The Triumph of Engineering

How did Google beat Yahoo?

Source: Bloomberg

Ten years ago we didn’t know what would happen. Google had just gone public, while Yahoo had been around a while. Both companies had a core search engine, and both were set on expanding their services.

Now Google is a $500 billion behemoth, while Yahoo is about to be relegated to the dustbin of history. How did Google win the competition for hearts, minds, and clicks? A lot has to do with the way they engineered their approach to data storage and management. From the start, Yahoo used third-party vendors to handle its file sharing. NetApp was their go-to system. At first, this seemed reasonable. They could add or subtract services just by adding or taking away NetApp modules.

Google took a different approach, designing its own information infrastructure. They built their file system to be inherently flexible and scalable, simplifying and accelerating their roll-out of new products. As a result, while Yahoo engineers were reengineering their data interface with each new app, Google’s system could be quickly adapted when new services were adopted. This also allowed Google to use its computing power more efficiently. When servers weren’t busy on search they could be used to process email. Yahoo, on the other hand, had to deal with redundancies and inefficient connections all the time.

Photo: Matt Wade. Source: Wikipedia

This was a classic build vs. buy decision. Yahoo came quickly to the market by using pre-existing infrastructure. Google, on the other hand, spent three years building its own file system, but they began with the end in mind, structuring it for growth and flexibility.

From the outside, it was impossible to tell which company would win. Sometimes getting to the market first gives a company an insurmountable advantage. But more often, what matters is getting things right—if not the first time, eventually. Google understood that their data needs would be constantly growing and changing, so they needed an adaptive, flexible, efficient system. That’s what’s allowed them to add Gmail and Android and YouTube to their core search capability.

When you face a problem, try to visualize it completely, from as many angles as possible. Imagine the ideal approach—ignoring what’s been done before. Then you can evaluate what resources you have, what might need to be outsourced, and what you can do yourself. Above all, begin with the end in mind. You never know how far your idea might go.

Douglas R. Tengdin, CFA

Chief Investment Officer

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