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Um, I have, I don't want to spoil, I have some stuff that I could tell you, but I don't want to spoil it. Awesome. Well, Google Maps. Google Maps. Welcome to season five, episode three of Acquired, the podcast about great technology companies and the stories behind them. I'm Ben Gilbert and I'm the co-founder of Pioneer Square Labs, a startup studio and early stage venture fund in Seattle. And I'm David Rosenthal and I am a general partner at Wave Capital, a early stage venture firm focused on marketplaces based in San Francisco. And we are your hosts. Today we are talking about Google Maps and the acquisition of three companies starting with where two technologies in 2004 that set the whole thing in motion. And David, I would not have guessed it when starting the research, but there's a chance this is as big of a success, but far less discussed than our shining example of an A plus Instagram. And listeners over the next hour or so, we or at least I am going to try and build that case. Oh, I can't wait to hear it. Well, that's actually a good question. Which probably Instagram is used more like in terms of more individual like uses sessions per day than Google Maps. But I don't know. With the account all the APIs of Google Maps, like it might be close. Yeah, the dual revenue model as one being a different front door to Google then search and two actually now selling that API access. But we will get into all of that and more. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founders so we knew there's a natural fit. We know the host of founders well, David, Senra. Hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for founders and executives. Errili, as we use your show for research a lot, I listened to your episode of the story of Akio Maria before we did our Sony episodes is incredible primer. You know, he's actually a good example of why people listen to founders and to acquired because all of history's greatest entrepreneurs and investors. They had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research. I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired we focus on company histories. You tell the histories of the individual people you're the people version of acquired and where the company version of founders listeners. The other fun thing to note is David will hit a topic from a bunch of different angles so I just listened to. An episode on Edwin Land from a biography that David did David it was the third fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion the greatest entrepreneur to ever do it my favorite entrepreneur personally is Steve Jobs and if you go back and listen to like a 20 year old Steve Jobs. He's talking about Edwin Land's my hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes and the beauty of this is the people may die but the ideas never do. And so Edwin Land had passed away way before the apex of apple but Steve was still able to use those ideas and now he's gone and we can use this idea so I think what requires doing what founder trying to do as well is find the best ideas in history and push them down the generations make sure they're not lost history. I love that well listeners go check out the founders podcast after this episode you can search for it in any podcast player lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders go check it out if you like the show you should come join the other 2500 plus acquired fans that are hanging out in there. And if you want more of the show you should become an acquired limited partner David and I release one LP show for every main show and we use these episodes to go deeper on company building topics the last of which was on a not very well known topic with Andrew Abramson from Riviera partners on how the best. Companies in tech search and recruit for product executives you can get started with a seven day free trial and listen right now here in the podcast player of your choice. By clicking the link in the show notes or going to glow dot FM slash acquired. All right David I'm pretty excited to do a classic acquired episode know this is going to be classic I noticed in our LP show read you you no longer say how buttery smooth it is to subscribe because it is very buttery smooth but we got a bunch of. Feedback in the survey that people people didn't like that description yeah I don't. Yeah a lot of funny feedback actually we should do an LP show on stuff we learned from the survey so it's a lot of good of course there's like interesting demographic stuff for example the top two types of people listen to the show or product managers and engineers. But there's a lot of other really interesting data that I think we should we should tease out an LP show we totally should do that we had what almost 800 responses. Yep which is great thank you for all the feedback and some great helpful stuff some really funny stuff but mostly we just appreciate you know all you for listening it's super cool thank you. All right David you want to dive into the acquisition history and facts let's do it so we go back to 2003 relatively recent by acquired standards. Yeah we're not starting with like the original cartographers yeah. So we could have someone thought of an idea of a map and it's been a busy week here at Wave you know. No we go back 16 years to 2003 to Google in Mountain View it is pre IPO Google as we're going to see just pre IPO Google they're starting to gear up they have found their business model of paid search inspired by over the researcher which we covered the borrowed best business model of all time yes we covered with the internet history podcast right. Yep Brian McCullough yeah thank you Brian so it's 2003 and a young product manager at Google fresh out of Stanford whose name is Brett Taylor is working on a little and truly little feature of Google at the time called search by location. The idea is that you could enter searches into Google by location but there's no maps there's no it's like completely useless and and in Brett's own words it had zero users per day. And I think if I remember right you had to like use a keyword like you were typing in the search bar and it was like location colon or something like that to scope where you wanted to I mean it was like a command line function. I mean I don't remember because I didn't use it but for listeners the name Brett Taylor might sound familiar then you know what Brett Taylor went on to do is he CTO of Facebook now well he went on to become CTO of Facebook well he went on to first of all he found it friend feed he was a friend feed that was acquired by Facebook he became CTO Facebook then he left founded quip which was fired by Salesforce and he's now the chief product officer of Salesforce. We're going to have many illustrious Google maps alumni as we continue throughout the episode here. Friend feed was so awesome that was that like time in social where all of the platforms were similar enough that you could build an aggregator and that actually made sense like now Facebook posts have so much crazy metadata and different types associated with them Twitter everything has. So sort of unique but friend feed basically said sure connect with all your services and we'll create one feed of all your friends across all your services that wildly defies the business models of all these companies now so that we could shut down immediately but that was a really cool. It was like time when you worked on with red ride of aggregating Uber and Lyft and yeah great idea not anti business model of big companies anyway we digress so it's 2003 Brett sits down with Larry Page co founder of Google and recently hired VP of business development Megan Smith to talk about search by location the state of the product the state of the competitive market out there and they realize like this is not this feature is not cutting it we need to do better and what was going on out there a well a couple years earlier had bought map quest map quest was the leading map internet mapping product out there and it was already public they they bought it after it was a public company yeah that's right they bought it for a billion dollars I think that because I was pre bubble bursting it was the most used product out there Yahoo also had Yahoo maps out there which were quite popular and Google found out that Yahoo was doing a bunch of work to adding a bunch of features to Yahoo maps and really making a push on it. And so the three of them decide we need to really compete in this space for to this Lee right around that same time they get a tip from their investors so quite a capital one of their investors that there is an interesting little company down under in Australia that they might want to look at. In researching this last night I discovered that map quest is still around you can go to map quest calm the logo is something that I've never seen in my life because of course it's owned by Verizon because the whole a well to Yahoo Verizon it's right so it's like a still a thing you can use it uses map box and. The licenses sort of maps and data I couldn't believe it was still around because like my the last time I use map quest I was like printing out the directions so when I was driving somewhere I could look at the piece of paper and you know that's what we get to state of the art in a minute well that was state of the art was you when I'm a master yuck maps you got some directions you printed them out as you drove along or walked along you were like looking at the sheet of paper there was no look how cool it is this was made just for me yeah they were just. Static pages you entered your starting point your destination and you got a static web page that you then printed out so down in Australia though there is a motley crew of four people to Danish brothers Lars and Jens Resmussen who had recently moved there they're Danish by birth they had been in Silicon Valley in California they had been working at a startup that startup was called digital fountain well it was a dot com bust I think it ended up surviving and maybe ended up getting. They were getting acquired like in the middle of the thousands or something they laid off like most of the people to lay off most of the people and so the two brothers had gotten laid off and they said okay well you know it's kind of nuclear winter here post dot com bust but let's start something like you know we've seen we've been through this startup we were interested in starting company Lars was dating a woman who a who ultimately marry who was Cuban and she couldn't immigrate to the US and so she and he decided to move to Australia. So they moved Australia but he and his brother Jens are thinking about a product that they could build and Jens had the idea that that you know just like we're talking about this state of the art in mapping on map quest and Yahoo maps it kind of sucked like it really kind of sucked and maybe like they could build something that was better and his idea was that so if you go way back and try and remember using these sites you would see a map but the map wasn't like actually the key part of the experience it was the list of turn by turn directions on the side of the map in the map itself was like you get a tiny little like you know just for fun they generate you this tile that's like look this is sort of illustrative of where you're going and so he had the idea that the map should be front center just like a map and that the directions should be on the map and the map should not be static but it should be dynamic and you could interact with it you can zoom