Web Masters Episode #58: Steve Kirsch


12 Insane Walt Disney Company Acquisitions over $112 Billion

Steve Kirsch:

So I was at Frame Technology and I have a friend Jim Roskind who was pretty passionate about search and he said, “Hey, check this out. This is a computer library, it’s on a CD-ROM, and this will be the future. I think if you made this available on the internet, it’ll be really cool.” And so the original focus was to take computer journals and make them searchable.

It would essentially be a cheap version of dialogue, when dialogue was this information, retrieval service at the time, and it, they charged you $10 a query or $5 a query, it was very expensive. And so the concept was to license the computer content from these computer magazines and make them searchable on the internet. So computer people could find these articles very quickly instead of having to use computer library. So, at your fingertips, you could search for all these articles and it’s all updated every month. And so we negotiated the license agreements with all the sources. And so, Infoseek originally was searching for computer articles.

Aaron Dinin:

Infoseek a search engine for computer articles that charged a few dollars for each search. It made sense when the only people using computers were people interested in well computers and finding the literature they needed was time consuming and expensive, but that was quickly changing. So Infoseek changed to becoming the first commercial search engine for the World Wide Web, and in the process they brought along their business model, or at least they tried to.

Steve Kirsch:

Jim suggested, “Hey, why don’t we index the web?” And people thought that was a good idea. And the web was pretty small at the time. So it wasn’t all that outrageous to do. And so that’s what we did. And we started seeing lots of traffic and eventually Netscape saw what we were doing. And we became the official search engine on Netscape. You would go over to Infoseek to do your search. And so that was good for them because they had a net search button, which made it easier to navigate the web. And it was good for us because we were trying to give them 10 free answers. And if you want more than 10 answers, then you have to pay. So we were the original paywall on the internet.

Aaron Dinin:

That’s right. Imagine a world where searching the web wasn’t free. You had to pay for every query that could have been the world. We wound up living in, if not for a few lucky twists of fate as Steve Kirsch, founder of Infoseek was building one of the web’s first search engine companies. Are you ready to hear the story? Let’s get dialed in.

[INTRO]

Aaron Dinin:

Hi there and welcome to Web Masters. The podcast that’s going to make you a better entrepreneur by giving you the opportunity to learn from some of the most successful tech entrepreneurs in history.

My name is Aaron Dinin. I’m your host. I’m a former tech entrepreneur. Now I teach entrepreneurship at Duke University and this is my podcast, but you probably already figured that out. So let’s get right into things with legendary tech entrepreneur, Steve Kirsch, you might have heard of him. He’s done some things.

Steve Kirsch:

I’ve started a couple of companies that had billion dollar market caps, that would be Frame Technology and Infoseek.

Aaron Dinin:

Frame Technology would go on to be purchased by Adobe and is now known as Adobe FrameMaker. And Infoseek was the first commercial web search engine. Everything else at the time consisted of poorly resourced academic experiments that were quickly overrun by users. In contrast, Infoseek was trying to build a business and it worked pretty well too. In fact, Infoseek could have become what Google is today except well, things happened. Steve was kind enough to drop by the show to tell us what those things were. We’re going to hear all about them. But first we’re going to take a moment to hear about our sponsor.

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As you already heard by the time this episodes guest Steve Kirsch founded Infoseek, he was a seasoned entrepreneur. That’s important because unlike a lot of other people dabbling in web search at the time, Steve was trying to figure out how to make money from day one. That business background meant Steve and Infoseek approached search in a completely different way than some of the other stories you’ve heard on this podcast about early search engines, from people like Alan Emtage, founder of Archie, which was Web Masters episode 21, Fuzzy Mauldin founder of Lycos, Web Masters episode number 52, and Louis Monier, founder of AltaVista, Web Masters episode number one, but before Steve was a seasoned business executive, he was actually a lot like all of those other early search engine founders. He was a young kid fascinated by the emerging world of computers and had some pretty impressive early mentors

Steve Kirsch:

Computers. I started discovering when I was in elementary school and I’m 65 now. So you can imagine elementary school for me. It was a long time ago. So we had things like Olivetti-Underwood programma 101s was the rage back then. I mean, that was cool. That was a little programmable calculator that was desktop sized. So it was since then I just graduated more and more to larger, more sophisticated computers. And then when the internet came out, I was fortunate enough to work with the people that started the internet. Some people like Jon Postel and Vint Cerf and others that were at the UCLA Network Measurement Center, which was no number one on the ARPANET.

