Well folks, here it is: the Google article.

The word itself is a misspelling of the word Googol (or 10 to the 100th power). It has become a ubiquitous term among all those who use the Internet – it is a noun, it is a verb, and I’ve even heard it used as an adjective. You may think you know a lot about the company because you use its product 20 times per day, but there’s much more behind Google, Inc. than its search engine.

As I do with all of my articles, I want to give you a rundown on the company at hand. I’ll talk a little about the technology at work within Google’s search engine and what makes it so damned good. I’ll also talk about some of the other products that Google has in the pipeline – some really interesting stuff to say the least. And finally, I’ll get into the competitive landscape where Google will soon be dueling with the likes of Yahoo and Microsoft.

As a company, Google was founded in 1998 as an offshoot of a Computer Science doctoral thesis by two young students, Larry Page and Sergey Brin. Whether their original vision was to become an online advertising behemoth or not isn’t quite clear…but what is extremely clear ...but what is extremely clear is that these two men, from the beginning, realized that Search was a disruptive technology being highly overlooked by the bigger fish in the sea.

They also knew that the companies that were considered to be the “top” search engines didn’t have it quite right. There was always something missing from their equations. Well, what is a search engine, really?

It may seem like a simple question, and in reality it is, but most people don’t know exactly what goes on behind the scenes of a search engine, and why it’s important to a company that bases its whole business on it.

There are two main parts to any search engine. The first is what’s known as the index. The index is essentially the database where data on billions of web pages are stored – picture a really, really big filing cabinet! The second part of the search engine is the search algorithms, or the functions that scan through that big filing cabinet in an attempt to find what you’re looking for. You can think of this like an assembly line.

You put some words into the front-end, the search algorithms sift through the index, and on the other end you get your search results. It is in this “middle” process where Google separates itself from the pack.

Before Google, most search engines simply scanned through their filing cabinet of web pages, looked for the pages that had the highest frequency of the terms being searched (among a few other minimally effective techniques to determine relevancy,) and returned the results to you in the appropriate order.

So in theory, if I were the owner of a web page, I could simply bog my page down with as many keywords as possible and search engines would think it was relative to just about everything anybody searched upon.

And as we all know, this was certainly the case for a while. What Google does differently is that it uses a system called “Page Rank”. Page Rank essentially finds out how popular a particular web site is, and then uses that popularity ranking combined with word frequency to determine how relevant a search result is. The way they determine popularity of a page is pretty simple and at the same time extremely effective. What determines a page’s popularity is the number of other pages that reference or link to it.

So let’s say I was going through a big filing cabinet and I wanted to find a document that would give me the most accurate information on Colonial New England. I would first scan through all of my documents for the words “Colonial New England.” Out of these results, I would then see which document has been referenced by the most scholarly sources, and would read the most popular document first.

That is the real magic behind the Google search engine. Pretty simple, huh? It also does some cool stuff with data storage, compression and search functions that makes the entire process lightning fast and also helps to keep costs low. But at the end of the day, this isn’t how Google makes money. The bulk of Google’s revenue comes from its advertising programs, AdWords and AdSense.

With Google, advertisers can now have their ads displayed right alongside Google’s highly-relevant search results, which also gives users the impression the advertisements they are looking at are also highly relevant. It’s really a direct marketer’s dream come true. You can get an entire ad campaign up and running within five minutes. You can track your results and even see how well the sales leads convert into actual customers.

It’s a market-based pricing system, so you’re never overpaying unless you allow yourself to, and the fact that Google handles billions of searches every day allows you to test various advertising approaches and adjust them on the fly. I don’t mean to sound like an advertisement for Google itself, but I am truly impressed with its product and service.

The funny thing is, Google wasn’t the first game in town. There was another company known as GoTo.com – which later became Overture and which was eventually acquired by Yahoo! – that provided a comparable service many years before Google got into the market.

My feeling is, it was Google’s superior technology, fiercely loyal consumer base, and their advertiser customer service that eventually propelled it into the top seat. Overture eventually sued Google over a patent issue, and unbeknownst to most people, Google ended up settling with them for an undisclosed sum right around the time of their IPO.

Aside from Yahoo!, Microsoft has also revamped its search strategy amidst Google’s success in the area.

But Search isn’t the only trick Google has up its sleeve. The company is also chipping away at Yahoo’s and Microsoft’s dominance in web-based e-mail and Instant Messaging. Its free e-mail service, GMail, launched only a little over a year ago already has about six million users. Although this is a far cry from Yahoo’s 64 million users, it did show that Google has the ability to rattle the cages in any industry it enters.

When Google first launched GMail, it started by giving away one GB of free storage space. Until that time Microsoft and Yahoo were giving away a couple of Megabytes for free. Since then they have all upgraded to at least 1 free GB and AOL, out of the blue, started giving away two free GB’s of storage. GMail is still on top, giving away roughly 2.5 GB of free storage space and says it will increase the quota on a daily basis.

How is a company supposed to make money when it’s giving EVERYTHING away for free? Advertising, of course! Google serves up ads based on the content of users’ e-mail conversations. This had people a little creeped out at first, but Google maintains that no human ever reads an individual’s e-mail, and the scanning is always done by a computer.

Most people’s fears have been alleviated, and Google claims the targeted ads are doing extremely well for the advertisers. This is the one aspect of Google’s strategy that keeps me worried about the long term sustainability of the company.

Everything is based on advertising, and although it is less vulnerable than other companies that generate their money through ads, it is, nonetheless, vulnerable to a downturn in the ad market. If I were a shareholder, I’d feel much more comfortable if it had more transaction-based businesses.

But who knows what the future holds? Google has always been, and likely will always be, very hush-hush about the products it is developing. A pay-for service could be right around the corner. But then again, if it did launch a service that people had to pay for, I wonder how receptive Google’s audience would be?

We’ve all become very accustomed to getting great products from Google for free. Will Google users be willing to pay for something they feel should be given to them for nothing? And what happens when an 800 pound Gorilla like Microsoft is on your back? Can Google effectively compete and hold its ground in search while attempting to diversify its revenue streams and product line? And what happens when Yahoo works all of the kinks out of its advertising system?

Google is going to find itself in the middle of a knock-down brawl with some of the toughest guys on the planet. The stock is currently trading at a P/E of 82 while Yahoo is only at 34 times earnings. The stock certainly has a long way to fall if Google doesn’t hold up well to an advertising downturn, or if it gets a black eye from Microsoft or Yahoo. But that day may never come, and Google might end up being the last man standing. And this is the real trick to investing in technology stocks, folks…don’t just buy a stock based on growth.

In the words of Warren Buffett: “Growth should be a byproduct of value.”

Therefore price, competitive position within an industry, and the intrinsic value of a company must always be taken into account when buying a piece of a publicly traded business.

So I hope I’ve inspired some of you to go out there and do some research of your own or take a second look at some of your portfolios if you’re holding onto some of the stocks I’ve talked about.

We are living in exciting times, and if you equip yourself with the right information, you can absolutely profit tomorrow from the innovations of today!

Profit tomorrow from the innovations of today. -Wayne Mulligan

So until next week folks…