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Yahoo! Inc. (YHOO), Consolidated Edison, Inc. (ED): The Birth of Google Inc (GOOG) and the Technology That Made It Possible

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On this day in economic and business history…

Google Inc (NASDAQ:GOOG) 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 Inc (NASDAQ:GOOG) 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 Inc (NASDAQ:GOOG) 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 Inc (NASDAQ:GOOG) 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! Inc. (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 Inc (NASDAQ:GOOG) 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 Inc (NASDAQ:GOOG)’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.

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