Aaron Dinin:

Vint Cerf, original creator of the internet and Jon Postel, one of the most prominent early voices overseeing the standards for the internet, were Steve’s mentors. If you were to create a Mount Rushmore of the most influential internet, founding fathers, both of them would be up there. And they were the people giving advice to Steve.

Steve Kirsch:

Vint Cerf is the one who told me I should go to MIT and I followed his advice. Fortunately, they allowed me in. So I went there from 1974 to 1980.

Aaron Dinin:

So you were an undergraduate at UCLA and then they sent you to MIT for grad school. Is that right?

Steve Kirsch:

No, I was in junior high school. I would take my bike and bike up to UCLA and play on the computers there. And I continued that through high school. So that’s how I met the people at UCLA. And then when I graduated from high school, because Vint told me to go to MIT, I went to MIT.

Aaron Dinin:

Well, hold on a second. What is a junior high schooler doing biking to UCLA and hanging out with the founders of the internet?

Steve Kirsch:

Working on the computers, programming computers. So I wrote the email system used by the creators of the internet, for example, that was the fun project.

Aaron Dinin:

And this was as a high schooler?

Steve Kirsch:

Probably it was in high school at the time, it was written in an assembly language, so you could create a message, send a message. It was a local message system. It wasn’t internet-based, but it was a local message system so that people could leave messages for each other on the system. It was a Sigma 7 computer.

Aaron Dinin:

And what got you so interested in computers at such a young age?

Steve Kirsch:

I thought it was neat technology and you could interact with it. And the computers would always do what you told them to do. Sometimes to you, you’re detriment because the instructions you gave it were not exactly what you intended, but it was cool because you could do things like write programs to play Tic-tac-toe, for example. Right? And it was just a challenge to understand the algorithm for Tic-tac-toe, and then know how to code it and then code it so it would always win and then do a user interface to display that to a person.

So the person could interact with it in a pretty reasonable way. So it was mentally challenging and rewarding because you got instant gratification, right? It’s not like building a house where it could take years, you could build a computer program and it could take weeks. And when John Conway came out with his game of life, then I used the PDS-1 display. I forget the brand name, it started with an I. So I programed that in assembly language and there’d be a CRT display that is bitmapped on the computer. And I would start off with a pattern and press the button. And we would see Conway’s game of life on all animated on this computer. It was very cool. And at the time I had to use the switches on the console in order to enter my program.

Aaron Dinin:

Well, I guess it’s no wonder Vint Cerf father of the internet was sending Steve off to MIT. He was a high schooler coding early animations in the first email software for the internet. Those are some impressive skills he was flashing and it was a harbinger of more incredible inventions to come, most notable of those is the optical mouse.

Steve Kirsch:

I was in MIT working on list machines. I was frustrated because the mice were breaking all the time. So I thought, there’s probably a better way to do this. That’s solid state and no moving parts. So I came up with an invention for the optical mouse and I designed and built that at MIT. I show it to Steve Jobs. He said, “I like the idea, but I don’t like the pad. Come back later when you don’t have a pad,” so, close but no cigar.

Aaron Dinin:

Well sort of Steve Jobs might not have immediately latched onto the optical mouse, but the Steve we’re talking to here, Steve Kirsch was still able to turn it into a compelling product.