in you can do all of the things that we now think of as normal modern mapping applications the way he thought that you could do this was to make the map based on this concept of tiles and each tile it would be dynamic tiles in the map and they represented a small part of it and that they could stitch it together so that whatever view you were looking at was an aggregated view of all the little mini tiles that made up the map and you could move it around and see different tells them what that's a brilliant technological innovation that enables this it's amazing to me that it both requires this sort of like breakthrough technology innovation which is still how maps work today I mean there's a lot more vector stuff than just this sort of static tiles world that that that's what enabled this mapping revolution but the vision innovation that that he really nailed was if you made the map big and pretty and zoomable and searchable itself could be a platform for other services like the map itself could be a platform could be the mode of of interaction so large is like well yeah okay this is cool let's start a company around this and let's do this so he's moved to Australia comments as he ends to move to Australia and he recruits to other engineers who are friends of theirs no Gordon and Stephen Ma and the four of them start working on this out of no the way that you could build an application this performance and dynamic would be with desktop software right like you would this would be like the encarta and cycle video you're going to install this on your desktop computer and it would be super cool and you know you can find what you want panorama maybe you could still print out the directions eventually how else could you do this so they start working on it they realize that hey this is this is kind of cool they might be on to something they search for funding VC funding for this so Lars and Yens flight back to California they meet with a former Cisco executive that they had known who is a prolific angel investors name is Frank Marshall Frank says okay like this is cool I'll introduce you to my network to a bunch of VCs in including Sequoia capital so they get introduced to Sequoia and Sequoia it's pretty excited about this Sequoia been was investors in Google they were investors in Yahoo investors in in lots of great companies over the years as we've seen many times on this show they start talking terms and they give a unclear if this is a verbal offer they actually gave a term sheet to the company to invest two million dollars for 40% of the company it was a different time back then post mobile burst to the company so they actually gave a term sheet to the company to invest two million dollars for 40% of the company it was a different time back then post mobile burst things that would be a five million dollar post money valuation selling 40% of the company or two million so many times have definitely changed in the seed market since then however before they ink a deal and the brothers are excited about this they're like meant great so quite capital premier and market venture firms out there they're willing to fund us here here here in Sydney Australia this is great they're excited to do it before they actually sign the deal though Yahoo releases what the Google folks know that they are about to do is a big update to Yahoo maps and they had local yellow pages listing and it's it's clear that like oh okay this is going to be the business model here of like we're going to have local businesses on these maps we're going to sell advertising around that people are going to be able to find them and this is kind of game changes in the industry so I see this and they pull out of the deal they say yeah yeah who's going to be the winner here we're not as excited about funding this startup company to compete with these giants anymore so going it's a lot of things right but well they still get something right though you know and this is one thing they are in many of the best you know big platform companies out there of course they're investors and Yahoo and Google and Sequoia does say as a kind of a parting gift to while passing with the brothers here and where to says you know with Yahoo launching this Google is going to need to respond and you know we're investors on the board of Google we can introduce you to them we'll broker an introduction so they as we alluded to earlier make this introduction to Larry Page back in Mountain View I don't know for sure but I assume large and Yens fly over again back to California they meet with Larry and Megan they pitch them this company of the building I think I didn't mention earlier the name of the software the desktop software is expedition they show them expedition how cool it is they pitch them and Larry and Megan are interested but there's kind of two problems one as we alluded to earlier Google is in the middle of desktop well the smaller problem is Google is in the middle of preparing for their IPO so all deals are on hold like period indefinitely they're not doing any MNA during the quiet period while they're getting ready to go public this is 2004 at this point but to yeah it's a desktop so like we're talking about Google here Google doesn't make desktop software Google makes Web software did you see that that Larry page quote we like the web yes exactly we like the way that's a lay at the end of the meeting that's a Larry say is like you know yeah this is great but we like the web of course Lars and Yens in in typical great entrepreneurial fashion they say well we can do that so they go back to Australia and the for them and we're to only the for the still just for engineers they work feverishly for three weeks and at the end of three weeks they come back to Larry and Megan and they say hey remember how we had expedition running on the desktop last time what here it is running on the web and what they do they haven't running on a web browser they use this idea that was as best as we can tell and they've talked about in Google's talked about it kind of independently invented both by the Gmail team and Paul Buckeye within Google and also where to while they're trying to get acquired by Google at the same time and that's leveraging this kind of relatively unknown feature of JavaScript that Microsoft had added to Internet Explorer that allowed it to sync with allowed a web page that was already loaded to sync with XML data stored on a server so like ordinary and at this time like web pages are static but what a web page everything is done there's no processing happening on the web page it's static but there is this feature that you can dynamically fetch XML data in the background without refreshing the synchronous JavaScript and XML indeed the wave of the future wave of the future and for all of our engineering audience and probably some others you're going to know exactly what we're talking about here but for everyone else you may have heard of the term X asynchronous JavaScript syncing with XML data stored on server short for yeah eight times we're coming to the plumbing the depths of our engineering abilities here all I remember is this is like a couple years before I rewrote the the Hudson High School website and I remember writing a lot of XML HTTP requests and being like this is going to be cool like Google maps was so indeed you know I feel like we've been lately been on a web 2.0 history kick here but this is that becomes a killer key building block of the whole web 2.0 era is the ability to have non static web pages via this technique as part of the slack episode we talked about flicker that had just launched a couple months before this is really like one of the key underlying technologies of the web 2.0 Renaissance so the where to team they come back they present a Larry and Megan and they're like well well all right this is this is pretty good and they were doubly impressed and Google was doubly impressed because again Paul Buckeit at on the Gmail team that was I think I don't think Gmail had come out publicly yet I think it was still being worked on internally they were like at the bleeding edge of building web applications they were doing the same thing internally so who was like wow man these engineers must be pretty good if they come up with this independently so later that summer in August Google does complete the public offering on August 19th 2004 and then very shortly thereafter probably as soon as they can once the does settles from the IPO in October 2004 Google acquires where to Brett Taylor moves over and becomes the first PM for this new team which is rechristened from where to to Google maps very inventive name so you know it was just over the summer while where to is building the web version of the product to try and impress Larry and Megan Google maps launches publicly in February 2005 so the acquisition is October 2004 the web product is only a couple months old and within months Google maps is launched to the public it's it's pretty incredible I feel like we hear this story a bunch on acquired of some of these totally world changing products are built in just a matter of months by really really talented engineers one of the things that makes this story so common on this show is there was this time when web applications were so new that it was intuitive what was going to have product market fit because there were so few web applications I mean I think like oh the first really good interactive mapping software the first really good interactive you name it like there was probably a big space for it photo software flicker video software YouTube you know all of these companies yeah it was the floodgates were opened to building these applications on the web and whoever could build them fastest and the web was so slow at the time to that it's exactly at fastest and best like there was like this was an era where technology innovations created a hundred X better user experience for people that made them actually use those applications so there was lots of people that would sort of like decide that they wanted to get into this but it took real technical genius to you know work with the the internet speeds we had at the time the browser technologies to be able to sort of like make that possible for people yeah and what's interesting is like this is pre Google Chrome days so actually all of the browser technologies making this possible are coming out of Microsoft and Firefox and well and Firefox to yeah yeah pretty incredible okay so rewind just slightly back to the end of 2004 Google also acquires to other companies in quick succession at the same time one is a company called keyhole keyhole was unlike where to was a well-funded startup I believe located in Silicon Valley in California it also though made desktop software and it was called earth viewer and of course the listeners can probably guess that becomes Google Earth which interestingly would remain desktop software for quite a number of years and contain a flight simulator that's right that's right Microsoft parallel very important here Ben do you know who the CEO of keyhole was I do not well it was I'll give you his name if this rings any bells John Hanky nothing oh man so John would ultimately after a couple years become the VP of the geo group quote unquote within Google so he would be taking over on Google Earth and Google maps responsibility is an executive for that but then as you know oftentimes happens to be companies in a Google he kind of got bored with this role wanted to do go back to doing something new and innovative and he had come from the video game