How did Google become the world's most valuable company?

  • 1 February 2016
  • From the section Business
Google+ logo Image copyright Getty Images

It doesn't sell anything you could pick up and put in your pocket. We never pay it any money directly.

Yet now, after its latest earnings report, Google's parent company Alphabet has a market capitalisation larger than Apple's, as shares rose sharply in after-hours trading.

That makes it the most valuable company in the world, worth nearly $520bn (£362bn).

So how did it get here?

Google's success originated in one simple insight from its founders, Larry Page and Sergey Brin. They realised in the late 1990s that the sprawling, chaotic mass of material that was cascading onto the world wide web could be tamed by ranking search results according to their popularity.

They haven't looked back, making millions from online advertising and embracing some of the most challenging new ideas in the world of technology.

And most of us use it day in, day out: to check out the snowfall before you book a last minute ski-ing holiday; to email the boss you won't be in; to translate your child's French homework.

Image copyright Getty Images
Image caption Google's founders Sergey Brin (L) and Larry Page back in 2006

And yet with success have come doubts: over whether Google's dominance of the market is fair to other players; whether their growing influence allows them, along with other multi-national giants, to pay less tax than many feel is warranted; whether the information they hold about us grants them too much power.

In the beginning

Pulling together $1m from family, friends and other investors, Mr Brin and Mr Page launched their company on 7 September 1998. Known in a previous incarnation as "Backrub", the new company name was a play on the large number Googol (1 followed by 100 zeroes).

Since then the company has grown steadily to dominate online search worldwide, and with that taking a substantial share of online advertising revenues.

Image copyright Lucy Hooker

Soaring share price


Alphabet's share price 1 Feb 2016


stock market value

  • Google shares have risen

  • 18 fold since the original stock first floated in 2004

Getty Images

"Scale begets scale," says Brian Wieser, analyst at Pivotal Research Group.

While Google did come up with the best search engine on the market, he suggests, it was its early success that provided it with the experience and crucially the data to allow it to improve quickly.

"The more you know about what people mean when they search, the more you are able to deliver accurate results ... There are a lot of costs associated with that, processing, the data centres to support that. So there is a natural monopoly."


Alongside nurturing the growth of the search engine Mr Brin and Mr Page were always eager to explore new ground.

Google's famous "20% time" - allowing employees to take one day a week for some blue sky thinking on original projects - has produced some innovations such as Google News and the virtual reality Google Cardboard fold-out viewers.

But that wasn't enough for Google's founders.

Over the last few years they've been on a spending spree, bringing dozens of companies under the Google - now Alphabet - umbrella.

"Google's executives are driven by wanting to have start-ups... they want to have a portfolio of start-ups," says Mark Bergen of online technology publication Recode.

Last August the company announced it was creating the parent company, Alphabet, and leaving the Google moniker off the more outlandish "moonshot" businesses like extending human life, drone deliveries and internet provision via high altitude balloons.

Mr. Bergen puts the creation of Alphabet down in part to them wanting to seem less all encompassing and less menacing.

Image copyright Lucy Hooker

Google's shopping spree

Google has bought over



  • Its largest acquisition was in phone maker Motorola at $12.5bn

  • It also bought thermostat company Nest Labs for $3.2bn

  • And it bought video sharing site YouTube for $1.65bn

Getty Images

What does Alphabet do?

The Google arm of the company includes: search, maps, YouTube, Chrome and the Android mobile phone platform.

And the "moonshots"?

X includes: driverless cars, drone delivery, internet via balloon, contact lenses that detect glucose levels, AI and more

Calico tackles longevity or "the challenge of ageing and associated diseases"

Nest makes smart-thermostats and more for the connected home

Fiber is about providing superfast broadband and TV-on-demand service to US customers

Robotics is another moonshot area, though none will be developed with military applications, the company says


Google Ventures and Google Capital allow the company to back new outside projects

Yet not everything has worked.

"Google Glass was a fairly expensive investment," says Mr Bergen. "They clearly made some mistakes."

And the company has notably been unable to match its rival Facebook in the social media sphere.

'Do no evil'

So has Google abused its dominant position?

Its sheer size has given it access to politicians in capital cities around the world. Now some are arguing that the company has "captured" governments' thinking and is being given an easier ride on tax.

Google, like many large companies, doesn't disclose how much tax it pays in each jurisdiction that it operates, but in a letter to the Financial Times last week, its communications director for Europe Peter Barron did say: "As a US company, we pay the bulk of our corporate tax in the US: $3.3bn in the last reported year."

Image copyright AP
Image caption Google's driverless cars have already covered more than 1m miles, the company says

Famously Google originally had a slogan: "Don't be evil" for which it has sometimes been mocked.

"That was always pretty silly," says Brian Wieser. "It betrayed a sense of idealism."

But he does think there are people within the company who genuinely believe in the motto and that that has stopped Google from abusing its dominant position.

"As bad as some observers think Google's behaviour has been, it could have been far, far worse," he says.

He says he can't see any way that consumers have been directly harmed by Google's dominance, though advertisers may be more justified in complaining.

In the long run

So could anyone challenge Google's dominance?

Brian Wieser thinks yes: "It's not that hard to build a search engine and there are plenty of them out there."

He says consumers could switch relatively easily to a new search engine if a better one came along.

"These things aren't that hard to do any more. If there's a chink in the armour it can be attacked."

But Mark Bergen thinks in 10 or 20 years time Google will still be a big player, if only because they are being so ambitious now.

"They have so many irons in the fire, at least one of them will pay off," he says.

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