Steve Kirsch:

That became a company mouse systems, which then supplied the optical mice for Sun Microsystems, and Apollo Computer, and also PC Mouse. So we were the first to put optical mice available on the PC where you can connect it into Lotus 1, 2, 3, and so forth. And so we wrote connectivity program to make it work with Lotus 1, 2, 3. So people could zoom around their spreadsheets using a mouse, which of course is nothing today but back then, that was hot.

Aaron Dinin:

From his optical mouse company, Steve moved on to FrameMaker and from FrameMaker, he moved to Infoseek, which as we heard at the beginning of this episode, began as an idea to charge people for the ability to search computer journals and evolved into charging people to search the web.

Aaron Dinin:

This is where Steve’s extensive background in business was impacting his approach to web search in ways that is competitors who were academics, building search engines at universities simply weren’t considering. Specifically Steve knew and understood that providing a valuable search service was going to cost money. So Infoseek needed a way of generating revenue immediately.

Steve Kirsch:

We started it as a business, I jumped from my previous company to start Infoseek and I started as commercial business. So it wasn’t like we’re sitting around thinking about this stuff. It’s like, Hey, we’ve got a business to run, here’s the business model for it. And then the original concept was these proprietary computer journals. And none of them wanted to give away their content for free. So we had no choice. It wasn’t work for us and then fund all of the information needs of everybody on the planet. We needed a monetization model. And so the most straightforward was well charge the people who you give value to.

Aaron Dinin:

It was a logical first attempt at monetizing web search, charge the people doing the searching. Remember this was a time in web history when search engines were a fairly new concept and nobody had built business models for them yet. Heck people weren’t even sure it was possible to build a profitable search engine and hard as it is to imagine now for a time, the strategy of charging for search queries did work. Thanks in part to Steve and the Infoseek team’s savvy business background and some convenient personal connections.

Steve Kirsch:

We just started it as a website. And we tried to let people know about it through PR and traditional advertising. And Infoseek started in January, 1994 as this sort of pay for use service. We started seeing lots of traffic and eventually Netscape saw what we were doing. And we became the official search engine on Netscape. You would go over to Infoseek to do your search. And so that was good for them because they had a net search button, which made it easier to navigate the web. And it was good for us because we were trying to give them 10 free answers. And if you want more than 10 answers, then you have to pay.

Aaron Dinin:

How did you get partnered with Netscape? Because that seems like the real turning point for Infoseek was it really that they just happened to notice you?

Steve Kirsch:

We’re in the same area where took 10 minutes to drive from Infoseek headquarters to Netscape headquarters. We knew the people who were involved in that and they knew of us, and they knew that we had a quality search engine. And so it just seemed to be a very natural fit, and a lot of its personal relationships as well.

Aaron Dinin:

Let’s pause for a moment to appreciate the important, if somewhat frustrating lesson here, there’s no such thing as magic in entrepreneurship. Steve in Infoseek, didn’t just magically get on the radar of Netscape, then the largest and most prominent internet company in the world, their offices were 10 minutes away from each other. And there were personal relationships involved in cementing, a partnership.

Aaron Dinin:

I always like to remind entrepreneurs to note things like this when listening to someone else’s story of success otherwise they’re liable to think that they too can just get suddenly lucky. Steve didn’t get lucky. By this time he had decades of experience in relationships under his belt. And those experiences in relationships gave him an opportunity he was able to leverage into a lucrative partnership and it was a partnership that would become more lucrative, though, more expensive to maintain when Steve and his team soon realized there was an even better business, this model than charging users.

Steve Kirsch:

We got wise to giving the searches away and charging advertisers. So we would have rudimentary keyword matching algorithms. So you would buy the keyword truck. And then whenever someone typed in truck, your ad would be shown. When we started doing that, then of course, Netscape noticed, and then Netscape said, we’re going to charge you for being the net search button. And then it was a competition.

Steve Kirsch:

And so we were then in competition with other search engine, who could pay Netscape the most to be the net search button on Netscape. So for Netscape, this was huge revenue generator. And for us, we were kind of like, geez, we put in all this technology and now we have to give it all away in order to bid for our spot, just to get the traffic. So once we got them on our search results, the goal here would be to get them to come to us directly so we wouldn’t have to paint Netscape, a big portion of our revenue.