industry before he started keyhole and so he started a little project within Google that was referred to as nianctic labs no way yes yes and so John is the geospatial stuff makes a lot of sense that indeed John is is now the CEO and co founder of nianctic which of course makes Pokemon go and the new Harry Potter game and all of the and the game was a lot of progress and in while started with the Chris yet and all of actually started with I think it was field trip which was a application built on Google maps to that could show like interesting points of interest around you with you if you held up your phone and like pandered around but yeah certainly by far the most successful augmented reality game or probably application period out there right now yeah yeah for sure I mean with it is funny I think when people talk about the market I think that's the widest used air that is the market yeah Pokemon go that's the market that was keyhole a Google also acquires a company called zip dash a very very small company I believe they paid two million dollars for for zip dash zip dash was also based in Silicon Valley in California and they were providing creating real time traffic data on streets and they were getting that data both from and sending it to mobile phones of course like that is when you would want traffic data is when you you have your mobile phone with you while you're driving there's a giant market of only for next tell phones at the time of the acquisition does had the sweet like walkie talkie yeah the push to connect oh man I never had one of those but I always wanted to have one commercials were great I know the commercials were awesome so the the zip dash team by far you know the most insignificant of the three of these acquisitions to this day the where to acquisition prices still undisclosed it was a mix of cash and stock that's the most we know but I think it was less than 50 million like I think it was a relatively small acquisition I mean great for four people but and I believe keyhole was around 35 million I think I'm being sort of facetious about the total insignificance of the zip dash acquisition because Google would of course you stick them in this backwater thing that they would work on that nobody would care about which would be the mobile version of Google maps which of course is now like by far the you know 90 plus percent of the business and one of the most important applications in history back to the launch in February 2005 of Google maps the night before launch it got slashed out it members last out oh man yeah that was like I was like getting dug before dig I know I know so great or tech means now or you know I mean it's still up like you can I think you can still I don't know if there's traffic but like there's writers I remember going to slash that like literally every day it looks the same I mean this is crazy oh man it's not even the way back machine yeah like somebody published something this morning this is this is like still a news site well so slash dot of course for listeners who don't remember or or weren't alive was you know sort of the tech meme equivalent it was it was the user generated and posted news site for technology back during this era getting slashed out it quote-unquote was if your application or service or product or what have you made it to the top of the slash dot boards you would get just a ton of traffic I'm reading the about slashed out was created in 1997 by Rob commander taco Malda I remember commander taco he would like he was like the the username on all the posts yes so great people find out about this impending kind of re well not even relaunch of of where to because expedition was I don't believe ever launched publicly and it was desktop software but the launch of Google maps coming at the night before it gets slashed dotted with the URL of Google dot com slash maps and so when they launch the next day and announce the product they just get a ton of traffic ton of traffic but that doesn't equate to immediate success for the product and and actually according to according to Brett Taylor and many of the histories out there for about a year it was like okay it got some usage but certain math question and Yahoo maps were despite being obviously inferior in many ways were we're still the the the leading products out there on the web over the next year though they do two things that are really important one that is sort of like fundamental that was starting to be well known and I feel like Google was way ahead of the curve but now is like obvious which is that they rewrote the app it was really slow and they rewrote it for speed so like Google understood that speed of loading of web pages search results you know everything I mean there's one of their primary value propositions for for why Google want not only was at the best results but it was the fastest it was instant and so they rewrote all of the software they make Google maps actually performant and fast and that certainly helped a lot and especially as the product scaled helped a lot to though on the distribution and sort of stunts side they added satellite imagery to maps and I vividly remember this in the satellite imagery they they the aerial imagery they took from the Google Earth team from the keyhole acquisition and they they were able to bring it into maps and the web application and so in this launch people it was such a novelty and I remember doing this I remember my parents doing this everybody would go find their home go find my house go find my house and view it from a satellite and that was like the key thing that like made sort of like the Zestimate for Zillow that like you thought you were like a spy yeah it was like you were like I saw this in a movie only the government can do this and now I can do it too yeah yeah and there's a super super fun story from Brett Taylor that he posted on Twitter that will link to about naming this product feature which of course is as we all know now called satellite view when they were working on it the maps team called it satellite view but apparently the earth team got really upset about this because some of the images were from satellites but most of the images helicopters yeah we're actually aerial from planes and helicopters and so there was this kind of like holy war between the engineering team was about you can't call it satellite view it's like most of its from planes and so they ended up having a product review and one of the product reviews before the feature shipped with Sergei Brenn is in the in the product review where they like on the agenda was to finalize the name of this feature and apparently in typical lary and Sergei fashion and especially Sergei they are always doing you know nutty stuff and Sergei was on this kick that every meeting had to end on time every meeting he went to he brought like a timer like a countdown clock and he would hit the countdown clock at the beginning of the meeting for you know 45 minutes or an hour have along it was and then when the clock reached zero he got him walked out meeting was over and whatever like decisions needed to be made the current state of where things stood that was the decision so they're in this meeting and debating what to call it and everybody's throwing out different names and Sergei's mostly in listen mode and then the clock hits like 10 seconds and Sergei says let's call it bird mode and then the buzzer like goes off and he walks out and everybody's looking around and they're like are we really going to call this bird mode? So according to Brett the the maps team goes back to work on it and they're really debating like we can't call this bird mode that's ridiculous and so they decide just not to do it and they just leave the satellite mode you know name in there and then they ship the feature and nobody asked them ever again and so they literally defied Sergei and they just did it and now satellite mode that we all know and love is satellite mode So reminds me meanwhile Microsoft shipped the org chart I remember I don't know what it looks like today but I remember in Bing maps for the longest time there was both satellite which was truly from satellites but then there was also like I don't know if they called it bird's eye or they called it helicopters but are aerial perspective or something like that and this was actually the helicopter shots which for nerds was pretty cool because then what you could do is they crisscrossed in the sky like north to south south to northeast to west west to east and you could actually rotate the perspective that you were viewing and it wasn't like at a 45 degree angle it was maybe like a 20 degree angle or something but you could actually like sort of see what it looked like viewing not directly down but sort of like slightly at an angle down and see what they did this Yeah I remember like I'm like this is cool but like is this useful at all Right and why would you have two different views for this? Yeah but sure enough I looked at my house and I looked at it from all four angles and I was like this is pretty cool It's pretty good web well to be back in the mid 2000s so by 2006 once all these features and shipped Google takes over map quest and Yahoo and becomes the largest internet mapping destination and provider in the world In mid 2006 they release the maps API and this was another like watershed moment in web 2.0 development as developers go nuts with access to the maps at Google maps API and they start creating mashups do you remember mashups been no oh Google maps mashups were such a thing it was like the tech world meme of you know 2006 to 2009 all sorts of applications get built showing you know overlaying crime data or you know any points of interest data or whatever people is just like taking the underlying maps and the dynamic nature of it embedding it in their web pages layering data over it super cool stuff gets built my favorite was do you remember padmapper did you ever use that? Oh yeah for sure yeah so that members of Google maps mashup yeah that makes sense I mean that's how I found an apartment that way like until at least Craigslist got all Huffy and shut them down for scraping yeah and this was super I mean this is fun stories here but like this release the API the developer interest in mashups and people starting to do this this leads to things like truelia things like zilo things like uber you know none of this would be possible without the Google maps API which for a while we should say was free it was a maybe a Google growth strategy but maybe just Google saying like we love making things that make the web better and so if you want to use Google maps for your own thing it's it's free and then if you're really using it a lot it's pretty cheap until recently I remember I worked for a year at the Wall Street Journal after investment banking and before moving to Madrid and getting into venture capital and during that year we started doing a bunch of mashups and work with Google on the with maps and we spent a ton of time with the maps biz dev team trying to figure out how we know could we use this for free did we have to pay for it how much do we have to pay for it also it's it took Google a little while to figure this out I think they've got a pretty good business model now also listeners quick update on my last comment I'm on Bing maps right now they no longer have the they have an aerial feature but it is effectively satellite view and there is not a way to rotate around your favorite buildings in four slightly different angles oh sad there's just one problem with all of this though