sergey Brin students at Stanford University and quickly became the world’s largest search engine.
- Although the founders initially viewed advertising as a threat to their neutrality, it was precisely AdWords and AdSense that brought them to the top.
- Today, around 68 percent of Alphabet’s revenue comes from advertising, which can be increasingly personalized through user data and artificial intelligence.
There seems to be something about garages. They’re at the heart of some of the world’s largest and most revolutionary companies: Amazon, Apple – and Walt Disney, who drew his first animations in his uncle’s Hollywood garage in 1923, to name just a few. Google also claims this garage myth for itself.
The story of the world’s largest search engine begins three years before the garage, in 1995 at Stanford University in California. Larry Page and Sergey Brin, two computer science students, were working together on a novel search engine. Most search engines at the time were either directories full of link collections or, like AltaVista, sorted search results by frequency and position of the searched words.
But the two computer scientists’ approach was different: Their search engine, called BackRub, sorted the results based on backlinks. Links were treated like recommendations, and a frequently linked website would thus appear at the top of a search – a link from a reputable site counted more than one from an unknown one.
Initially, BackRub, which was soon renamed Google, ran on Stanford University servers. But as the search engine grew in popularity and outgrew the university campus, Page and Brin moved into a garage in Menlo Park, California (45 kilometers south of San Francisco) with a $100,000 check from German Sun Microsystems co-founder Andy Bechtolsheim. Google Inc. was founded.
Why the opponents of advertising still placed ads
But the young company was struggling to make money. Venture capital and licensing agreements with other portals like Red Hat and Netscape, to whom Google provided its service, kept the search engine alive. But the pressure on the founders to come up with a different business model was mounting. Their investors saw the losses and had a simple answer: advertising.
Page and Brin initially resisted. While still at university, they jointly published a paper entitled “The Anatomy of a Large-Scale Hypertextual Search Engine.” In it, they argued that search engines that displayed advertisements alongside their results could quickly lose their neutrality. The study stated that it would be difficult to justify prominently displaying a study on mobile phone distraction while driving if a mobile phone company was advertising there. Instead of providing the best service to its customers, there would be an incentive for providers to favor certain companies. They also feared that a search engine would no longer be able to quickly guide its users to the best results because it could display fewer advertisements.
However, this no-ad strategy could no longer be maintained after the bursting of the dot-com bubble and the resulting revenue losses. AdWords was launched in 2000 – small text ads that appeared separately from the search results.
Different ads were displayed based on search queries – initially, advertisers paid according to the number of impressions. It wasn’t until 2002 that Google switched to pay-per-click (PPC) advertising, making this model a mass-market product. Simple credit card payments and rewards for frequently clicked text ads enabled even small companies to run successful ads without the backing of a large advertising agency.
AdSense followed AdWords in 2003. Now other websites could also integrate Google’s ads – tailored to the content of the respective page – and receive a share of the revenue. The advertising space next to the search results became a network spanning the entire web. The speed of its growth is evident in the third quarter of 2004: almost half of Google’s revenue already came from AdSense. This is according to the quarterly figures Google published after its IPO in August 2004.
This period was a special one for the search engine company. After several relocations, Google settled into its new headquarters – the Googleplex in Mountain View – in early 2004. With nearly 2,300 employees students, the company decided to go public. From the outset, with a valuation of $23.1 billion, it was one of the most valuable internet companies, behind eBay and Yahoo. Google Maps, Google Translate, and YouTube were added in 2005 and 2006 – services that are still used worldwide today.
Personalized advertising
And what about the advertising business? That continued to thrive – Google still earns its money from ads today. In the second quarter of 2026, advertising accounted for roughly 68 percent of Alphabet’s revenue – and 86 percent of Google Services’ revenue. The company was able to leverage its ability to “know its users better than their own mothers,” as Kevin Bankston, former chief attorney of the US civil liberties organization Electronic Frontier Foundation, put it to Computerworld.
Search engines allow companies to collect vast amounts of data about users’ behavior, desires, and preferences. And every user is also a consumer. While companies previously had to rely on large-scale advertising and hope for a response, Google’s algorithm now makes it possible to target specific dog food ads to dog lovers aged 25 to 34 in Berlin.
The advent of artificial intelligence has only further accelerated this refinement and personalization – especially through the AI Max service that Google has been offering its advertising clients since last year.
Over the decades, Google has changed – and with it, its attitude towards advertising. After initial warnings from its two founders against integrating ads, Google now thrives on precisely that.
By Hugo Jiménez