And of course, Netscape then changed the rules so that if you’re the net search button, then you can’t do that. So it’s all this business haggling over trying to deliver a free service to people on the internet. And then they eventually went to a model where there were five search engines, right? You’d click the net search button, which one do you want to choose to do your search, and then they would charge all five of us for a position on that page, right? So it’s like, how do we not leave money on the table?

Aaron Dinin:

Of course, this business model still exists today. We heard all about it in Web Masters episode, number 16, featuring Jon von Tetzchner, founder of the Opera web browser. In fact, Google currently pays Opera and Safari and Firefox a combined billions of dollars to be the default search engine in those web browsers. And that’s because as Steve figured out and Google has proven to an unfathomable degree, charging advertisers rather than users was an incredibly valuable way to monetize web search.

Steve Kirsch:

We started in January, 1994 with this pay model and on June 11th, 1996, we started trading on NASDAQ. Think about that. That’s two and a half years from an idea to trading on NASDAQ. I mean, that’s unbelievable. So, it happened pretty fast. Shortly after, we have somewhere around seven plus million visitors a month. And at the time we were the seventh most visited website in 1997 and we were the fifth most visited website in 1996. That’s pretty amazing from, hey people would be interested in searching computer journals.

Aaron Dinin:

And eventually you sold to, I believe it was Disney. Is that right?

Steve Kirsch:

So Disney caught interest and made us an offer we couldn’t refuse. And they ended up acquiring the company and we got tracking stock in the new entity. So we thought partnering with Disney would accelerate our growth. From my point of view, I started my entrepreneur career as creating a mouse, and then with Infoseek I was then having my company bought by a bigger mouse company sort of the Mickey Mouse, Disney. We made some jokes about that.

Aaron Dinin:

Hey now, I’m the one who makes jokes on this podcast. And that was actually even a joke I already had planned.

Steve Kirsch:

Sorry about that.

Aaron Dinin:

But seriously, something I was wondering is why Disney? Why would they want to acquire a search engine?

Steve Kirsch:

Well look because search engines are the root of a portal to the internet, so they wanted something that would attract a lot of eyeballs. So Disney looked at us as a way to attract eyeballs to their properties. And of course, we looked at them as a way to attract eyeballs to our property.

Aaron Dinin:

And why did that not end up working, do you think? Why did Infoseek fail particularly once it had all the resources of Disney behind it, while Google ultimately went out?

Steve Kirsch:

Disney focused on creating content on the search page that would attract users versus the Google model, which was the clean search page. And if you wanted to go to news, then you would go to the news page off of that. There was this fight on clutter on the homepage where originally Infoseek was just like Google. It was very pristine, but the business types said, well, no, let’s add this and this. And we’ll make sure that when they go to the homepage that they get more than just this empty search box, right? Who would ever create an empty search box? You can’t build a site like that. Let’s put all this garbage, sorry… this news information and stuff that people are entering and Yahoo did the same thing on their site.

Steve Kirsch:

There’s no more clean Yahoo search bar. It was a little box at the top. And it was, here’s the news and here’s the markets and here’s this, and it turned it into the front page of a newspaper, which people just wanted a fast loading webpage. They didn’t want to have it slowed down because a lot of people didn’t have fast internet connection. So, that was not necessarily a good idea. And there were those of us who pushed back on that idea.

Aaron Dinin:

So Disney cluttered the homepage and…

Steve Kirsch:

Oh by the way, there was another little anecdote where people in Infoseek said, we’re only going to search the a hundred million most popular pages, instead of trying to search everything. Because if you try to search everything then they required more resources. And so there was a strategic decision made that I did not agree with, to limit the scope, I think it was like to the 10 million most popular pages, if you can believe that. And I didn’t like that idea, but there are other people in the company’s whose views I had to consider. And I also didn’t like the idea of cluttering the search page. So maybe in my tombstone, someday see he was right.