this might actually be I bet this is why it took so long for Google to fully iron out the API business model which is that Google and Google maps were completely dependent on mapping data from other data providers and satellite companies the two largest of which were teleadalysts and navtech and in 2007 both of those companies got acquired I may mix this up but I think navtech got acquired by Nokia and tell it at least got acquired by Tom Tom and maybe the other way around but they're both fairly large acquisitions and they had a dual opally on satellite map and navigation data providing and so they would sell their data and images to all the car companies that were putting GPS and maps into screens in their vehicles they would sell to Garmin they would sell Tom Tom obviously was making their own stand on GPS devices and they would sell to map quest and Yahoo maps and Google maps so Google knows that this is a dependency that they're not too excited about also in early 2007 Larry and Sergey are back on the Stanford campus where of course they were PhD students and Google was started and they meet up with someone who I assume they knew and were friends with who was computer science professor Sebastian Thoreen who at the time was a computer science professor at Stanford and he was running two really important projects one was sale the Stanford artificial intelligence laboratory and two was the Stanford's team in the DARPA challenge and he and Stanford's team had just won the 2005 DARPA challenge the DARPA challenge of course was the challenge to create an autonomous vehicle that could navigate a preset out course in Thoreen in the desert and so Sebastian and his lab were like at the forefront of all of the things that would go into ultimately autonomous vehicles but a huge component of that is mapping navigation data all of these things Sebastian told Larry and Sergey that he is actually in the process of with a bunch of his grad students starting a start up to work on one aspect of this it was going to be called voo-tool V-U-T-O-O-L great to really great product name and they had a crazy idea that they were going based on their work in the DARPA challenge they knew all these things that were important they were going to drive around the streets of America with cars driven by human drivers but with big cameras on top and they were going to use these cameras to take pictures of everything and A that was going to have pictures of everything but B it was going to be data that was going to be incredibly useful for this future of navigation and autonomous vehicles and all of that which was not a thing that the public was in any way talking about that was five years out I mean I remember the DARPA challenge from back when I was in school at Princeton at the same time we had a DARPA challenge team I mean all the major universities did so it was something that like academics and engineers were thinking about but just nowhere near mainstream but it was like 2012 2013 before the tech community started getting busy about oh autonomous vehicles might be a thing sometime soon yeah it was totally in science project territory you could argue maybe it is still in science project territory but it definitely was then a similarity here all this from from Spasschid and of course they know on their minds is this dependency problem on tele-adlets and navtech and they say we're going to buy you immediately so they do and of course this turns into Google Street View but Street View itself as we were talking about was never the only goal of the project although Street View was super cool and it was a whole nother round of just like when they were sad I look at my house everybody goes and looks at their house but so it was great marketing for Google Maps using that data Google starts internally a project called Ground Truth and this is led by Megan Quinn who was a manager at Google at the time she would go on to square and then Client of Parkins and now she's a GP at Spark Capital and an investor and board member at Rover.com and one of the many illustrious Google Maps PM alumni so she leads this project and what they're doing with all the engineering talent at Google is basically taking the data and the images from the Street View cars and using that and interpolating it in ways such that they get everything they need from that and they don't need to buy tele-adlets and navtech data anymore. Talk about another unique and amazing technology problem to solve is we're going to take these whatever it is nine cameras or something that are mounted in this crazy way on top of this car that are all taking these still images and of course like there's the difficult thing of stitching them together nicely for Street View but we're going to be able to extrapolate structured data that serves to create our maps by taking these lat long coordinates from the moment that these pictures were taken and all these pictures and actually derive map data from that freaking amazing. Incredible engineering project. It takes a little bit of time as you would imagine but they have to drive the cars around all of America to get it but by October 2009 so they acquire VTWL in 2007. Back to 2009 Google boots out navtech and tele-adlets and they are officially only using their own Google data for maps and that then and I think it was right around then and now I remember this is when I was at the Wall Street Journal it was right around then that they open up the business side of the Google Maps API and they start charging to license out the Maps API. Continuing Ben's quest of playing with mapping software in real time while doing the episode there is a really cool feature you can do because you know these cars are still actively driving around all over the place capturing all this data where you can actually in Street View go and change the year that you are looking at. So in the top corner if you hover over the little clock you can adjust I'm on Mercer right now in Seattle you can adjust from 2015 to 2019 and even in those few years it's crazy to watch how much the city gets built up and how much that road changes and I think on average roads tend to have four or five years of historical data there but it is like the coolest thing to go in this time machine and look at what they captured today versus what they captured over let's see I can go back to 2014 over here and it's it's wild to watch the change over time. Wow I didn't know you could do that that's really cool. I found it in a deep way too much time on the internet Google images click around session. Okay so apologies for the multiple jumps around in timeline here but as I said like Google maps like this becomes such a foundational product and technology to so many things and of course I'm sure what is on everybody's minds and people properly remember going back to the zip dash acquisition is mobile what's going on with mobile for Google maps. So let's let's go back again to 2007 2007 great year you're I graduated from college but it was also what else did happen in 2007 it was the year of the phone. Yeah remember it was called the Jesus phone. I do. Oh my goodness I mean if any phone was a Jesus phone it was the iPhone. People probably remember when the iPhone shipped there were no third party applications on it everything was built by Apple but there were two apps that weren't entirely built by Apple and did have third party back ends and those were maps powered by Google maps and YouTube powered by YouTube and those beautifully skew more thick images like YouTube was that old TV. I know I know. Oh well we're going to be we're going to be talking about Mr. Farstall in a minute here this must have been in 2006 by this time John Hanky of Niantic fame had become the VP of the Geo group and so he both Earth and maps were reporting up to him and so one day according to him he's at his desk at Google and the phone rings and he picks it up and it's Steve Jobs just like the trip episode the EA episode of Trip Hawkins Steve dislike and so many episodes of Steve calling people on acquired and so he says this is a quote from from John he says Steve Jobs called me at my desk to ask me to help out on a project he wouldn't tell me what it was but of course I knew we worked closely with Apple to get maps ready for the launch of the first iPhone which opened up so many possibilities so at iPhone launch when Steve Jobs announces it on stage in January 2007 like we said maps in YouTube are the only third party apps on the iPhone except they're not really so what happened was they work closely with Google and YouTube on these but it's actually Apple engineers and Apple designers that are building the apps based on the back ends and the APIs from Google so Google has no control think about that time like how there there was no iPhone SDK everything was there was no separation between being a platform engineer and being an application engineer as far as iPhone OS went so of course it had to be Apple engineers because like there were no like APIs they were optimized for performance you are writing like directly interfacing at a very direct level and you to be very careful that you weren't doing anything that would you know just cause the app to crash every time or worse you know something operating system level we'll have to see if we can find and link to in the show notes these great great retrospectives and histories with people I think on the 10th anniversary the iPhone talking about how duct tape at all was together in the first version especially that demo that on stage demo where it was actually like three different phones that were used during the course of it because it couldn't all work on the phone and the choreograph the entire thing like if Steve touched one thing at the wrong time or went off script like the whole demo would crash anyway so Apple is controlling everything about the UI of maps on the phone Google is just providing the data but of course Google is also working on the smartphone of operating system of their own in Android which they acquired in 2005 2005 was a big four five was a big time of acquisitions for Google we of course covered that on our on our Android episode so then in 2008 when Android launches of course it has maps and Google maps on it and then when they update it in 2009 the next year with Android 2.0 Google adds turn by turn navigation to master Tom Tom anymore on Android and this is huge I mean people knew at the time this was like the death Nell of garment and Tom Tom and now tech and all these companies like they I didn't go back and looked up but I think their stocks dropped to like like 30% on the day of announcement and there you know worthless now meanwhile though like Google maps for the iPhone you just see your blue dot you know where you are you you can get a list of directions but like you can't get anything live yeah remember tapping through like oh I've made this turn now now I'm gonna tap but I'm gonna go look at the telephone that I have moved barbaric who knows what was going on in discussions between the two companies you could paint a picture where Google wanted to add turn by turn navigations to maps on the iPhone but they couldn't because they didn't control the UI but then as the two companies start fighting over the smartphone wars in this era the turn by turn navigation is a killer killer feature for Android there were turn by turn apps available on the app store for iOS but they were like 50 or $100 that you had to pay remember that yeah because I think Tom Tom had one of them yes Tom Tom did I maybe Garmin too we talked