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The Billion-Dollar MISTAKE That Made Google Unstoppable
Google "borrowed" it's business model from a small search engine then made it disappear from history.
Google wasn’t always the internet giant we know today. In fact, in its early days, it struggled to make money—until it borrowed an idea from its biggest rival. This is the story of how Google took a groundbreaking concept from GoTo.com and turned it into one of the most profitable business models in history.
In the late 1990s, Google was a revolutionary search engine with an advanced algorithm, but it had no clear way to monetize its traffic. Meanwhile, GoTo.com had pioneered pay-per-click (PPC) advertising, a concept that would change the digital advertising industry forever. Instead of charging for ad impressions, GoTo.com introduced a system where advertisers only paid when users clicked on their ads—making online advertising more efficient and measurable.
At first, Google dismissed advertising as a necessary evil that would interfere with its mission of providing unbiased search results. But as the company burned through cash and faced mounting pressure from investors, it was forced to reconsider. In 2000, Google launched AdWords, a simple ad platform that initially followed the traditional cost-per-impression model. However, it wasn’t long before Google saw the true potential of PPC advertising.
By 2002, Google introduced AdWords Select, a pay-per-click system that looked remarkably similar to GoTo.com’s model. But Google went a step further—it improved upon the system with a "quality score" that ensured ads were relevant to users, preventing advertisers from gaming the system. Google also introduced a second-price auction system, ensuring advertisers didn’t overpay for keywords. These innovations gave Google a competitive edge, making its advertising model more effective than GoTo.com’s.
While Google refined the PPC model, GoTo.com (which had rebranded as Overture) made a series of costly mistakes. Instead of building brand recognition, it focused on powering search results for other companies like AOL and Yahoo, allowing competitors to benefit from its innovation. Additionally, Overture failed to patent its PPC auction system, leaving the door open for Google to legally adopt and improve upon it.
By the early 2000s, Google’s AdWords was generating billions, and the company was quickly dominating the online advertising industry. Meanwhile, Overture was acquired by Yahoo in 2003 for $1.63 billion, a fraction of what Google would later be worth. Yahoo attempted to compete, but Google had already perfected the business model.
In 2004, Yahoo sued Google for patent infringement, claiming that AdWords had copied Overture’s advertising system. The lawsuit was settled out of court, with Yahoo receiving shares of Google stock—an ironic twist considering how much more valuable Google would become.
The Google vs GoTo.com battle highlights how a single business decision can determine success or failure. GoTo.com invented the PPC model, but Google perfected and scaled it, transforming it into a money-making machine. Today, Google Ads (formerly AdWords) generates over $200 billion annually, making it the backbone of Google’s empire.
So, did Google steal GoTo.com’s idea? Technically, no. But it did take an existing concept, refine it, and execute it better than its originator—something Google has done time and time again in its rise to dominance.
This is the untold story of how Google took a rival’s idea and built a trillion-dollar empire.
00:00 Google’s biggest idea wasn’t theirs
00:46 Google’s PageRank success
01:57 Google’s early struggles to get contracts
02:07 Google rejects banner ads
02:31 Google bleeding cash
03:15 Page and Brin discover GoTo.com
03:26 Bill Gross invented paid search results
04:32 Pay-per-click ad revolution
05:30 GoTo.com gains momentum
05:55 GoTo’s critical mistakes
06:18 GoTo becomes Overture
06:34 Google turns down Goto’s partnership offer
06:56 Google creates Adwords & Pay-per-click
07:09 Google dominates ads
07:25 Google launches on the stock market
07:40 How Bill Gross feels about Google’s success
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