Aaron Dinin:

… So that’s the reason you think Infoseek didn’t reach its full potential? The potential Google would ultimately demonstrate?

Steve Kirsch:

I think it was sticking to your gut in terms of what you thought. So I was the one at Infoseek that said, Hey, look, we shouldn’t just focus on the best 10 million pages. We should be focused on indexing the entire web. And we shouldn’t clutter the homepage with all this stuff. It should be clean search. And if we want to have other search, they should be available of that. I mean that I think was some of the mistakes that we made in Infoseek, which I had argued against and not keeping the focus on search and building search and the advertising sophistications and so forth, I think were strategic mistakes.

Aaron Dinin:

And when you look at Google now and what it’s become, what do you think, is there still an opportunity in search, or will Google forever be the king of the industry?

Steve Kirsch:

I think that it’s really hard to compete against Google at this point. I mean, their technology, the data centers, I mean, it’s really an impressive operation. They use custom computers that are designed for search. They have really clever people working there, the algorithms, the performance. I mean, there is a lot of technology behind that. It would be very, very difficult to compete against Google and win. And even Microsoft with all their resources came late to the table and recognizing the internet. They were ignoring the internet for the longest time.

Steve Kirsch:

And they have a pretty good search engine as well, but Google was early to market and they made the search engine just really, really useful to people. And they did a really job of doing that really core asset cash cow for them. And they deserve it. They hired really, really smart people and they did a really, really good job in execution. The page rank algorithm… it’s named after Larry Page, but it’s also named after webpage so it was kind of cute naming, but the page rank algorithm was very clever. At Infoseek we developed something similar later on, but credit to Larry for coming up with that algorithm, that was worth something as everybody knows.

Aaron Dinin:

What do you think about the implications of Google’s dominance? Is it good or bad for the world that they’re so powerful?

Steve Kirsch:

Look, I think that Google is a net service for the world. I think it’s amazing that you get all of these free services and you don’t have to pay a dime for it. Right? So from a user point of view, it’s just phenomenal. I love the image search as well, and I love the maps and I love the Google Docs and Google Forms. And they’ve done a really, really good job of executing in a number of areas that if they were to go away, my life would be much harder

Aaron Dinin:

To be fair. I think a lot of people’s lives would be a lot harder without Google. And for that, I think Steve is right. Google definitely deserves a lot of credit for how they approached web search differently and what they’ve been able to accomplish as a result. But hey, Google doesn’t necessarily get all of the credit. Steve gets some of that credit too, but not necessarily for what he did at Infoseek instead he gets so some of the credit for Google success because of what he didn’t do.

Steve Kirsch:

The two founders of Google came to us before Google was started and said, Hey, we got this idea for a search engine. And I said, so this is actually pretty clever, really like this idea, how much do you want? And they said, well, we want a million dollars. And I said, I not sure I’m willing to pay a million dollars. That was a mistake. My wife does not forgive me for that mistake.

Aaron Dinin:

No, I could see why she’d be a little mad about that. In fact, I’m pretty sure that’s actually the thing that belongs on your tombstone.

Steve Kirsch:

There you go. could have bought Google for a million bucks and it down. That could be how I will be remembered. I’m glad I inspired that. And I’m really grateful that if I had made a mistake and we had acquired Google, think of what would happen. I mean, none of this would’ve happened. So I like to think that even though I didn’t make the right personal decision, that I made the brilliant decision for the world, by turning them down and forcing them to go to venture capitalist. And of course I planned this all along, that was the re reason for it to inspire them to go off on their own and do that. The truth was that we were too cheap to give them the million dollars that they wanted, but it ended up to be a really good thing that we turned them down.

