The advantages for advertisers were manifest. They knew they were not being gouged, because they only paid a penny more than the next highest bidder. They benefited by being charged only when the user clicked on the ad. This gave them an incentive to produce a better ad because better ads produced more clicks, which lowered their cost per click. And by charging per click, Google opened online advertising to many small businesses who normally had nowhere else to turn but the Yellow Pages. By allowing Google to syndicate ads, advertisers were achieving the online equivalent of one-stop shopping offered by network television, whereby ads appeared on hundreds of local stations. And because the system was automated, advertisers were spared the expense of a monitoring system. They would simply transmit to Google their keywords, their bid per keyword, their monthly budget, and their billing information. And then using Google Analytics, they could monitor the results online.

Page and Brin made a major amendment to the new AdWords before it was inaugurated in February 2002. At the annual technology, entertainment, design (TED) conference in Monterey, they engaged in conversation with the Israeli entrepreneur Yossi Vardi. Vardi is a bear of a man with a walrus mustache and a friendly, even impish manner. His company started ICQ, the Internet’s first instant messaging system, and sold it to AOL for four hundred million dollars. He and the Google founders discussed search ads-how to make them unobtrusive and yet relevant to users. Vardi suggested that they could use two-thirds of the page for search results and wall off the text ads from the search content the way a newspaper walls off ads. They could do this by placing a thin blue line between the search results and a smaller gray box on the right-hand side of the page containing the text ads and links to the advertiser. Users could either click on the link or not. Vardi’s idea, Brin recalled, was the genesis for the way ads were displayed. Page and Brin decided the ads should be small, a couple of lines long, imposing a limit of ninety-five characters, and insisting that they be informational.

It was unclear when the new AdWords was introduced that it would be what it became: a Google money machine. “The AdWords is brilliant because it allows you to scale the advertising solution to what you need,” said former Microsoft executive Nathan Myhrvold. It democratizes advertising, allowing Google to use it for either small or large advertisers. It was also, Myhrvold believes, pirated from Overture. The rival search engine thought so too, and later that year filed a patent infringement lawsuit against Google.

A year later, a second money gusher-AdSense-would spring from the CPC model. At the time, Paul Bouchet was developing Gmail and working on software to match words sent in an e-mail with keywords selected by advertisers, allowing small text ads to instantly appear. Brin wondered why they couldn’t apply this innovation to a new program that would help bloggers and any Web site make money. This idea would be called AdSense. If a reader was looking at an analysis of computers on a Web site like Engad get, an HP or a Dell ad could appear. Similarly, readers of a story about the law in an online newspaper might see a law firm’s ad, while people looking at a Web site devoted to pancreatic cancer could see ads for pharmaceuticals. Google would serve as the matchmaker, delivering the advertising and sharing the revenues. As with AdWords, the advertiser would pay only when the ad received a click. And as AdWords democratized advertising, luring small advertisers online, so AdSense would become a way for Web sites to generate income. The effort was led and architected by Susan Wojcicki, vice president, product management, who later received the prestigious Google Founders Award-paying about twelve million dollars-to honor her efforts. AdSense, Danny Sullivan told USA Today, “basically turned the Web into a giant Google billboard. It effectively meant that Google could turn everyone’s content into a place for Google ads.”

Eric Schmidt recalled how Brin lobbied him for money to market the program. “He and an engineer developed a system of showing ads on people’s blogs or Web sites. They came to show this to me. It was not an exciting demo. And Tim Armstrong’s sales guy is assigned to help them out. Now we’ve got three people out of control! So Sergey comes in and said, ‘I need to buy inventory to make this happen.’”

“How much?” asked Schmidt.

“I need a million dollars,” said Brin.

“We don’t have a million dollars!” said Schmidt.

“Sure we do,” said Brin.

“I didn’t give a precise answer”-a couple of hundred thousand dollars, said Schmidt, chuckling. (Susan Wojcicki remembers that he alloted them a marketing budget of two hundred thousand dollars.)

Weeks later, Schmidt asked Brin, “Sergey, how much money did you spend?”

“A million and a half dollars,” said Brin.

“Sergey, you said one million!”

“No, you didn’t give me a precise figure!” said Brin.

“What does that tell you about them?” Schmidt said of the founders. “He had the idea. He assembled the activity. He figured out who his opposition was-which was me, in a friendly way. He told me about it because he wanted my support. And he evaded my guidance. And as a result, built a multimillion-dollar business.” (By 2004, AdSense would produce about half Google’s revenues.) Schmidt paused to chuckle again, then said, “You see why I work with these people!”

The chuckle is appropriate, for Google would not have succeeded without a measure of luck. As Larry Page confessed to a Stanford class, discovering the advertising formula that would work “probably was an accident more than a plan.” A reminder that timing, serendipity, luck-not just a smart strategy or brilliant execution-sometimes determines success. With programs like AdSense, Google did not aim to build a huge Web-based political constituency, but it did. As its advertising dollars rained on Web sites, Google was hailed as a benefactor. Not only was Google not evil, it was beneficent. Google would call these content Web sites partners, and give them about two-thirds of the ad dollars, with Google pocketing the rest. Many small businesses would be discovered and thrive. It was largely overlooked at the time that automated AdSense cut out the advertising middleman. Or as Wojcicki told me, “It changed the way content providers think about their business. They know they can generate revenues without having their own sales team.” In the online world, Google was potentially dis-intermediating not just the media buying agency but the sales forces of content companies.

AdWords and AdSense would solve the mystery of how Google could monetize its search engine. For the first time, in 2001, Google turned a profit: $7 million on revenues of $86 million. The next year, revenues more than quadrupled to $439 million, and profits jumped to $100 million. Google’s search index included three billion Web documents. Not surprising, among the top ten searches on Google in 2001 were these: World Trade Center, Osama Bin Laden, anthrax, and Taliban.

In 2002, Urs Hölzle, who is now Google’s senior vice president of operations, was undecided whether to return to his tenured faculty position at the University of California at Santa Barbara. AdWords made that decision simple. Google had finally found a way to make money. “Now we could fund all these things we couldn’t fund before,” he said, “2002 was when we said, ‘We can afford to spend more on machines!’” This was also the year Google discovered, as Eric Schmidt would tell me several years later, “We are in the advertising business.” Ignited, the Google rocket took off.