about this on on the ways episode which will refer to in a minute as all of this is deteriorating also I haven't my notes here remember when Microsoft thought Nokia is part of this oh my goodness and error best forgotten in time that was just like an arbitrary dig like you just dug that out of nowhere just I know I know well I just you know we haven't talked about it on acquired yet and I feel like it had to come up at some point time marches on we get to 2012 it's dub dub WDC and rumors are swirling that Apple is going to make a major move in the wars with Android they're going to release iOS 6 major update and the marquee feature is they are booting out Google they are launching their own mapping service Apple maps it's going to be insanely great and who comes out on stage to introduce it but Scott for a stall Scott for a stall and we won't be hard to I mean it's so hard to build a mapping service I mean I think well especially one where you're starting 10 years after the your your competitor yeah I mean not quite 10 but but everything we've talked about on this episode from where to to key hold zip dash all the work internally to street view and voo tool all of this over the years they all this engineering that Google has put into maps and Apple I don't know how long they were working on Apple maps internally I'm sure a couple years like and I'm sure that they realize it was a huge thing and they I mean they had cars driving around people sort of were posting pictures on macroomers dot com of the Apple cars driving around like it would they were they were definitely putting in a huge amount of money and effort but in the meantime Google was doing not only all this engineering but they had billions of people well probably hundreds of millions of people at this point in time using their services and getting all that data back from them and so when Apple maps finally ships in September 2012 with the release of iOS 6 Google maps is gone so Google is completely booted out you cannot get Google maps on the iPhone anymore your only option is Apple maps or a third party application of which Google is not on there and Apple maps did have turned by turn Apple maps did have turned by turn but if you followed the turn by turn directions you might not necessarily end up where you wanted to go it might be that episode of the office where Michael drives into the lake yeah the machine says totally and that I mean there were stories of this happening all over the world and the only thing worse than not having turned by turn navigation on your map app on your phone is having turned by turn navigation that sends you to the wrong place within days of of this happening and we covered this on on the ways episode Apple apologizes letter from Tim cook letter from Tim cook not from Scott forest all the story is yeah yeah the writing was on the wall there quickly Scott is and skew amorphism in total is is removed from Apple and as part of the letter Tim says we recognize this is unacceptable we are working to make Apple maps better here is a list of third party applications that you can get in the app store that are alternative mapping applications to use in the meantime one of those that he lists is ways and of course we cover this on on our ways episode which everybody can go listen to for the history there what everybody wants is Google maps Google maps is the best yet they hadn't done the rewrite for iOS yet they had not so it was remember Google was kind of caught flat footed here there was no team internally that had built Google maps for iOS so amazingly quickly again this was September 2012 when this on December 12 2012 so three months later Google ships a third party application to the app store of Google maps and it's incredible it's amazing it's it's so good it's so good it is complete feature parity with Android Google maps including term by turn navigation in many ways people think it was at the other design better looking better flow and within two days it is installed on over 10 million iOS devices it is like a tall cool drink of water in a desert so two quick personal stories on this one I remember like the halls of office for iPad or the apex team at Microsoft were a buzz when this came out because everyone's downloading it everyone's analyzing their user interface paradigms this was the first time that Google had really nailed that trade off of distinctively Google but sensibly iOS and it was there there's sort of first of many really great iOS apps that felt Google but also felt iPhoneie all of us were sort of like tearing it apart and trying to understand you know what should we be taking cues from this in office right that the second fun personal story there is the team that built that app was actually Kirkland based it was Google Kirkland it was a small team I remember there's four core people on the team and I went to a presentation by them on how we built Google maps for iOS like three months after they launched it they basically said like look that the whole API surface was already written for Android like we just needed to be really good iOS engineers and connect to the right services like not that it wasn't that hard but like it actually was architected really nicely for us to just sort of make an iPhone app that that you know we just had to be objective C experts it really shows the power of all the work that Google had done to this point that just in a few months there they could make something really nice to things that pull forward from playbook and maybe we can mention them again then but but to talk about them in the moment one I think all of this episode just highlights people talk about Google being an engineering driven organization and having incredible engineering resources and talent and like this is it I mean better than anyone else on the planet nobody else could do this everything that they did with maps over the now 15 years that it's been around the incredibly architected back end and API surface such that within three months a team that is an incredibly talented team can build one of the best iOS applications in the world at that time and use this this API back in and not need to worry about it and then ship it to the app store and and now Google maps is one of the most downloaded and installed iOS apps of all time pretty incredible yeah I also remember one big thing that made it so good was when it was still the Apple version Apple's app was connecting to an older back end that used the static tiles and had to read download new tiles for whatever your sort of zoom level was whereas when Google regain control over the front end by being able to ship their own app they could connect to their V2.0 or whatever it was APIs that actually had the vector maps so that suddenly the all the scrolling was much smoother and zooming and actually this is when they introduce that gesture and for anybody who hasn't used this if you don't use this and you're learning this from me for the first time this is going to blow your mind to make your life better instead of pinching on Google maps you can actually double tap and then move your thumb up or down to change your scroll level so you can use zoom one handed by just holding your phone instead of holding it with one hand and pinching with the other hand. Oh that's awesome I did know that but I'd forgotten that. It's huge. It's huge. Life changing here on a card. Life changing. So we're going to end history in facts here definitely go check out our ways episode our Android episode to hear more of the history around this and ways especially kind of picks things up from here because Google a couple months after this ways gets a huge traffic boost and download boost from Tim Cook's letter where ways is one of the applications he recommends in rumors start swirling that Apple is going to now buy ways to fix their maxing mapping problem then the rumors start swirling that Facebook is going to buy ways because they want to be a you know internet portal to and have a mapping solution for some reason ends up Google buys ways from $1.3 billion in June of 2013 and then progress marches on till today. One last little code before we leave the history and move on to acquisition category. I think this was one of our carveouts on these apos have episode with Alfred Lynn. Justin O'Burn did three wonderful wonderful long form blog posts in the last couple years comparing the development of Apple and Google maps over the last over the last few years willing to them in the show notes. If you're really into all the technical aspects and like detailed minutia mapping and business models around this go read Justin's post they're really really great. I've got a couple of fun catch ups from this story to today. The first is what did the Rasmussen do at Google after moving on the course what they go and do is Google wave Google wave. I remember when that was launched. I was so hype on that I watched laris's live stream of like here is the platform that's going to change the freaking world. It was super cool. I mean the crazy thing like one of the main meta themes on acquired that we keep talking about is like the tech group. The tech world is a small place old ideas in new again everything comes around they were right like they were completely right on the need for this and the need for it the product that met that need was slack. It was not Google wave sort of it was like slack plus notion because it was also that's true. It was like a document surface in addition to being chat. That's true. And so you know we'll be interested in think about like was it just that the timing was wrong was it that they got the product wrong of trying to be slack plus notion all in one product. We'll never know necessarily but yeah Google wave so then it do you know what laris went and did after Google wave. I know the company that he started that he's running now that before that. Ooh I do not. He went to Facebook. I don't know if he conceived of and launched but he was a key executive on Facebook for work which is Facebook's attempt to to compete with slack and be a smart guy. Which we have heard from listeners I think we may have denigrated Facebook for work in the past and we've heard from some listeners that they really like it and that is rolled out at scale inside their organization so that's definitely a quietly large and successful product. Yeah within Facebook so yeah super fun. Laris is a new company it's called weve.io weve not to be confused with wave and it is a like musical BPM syncing service that their first thing is a running app that I'm excited to try out. Yeah well you've been doing a lot of running lately. It's true. And then one last update the fourth co-founder of We're to Null Gordon is the only one of the four who is still working at Google so their fourth co-founder retired a few years ago the Rasmussen's obviously are gone but Null Gordon is still a Google error. Wow. 15 years later. Yep. Well should we move on to acquisition category? Yep let's do it. I think it's a technology acquisition with We're to walking through this listeners this is where we select whether the acquisition was primarily done or the main value that was acquired was people technology product business line asset which is what we decided that wave I'm sorry that was was since it was sort of a the data that was contained and the data that would be generated an ongoing basis in the future or other which gives us the ability to come up with new stuff every episode if we want to but I think this is pretty squarely a technology acquisition that they transitioned into