Steve Kirsch:

So, the world has people like me to thank for making the right decision that allowed Google to be created. There are a lot of people who made right decisions, Stanford allowed them to put their servers in Stanford originally and grow their traffic there and so forth. So, a lot of people contributed to their success, but had I made the decision to acquire them, you would not have the services that you have today. So a lot of things had to go, right. And I like to think that I was one of the people, one of the enablers of Google.

Aaron Dinin:

Believe it or not, I’ve actually heard a similar story. In the episode of Web Masters I’ve recorded with Louis Monier founder of AltaVista, he told the story of how this guy named Larry called him up from Stanford to ask if he wanted to buy the search engine technology for a million dollars. And Louis turned him down.

Steve Kirsch:

See, at least they were being consistent with their ask. Luis says the same thing, huh? There probably should be a Google appreciation day. For those of us who made the correct decision for them to start Google.

Aaron Dinin:

Well, there you go. Another person interviewed on Web Masters who could have bought Google for a million dollars, but turned it down. Who knew there were so many people. And by the way, that actually wasn’t the only mistake that Steve made in his career, which is even crazier.

Steve Kirsch:

eBay, I could have bought for 10 million. And I said, “No, that’s too high”. So I do have this very bad history of turning down these deals.

Aaron Dinin:

All, this is a great reminder that the path of history isn’t nearly as solid as it sometimes seems. Tiny decisions by one person could have completely changed everything we know. Heck, if not, for Steve Kirsch realizing that selling advertising was more lucrative than selling search we might all still be paying for our search queries. That’s quite a legacy.

I hope you enjoyed learning all about it. I know I did. So I want to make sure I thank Steve Kirsch for taking the time to share his story and the story of Infoseek. If you’d like to see what he’s up to today, you can find him on Twitter. He’s @stkirsch. Web Masters is on Twitter too. We are @webmasterspod. Feel free to send us any thoughts or feedback you have about the episode. You can also reach out to me directly. I’m @aarondinin, that’s A-A-R-O-N-D-I-N-I-N, or check out my website, aarondinin.com where you can read my articles about entrepreneurship, sign up for my newsletter and those kinds of things.

A quick thanks to our audio engineer, Ryan Higgs, who’s always so great about pulling together these episodes and a thanks to our sponsor Latona’s, for their support. Don’t forget to check out their website, latonas.com if you’re interested in buying or selling an internet business. Finally be sure you are subscribed to Web Masters because we’ve got another great episode coming soon. You won’t want to miss it. I promise until then it’s time for me to sign off.

[OUTRO]

Steve Kirsch:

And by the way, credit to Bill Peck, who worked for us for coming up with the banner ad, the infamous banner ad was invented and first used at Infoseek because that’s how we would monetize the free search, was with these banner ads and Bill Peck was the original advertising sales guy for Infoseek. And so this is the origin of the banner ad.

Aaron Dinin:

Hold on. I have got to dig into this because this is actually the third different origin story I’ve heard for the banner ad. I’ve heard it was created by Bruce Judson at Pathfinder, and I’ve heard it was first done at Hotwired? Hotwired.com, which was the digital magazine created by Wired. Any of those sound familiar to you?

Steve Kirsch:

Look, I’m not trying to say on my tombstone, this guy’s responsible for the banner ads. It doesn’t really matter to me. It could be that a lot of us were doing it at the same time. We definitely didn’t copy anyone. I mean, it was a original concept for us. We didn’t go and do searches on well, who else has banner ads? I don’t know. And I guess historians would care, but I don’t care.

Aaron Dinin:

What’s actually more interesting to me is that it shows the true nature of innovation. Good successful ideas don’t really exist in a vacuum, they’re a response to a problem that lots of people are experiencing. So it makes sense that multiple people would identify the same solution around the same time, particularly if that solution is effective.

Steve Kirsch:

So optical mouse… Richard Lyons at Xerox PARC came up with the optical mouse at the same time that I did. I actually got there first. And I think that can be shown in the patent office that I got there first, but hey, credit to Richard Lyons for coming up with a really clever idea for the optical mouse as well. It’s kind of like great minds think alike is what they say.