launching their own product. Yeah that makes sense. I mean you could make an argument for product but it wasn't like it was Google Maps they launched it status Google Maps like it really like a lot of the work and building was was done within Google and it was the technology that they that they acquired that led to this. All right what would have happened otherwise? Oh man that's a really good question like would Google have done this internally without buying where to and would it have been successful if they did without the Rasmussen's and the rest of the where to team. I'm thinking and keyhole and then subdash maybe maybe I mean maybe and maybe they would have gotten there internally eventually but there was so many other things going on at Google at this point in time the IPO obviously Gmail everything that was happening then all the YouTube which of course they acquired docs they certainly wouldn't have moved as fast and then you think about vutual and acquiring that stream maps and of course what we didn't talk about that is Sebastian through and goes on just like all of these alumni to do so many amazing things founded Udacity started Google X within Google and then of course wemo and and that whole division and Google's autonomous card division comes out of that we're really throwing rocks on this episode but I don't think Yahoo would have come up with all of this. There wasn't a logical other acquire for them I mean Facebook was too early and apparently made some decision that they didn't care about owning maps at some point I think they use Bing maps as their their solution now. I remember that you know Apple was you almost a decade away from doing anything here if they were going to sell the company to someone it was probably going to be either Google or a legacy player and then I guess the other what would have happened otherwise is what if they had the coin money and what if the timing had been different by you know just enough so that they actually could close the deal this is actually a good question did where to need Google in order to be a successful mapping product or could where to have been its own thing because if this were playing out today where to would have raised hundreds soft bank would have invested hundreds of millions of dollars in this company. I mean that box like literally soft bank invested 300 million in map box yeah so yeah so we have to go back to what was happening at the time I don't think this could have been an independent company actually agree with did they need Google for distribution maybe maybe not but I agree with Sequoia's decisions ultimately past because maybe they could have gotten distribution on there and you know certainly flicker did certainly YouTube did although both of this companies you know sold and sold way too early but they could have been built to standalone companies I think the problem here was the reliance on on navtech and teleadlist data like if you're an independent startup are you going to be able to negotiate with them get rates especially since users are not going to pay for the product like it has to be a free product because map quest and Yahoo maps is free so you're not going to have a business model you're going to have to license all of this super expensive data and the business model the ingenious business model that Google ends up developing of the API here that you can't really monetize until you free yourself from that data and you can for yourself from that data well there's multiple businesses so yes the certainly local advertising is the primary business model but but you're going to be hamstrung by that and I think that would just be at the time have been really hard to do as an independent company because there was no way even if you went public you couldn't raise the amount of money that companies can raise now and so they just wouldn't have the access to capital to do this. Google has run this in the red for at least ten years maybe more there's no way that they would have had the leeway to do that as a private company in that era. I mean and when I say in the red like way in the red like you think about the operational costs of driving all these vans around or paying someone else for that data which wouldn't have been as good as the data that data asset that Google has built up. Yeah and back to back to satellite for a minute in 2014 Google acquired sky box imaging which is a satellite company so Google is now owning operating and launching satellites into space to do all this could emit two thousand start up have done this all independently hard to imagine. Thank you right. All right so we move into playbook. Yep let's do it so it's been a while since we did a classic acquired episode of sort of analyzing a big company that bought a small company and then grading if that was a good use of capital or not from eight f so I went back and and cloned an old script and you know my old one said tech themes which of course we now call the playbook now because I think when we used to do this action we were just sort of obsessed with abstractly what tech themes are there here and we've we've definitely become more interested in what are the learnings from the actions that that Google took and where to took here that we can sort of extrapolate to use in future investments companies we start companies we work at and so here I have playbook formally known as tech themes. The biggest thing that I'm taking away here is that Yens saw the future that there could be a geo visualized search results page and this is an important distinction from turn by turn directions with a map it's it's if you have a rich canvas map and it's a full experience and in the future screens will get better and speeds will get better and everything you know all the technology will get better a map is actually a great platform interface for other things particularly search and I think it's important to think about that when considering startup or product ideas really sitting in the nuance of that this is not a direct competitor to map quest this has the potential to be something very different because we're going to build it in such a way where it can be so much more than what map quest is. Yeah there's two thoughts on that one you know just the power of the interface it's not just search it's not just Google Maps it's Uber it's DoorDash it's Zillow like none of these businesses would exist without without Google Maps and without this user interface paradigm. The other thing that reminds me of is I'm trying to remember who said this to me I think it might have been Kurt Delvenny back former way early days acquired a quest for venture partner at Moderna where we were all there and now had a strategy at Microsoft we're looking at a company and I remember him saying to me like it's very rare that you find an idea of product or a company or idea you think about it terms of an idea that the more you think about it the bigger it gets and this is one of those ideas like they're extremely extremely rare and they they often come you know in camouflage but when you find them that's the time to go big and and at this moment in time as we were saying there was no way to go big as an independent company the only way to really do this was part of part of Google maybe Microsoft could about them or something but but really Google was the natural fit here at this time exactly at this time yeah today if you find yourself with an idea like this well the first trick and this is actually a big part of our jobs as venture capitalist is like everybody you know might think they have an idea like this but are you really really intellectually honest with yourself and can people around you evaluate whether this truly is an idea of this category of which 99.9% of ideas are not but if you do have that today you can build it as an independent company and today you can become an enormous enormous platform even every self and I think this really is you know everything comes back to soft bank but for all the funny hijinks around soft bank and we will cover many of them in there coming we work IPO episode you know I think this is the thesis that like with ideas like this you can now fund them and build large independent companies and not have to be YouTube and sell to Google for a billion dollars it's a good point I think I remember if we talked about it on the show or not but I feel like you and I had a conversation four or five years ago and I remember having this conversation a lot and saying you know machine learning is becoming equivalent with software in the way that in the early 2000s you said we're software in the late 2000s you said we're an internet company in the early 2010s you say we're a machine learning company like it's table stakes to build a technology product especially a large scale one is to use machine learning in some way and I remember having this fear and definitely we both talked about this that startup innovation was capped because the big companies had all the data and the best products were going to be built by Google and Facebook not because they had the most money but also that but because they had the most data exactly your point for all the hijinks and criticism of soft bank it enables this this way to flank that and so it's okay yeah but what if you had half a billion dollars yeah or what if you know your door dash like what if you have like three or four billion dollars like how about that can you compete it does actually in a world where data modes have become incredibly important it does actually allow for startups to continue to have the ability to compete with these big companies yeah yeah well so this is you know at the risk of being too waxing poetic here which you could definitely accuse a salsa on a on a choir all the time but to zoom way out here I think it's really cool like we started the show in 2015 so we've been doing it for four years now and I think we've like witnessed and this show has been chronicled all the changes that have happened of exactly what we're talking about and and it's like when we started we were focused on acquisitions and acquisitions that actually went well and then acquisitions and that was you know still at that time people thought you know people were thinking about yeah you can build big independent companies course Facebook did and whatnot but like as we see these and as founders you were still like you know yeah I could build something I could get that half a billion billion dollar acquisition and the whole venture landscape was optimized around that you know most funds most quote-unquote early stage funds were in the 200 you know maybe at the outsize 500 million dollar fund size and so a billion dollar acquisition of a portfolio company that really was was meaningful but today that's really completely changed and so you see on the show it and to really dig into that like let's say you own 10% at exit that means you have a hundred million dollar return on that company if your fund size is is 200 million like ideally it's not it shouldn't be your biggest exit you should have an exit that's you know two to three exit size to really make the portfolio math start to pencil but you know but you could string together and number those and you could have you know a good fund it's been a long time since we've covered an acquisition on this show most of what we do are IPOs or just stories of great companies right because now the opportunity is to build a great company and there's so much more capital available not just from soft bank but from like Sequoia for instance which we'll talk about more on this season just raise the 12 billion dollar global growth fund so many funds new entrance all sorts of things and the goal is really find these types of ideas and build them into a really large independent standalone companies yep yep there's a few other topics I want to touch before we sort of go to grading so one is something we didn't talk about but I think was actually a really big piece of value creation for Google Maps which was Google mapmaker and Lars talks about this in a talk that he gives six seven years ago it's an old YouTube video with like 3000 views but basically in order to build out maps especially before they had all the cars driving around with cameras really operationalized they got a lot of their early data from relying on the passion of locals who I think were called Google guides or Google local guides who wanted to improve digital maps for their area because they saw this dream of oh my god like my area no matter where I am in the world should totally have a really rich robust digital map for it and they figured out this great system of appointing local guides and earning points and community leaders emerged to really build the maps for their area and it's totally the power of UGC of user generated content business models where if you can organize people to do something that benefits them I mean people are excited to use the maps but also have a little bit of street crowd around being a local guide and your vision is big enough and your vision is I want to make the world better in this way everyone should be able to digitally view a map of their area because of all the benefits that come with that you can get a crazy amount of stuff for your business for your business and in a sustainable and updatable way and for a long time and Google map maker is not a tool anymore but they still have variance of this with people in local communities updating information for them you can claim your business and update all the info on it. Another point that I wanted to make was Lars in that same talk talks about how difficult it was for them to recruit to where to it was the four of them they wanted to hire all of their engineering friends they couldn't make money from maps and I think it was even difficult to recruit once they got into Google because the canonical wisdom was there's not a business there and as we'll get into here and grading there was it was just 15 years later. Yeah well so lucky that Brett Taylor was already working on this and was the natural person to move over and help make this happen and have to imagine adding a truly excellent PM to the team of engineers like that had a lot to do with how fast they shipped and how fast they iterated. Do we want to do value creation value capture before diving into grading? Well we could probably devote a whole episode to this here you know between the wars between the platforms and the moat that Google has built because of all this and how hard it is to compete you know we talked alluded to map box which is like great and for sure has potential but like man that's a large hill to climb to compete with Google maps here and especially the ways acquisition and like I don't know in the current antitrust environment like would that have been allowed to happen probably not or at least it certainly I think would have been scrutinized a lot more than it was I mean I guess all this alongwinded way of saying I think Google maps is a perfect example to me of the kind of thing that Ben Thompson has been talking about for a couple years now of like antitrust needs to evolve in the current environment because Google maps has created so much consumer surplus it's free to use as a consumer it's incredible benefits to like so many people's lives and so many other businesses and yet because of that it has this moat where it's effectively a monopoly and it has been allowed to continue to purchase other startup competitors to it and like what does that mean for the future of innovation in the space but no doubt in my mind massively massively value creating for the world that this project exists and that this acquisition happened zero doubt the interesting thing is like it has created so much value for the world to like does that enable Google now to capture so much value going forward that it becomes a problem which is a great way to to segue into grading you know of the a lot of times the way to sort of think about value creation value capture is a fair trade is to be able to capture 10% of the value that you create for your customers you know at the very start of maps Google was capturing 0% and the question is how much are they capturing now from all this value that they're creating in the world so going into grading this is where I want to make my case the criteria that we use for grading for anybody who's joined the show in the last I don't know season and a half or something for grading acquisitions is how good of an idea was it for the big company to buy the small company like an F is they let the money on fire that it would have been better off in their bank account doing absolutely nothing or perhaps even buying a company that did less worse you know you referring to a burning black all time Warner or Nokia or you know a variety of companies and a plus is Instagram is our shining example booking dot com is a great one to of the price line group buying that you know where you spend money and it becomes an enormous enormous part of your business Instagram actually some great data that came out today thanks to some reporting by the information Facebook bought Instagram for a billion dollars and Instagram revenues were expected to surpass 10 billion dollars in 2018 after hitting one billion dollars just two years before so I mean you think about like yeah the enterprise value of Instagram is I don't know what is that one to four hundred billion dollars what is that that's over 300 percent annual growth over the last two years starting from a billion dollar base oh my goodness yeah so that's that's what an A plus looks like so let's think about this so let's start in the abstract Google's mission is to organize the world's information and make it easily searchable what maps does really is it organize the world's information geographically so it's this sort of like really really nice extension of their mission and another thing to keep in mind for context here is to remember that Google despite being in cloud computing productivity mobile operating systems making phones making laptops making home assistance and all these other bets 84 percent of the revenue for Google still comes from advertising revenue like 4 percent is Google Cloud which they just started breaking out and 12 percent is this others so when you think about Google as a business it is ads and most of the ads is search ads not this no does that include YouTube ads to I think yes the YouTube ads are included YouTube ads and maps ads are included in that 84 percent of revenue considered I guess advertising that what they don't break out is what is search advertising for I don't think that they have over and different points in time sort of alluded to it but it's not in their regular financials to break out sort of like YouTube advertising versus search advertising so advertising is still the cash cow maps one decent allegory is maps is a lot like Facebook acquiring Instagram granted maps didn't come with its own user base but you know in the sense that it lets their existing advertisers have access to more inventory and new and creative ways to reach users where they are you know YouTube is similar YouTube actually is estimated to be worth $160 billion according to Morgan Stanley estimates so David we got that we got that it is time for us to go and revisit YouTube we we analyze that business and said from as best we can tell it's still a break even business you know it's still is extremely expensive to run we just did the episode too early yeah well the funny thing is we did the episode sort of like value investors like you know what are what are the gross margins on this business and you know will it ever actually generate a profit and we should have been doing it like tech investors or like public market investors who are willing to buy these IPOs who are saying wow look how much revenue they're doing let's that's a hundred and sixty billion dollar market cap company right there within Google it's being a little facetious but you know it really speaks to the difference between trying to value a business based on what you think it's either you'd an economics or grows margins are today and what you believe that scale will be able to let that business accomplish in the future so here I'm making this case that maps is kind of like YouTube which is kind of like Facebook buying Instagram which is take your existing advertisers give them a new way to reach existing customers in a new inventory format that's valuable so you know what of the equity researchers sort of think that Google maps is doing as a business bear equity research has estimated that in 2016 maps could do 1.5 billion in revenue and then in 2017 they estimated that as soon as 2020 maps could do 5 billion in revenue and you really start to see you know this business emerging where people are using Google maps as a place to go for search and it's a different kind of search it's not what lawnmower should I buy I mean that's all happening over on Amazon but they're really using it for I need to find something around me and they're very open to suggestions I mean last year Google launched or I think two years ago they launched promoted pins on Google maps they just issued a change in the last six months that sort of made those larger and more prominent but they're really starting to think about using the Google maps surface much like the search results surface and I think that total a side here feature a request for any Google maps folks who are listening right now so I still use four square for restaurant bar cafe discovery I think you're weird in that man I well okay but here's why so for Google maps folks who are listening I hate the five star rating system of both Yelp and Google maps I think it's completely useless and doesn't give me any actual information four square has a 10.0 rating system and so when I run a search on four square they have two features one that you can use your finger to draw a geofensive where you want to search I still don't think you can do that on Google maps like for me like I'm looking for a restaurant in a very specific area that is not a rectangle that I can get to with maps to the ability to differentiate between quality at that 10.0 granular level is super important to me because everything's a four star and that just means like I want to know and what I can tell four squares show me ranked on a 10.0 scale within this very specific geofence area that I've drawn what the best cafes are and then I can like that is much more useful information to me than the current way you can search for such things on Google maps. It's a great feature request and actually I looked up last night to see what's Yelp do in revenue last year they did about a billion dollars I mean that could also be Google's revenue like I could see a world where Google maps continues to get better and better they encourage people to do more and more local searches there they control the operating system so they could get a little bit more heavy handed for how most people are at least 50% of America most of the world begin to look for things in the real world it seems very plausible to me that there's five 10 billion dollars of advertising revenue that Google could see come from the mapping product and if if you're looking at it that way I mean it could well be as big as an advertising platform as Instagram is. Yeah, yeah. Then you have the API licensing and I haven't dug into the finances there but it's tough. What you can do the new pricing is $7 per thousand requests. So it's a $7 effectively CPM so any app that wants to so door dash is paying $7 per thousand time someone looks at a map and there are five million customers with API keys for Google maps and so tough to quite understand how much of the Google maps business is attributable to the API versus search ads but the potential is there. Yep, for sure. For sure. So when I look at this versus ways you know let's say that this acquisition just to put a number in the air is where two was maybe $10, $20 million. Ways was a billion dollars. You look at the revenue potential from maps and probably what they're doing now being single digit billions maybe in the next couple of years getting to five billion. It's a much better revenue business. There were generally a lot more revenue from Google maps than they are from ways and they paid a heck of a lot less for it. Now of course the amount of the billions of dollars they've poured into building the asset over time. That's actually I think the right way to sort of analyze this but just from the acquisition itself paid way less to buy the company and seeing significantly more upside than ways. In this case it's truly warranted to say the financial aspect is only one part of grading here and probably not even the most important because it's everything we've been talking about. This is fundamental infrastructure for so many of the internet and beyond the internet going forward as you think about autonomous vehicles if and when they should ever become mainstream. That this asset is so so valuable and they bought it for you know so we know it was $37 million for zip dash and keyhole and say another. It's more silly. They've probably spent billions of dollars. They've spent billions of dollars. But as we talked about if they hadn't bought these companies I don't think it would have bubbled up internally. Certainly not as fast to be working on these things and the most that they have you know we can back one of just no burns pieces called Google Maps mode. The mode is so wide at this point they have years and years of advantages over any other competitor and that gap keeps getting getting bigger. It's funny you mentioned self-driving cars because I think if we had done this episode a couple years ago I would have been more inclined to grade on how helpful has it been to self-driving cars but in spinning waymo out and that market developing slower than we all sort of thought it might have thought. Yeah and it feeling like Google is not necessarily a clear winner there. But I think the best of the value that Google Maps is going to provide is coming from self-driving cars in the next five years. That may be true but what's interesting though is like to me it comes back to the API. Forget self-driving cars. What about Uber? What about Zillow? How many more businesses are going to be built on the Google Maps API? I don't think we're done yet. No I think you're totally right. This is an A for me. Yeah. Well I think the yeah for me too the question is is it an A plus? I mean with Instagram it's like they have on every dimension strategic asset base and financial returns it's a knack it out of the park. The reason why I think this is an A and not an A plus and you just compare it to Instagram is Instagram is a pure tech business. Like they've built an incredibly asset light thing that's pretty. I'm going to say easy to maintain even though there's tons of people working on it. But basically like super high fixed costs almost no variable costs and except for like cost of revenue to go and acquire the advertisers that are that are putting the ads on it. But crazy high gross margin business when you look at this the maintenance costs of keeping the maps up to date to adding the expected functionality to doing all this stuff in the physical world it's it's meaningfully higher. I'm with you. So there so our only A plus is remain Instagram and next. I think booking was was booking an A plus or an A if it wasn't we were wrong. Okay we're either actual greeting or revised greeting the A plus pantheon is next Instagram and booking. Yeah maps doesn't quite make it but it's very close doesn't quite make it and we'll see you over the next few years too I think it could I think it could emerge the two big takeaways are one it's fundamental structure to the internet as we know it today that they're going to monetize through charging for that API and two it's an ever increasingly common basically new search page and Google makes all their money on the search page. Yep there we go very compelling argument we want to do a bit of follow up. Yeah so I messed something up on the Shopify episode that I wanted to talk about that was our last episode not including the quick take that we did on DoorDash and that was Shopify actually powered 41 billion dollars of sales last year not 14 billion as discussed toward the end of the episode that 14 billion number that we talked about was the fourth quarter number so I guess we way discredited the incredible amount of commerce that that Shopify powers so well this changes the analysis of the value captured that we did at the end of the episode where Shopify actually only captures two and a half percent of the merchant sales as their own revenue not the 7 percent which admittedly is very different I don't think it changes the overall sentiment that we had on the company as as discussed in the episode any thoughts on that David. The only thing I'd add especially given this episode and the just what we've talked about the platform that Google Maps has built and the ability for power of companies to be built on that platform I'm starting to think Shopify actually is a similar opportunity that you could think about like I think you might be able to build really big companies that use Shopify and Shopify's customers as a platform and in particular Shopify fulfillment that was just launched which is not them doing their own fulfillment it is it is a wide open door for new logistics and fulfillment providers to come in and serve all of Shopify's customers with a very easy distribution channel and customer acquisition so I'm even more bullish on Shopify's potential as a platform. Yep very much agree and interestingly that's predicated on there being a huge total addressable market out there because if you think about this so Shopify I mean it's not a marketplace business so it's not a take rate but if you think about it this way they capture two and a half percent of the value that they create as their own revenue if you think about Uber Uber captures close to 30% of the value that they create as revenue for themselves in the form of a take rate that's marketplace a sign where the platform itself is doing a lot of the work if you look at a you know Airbnb marketplace assist you know what the take rate there is David. It's about 14% or at least historically on average. So less of the value is sort of being provided by the platform than Uber because Uber actually assigns you someone when you bring supply to demand you're entitled to take much more of the economics than if you just provide a platform and then say to someone go find all your own customers and I think that that was sort of an interesting take away from me in analyzing the percentage of total value they're capturing. Yeah well it comes back to the end of the shop by episode which we talked about of it's not a network effect business although they're not perfect aspects to it's platform and it's Bill Gates definition of a platform is you are capturing far far less of the value than you are creating and what's cool about platforms like Google Maps is they provide a wide open opportunity for businesses to be built on top of them and especially marketplace businesses. So if you're building a marketplace business on Shopify or anything resembling a marketplace business please come and talk to me. Carbouts? Carbouts. I'm going to do a mash up of one of your recent carbouts which is the expanse. I started reading not yet watching the TV show I want to read the books I started reading the books of the expanse and series they are so good so so good I finished the first one I'm in the second one I think there are maybe nine in total so it's going to keep me occupied for a while but really really great stories. I heard the books are great I did the least thing and watch the TV show it's good. It's good. Books or TV show take your pick great great sci fi stories. Yeah David as you alluded to early in the episode I've been doing a lot of running recently I ran my first marathon on Sunday this past weekend and that means that I've listened to a lot of podcasts in my training I always thought I'll never listen to podcasts when I run like I need something I need music I need that to be a lot of like fast and motivating and I can't like not focus on the running it turns out like when you're doing lots and lots of miles having a distraction is actually pretty nice and being able to not focus on the steps is quite nice so one of the episodes that I listened to during the marathon was an episode of the moment with Brian Coppelman who you may remember me raving about is the one of the co-creators of billions on a previous carvout so he did a lot of the work that I did on the last day of the marathon. I was really excited about the podcast. The podcast itself is very cool because he talks to people from all walks of life but really dives into creativity creative process. It's like lightweight cycle analysis but it's a lot of making the unique work that someone does often in a very archaic way understandable and digestible to a broad audience and that's very similar to what he did billions it's very similar to what he did in rounders and recent and it's really fun to for listeners to this show for myself or David we listen to people talk about tech and venture capital and building big companies within our own circles a lot and we get to hear it discussed it a very mic exactly exactly we all know what the terminology means every there's lots of expectations that we all sort of have there's lots of things that you can look over to another person and know that they have the same fundamental basic assumptions that you do. Brian's show is not like that and so it's very cool hearing Mark Andreessen explain venture capital to not you know people who probably have never come in contact with it. It's just a really cool and a different perspective on it I think. Super cool. I have to listen to that. Yeah. Alright that brings us home listeners if you aren't subscribed and you like what you hear you should click the subscribe button in the podcast player of your choice and if you want to become a limited partner subscribing gets you access to our bonus show where as I mentioned earlier we dive deeper into the nitty gritty of actually building companies rather than you know what we're doing on this show which is reflecting on sort of where they ended up. So if you are in the process of building company in any way shape or form we'd love to have you join us and listen you can click the link in the show notes or go to glow.fm slash required and all new listeners get a free seven day trial. So with that we will see you next time. See you next time.