GOOGLE first showed up on the radar screens of those beyond its circle of devotees in 1999, when it received $25m (£15.6m) in venture-capital funding.

But for a long time, even after its brand became well known and the search engine was cranking out millions of responses free of charge to computer users around the world, the company struggled to generate cash. With the notable exception of two companies, Red Hat and Netscape, nobody was willing to pay for the right to license the Google search engine.

In that first year after Kleiner Perkins and Sequoia Capital invested in the firm, it looked as if the sceptics who said they had wasted a huge sum of money might be proved correct.

“The original business idea was aimed at licensing the underlying search-engine technology to a variety of other internet companies and enterprises,” said Sequoia’s Michael Moritz. “During the first year we were concerned that the market we were pursuing was more difficult and more intractable than we had anticipated.

“The negotiations with potential customers were protracted,” Moritz went on. “There was a fair amount of competition, and we didn’t have a direct sales force. The customers were very harsh on the prices they were prepared to pay. It was clear that if we were going to pursue that path, it was going to be a brutal path.”

Although Google was averaging 7m searches a day by the end of 1999, its revenue from licensing deals remained small. The Google founders Sergey Brin and Larry Page didn’t care about getting rich, but they didn’t want Google to flounder. If the business could not sustain itself, they would not be able to fulfil their vision of making all the world’s information easily available to users without charge.

The duo wondered how best to navigate this maze. Anything that compromised the relationship of trust they had with their users would be unacceptable to them, even if it generated a lot of money for Google. They were uncertain about advertising, and had included a strongly worded statement on the subject in a 1998 paper they published on Google technology.

Ad-funded search engines are “inherently biased towards the advertisers”, they wrote, suggesting that “the better the search engine is, the fewer advertisements will be needed for consumers to find what they want”.

At the same time, advertising was a type of information that some users might want. Perhaps not all ads would violate the Don’t Be Evil motto that Brin and Page had adopted for their company.

Yahoo, the giant internet site, was dependent on ads. It saw search as a sideline feature that it contracted out. When it came to search, Yahoo’s manually edited, categorised directories couldn’t keep up with the mushrooming web, and the directories became less valuable. To address that problem, Yahoo relied on other firms, such as Inktomi, to crawl the web as an unbranded search engine and augment the results Yahoo served up to users.

Microsoft, for its part, didn’t see consumer search as a big business opportunity and invested in numerous other areas. Both Microsoft’s MSN division and America Online were relying on third parties to provide them with unbranded search results.

Page and Brin seized the opportunity to hire bright technologists and focused on doing one thing: search. Google’s revenue might not be growing rapidly, but its employee brainpower was. Instead of paying these engineers big salaries, Google offered them mediocre pay and thousands of stock options that might prove valuable some day if the company prospered. This was the typical Silicon Valley bet that bright engineers made.

Brin and Page, who interviewed every prospective employee themselves, had their pick of talent, since they were hiring while everyone else was firing. It also helped that Google was a private company during the technology bust. For all the pressure mounting on Google because of its lack of revenue, it was nothing compared with the angst at publicly held companies that had sold stock to investors at high prices only to find that having a dotcom name was not enough to guarantee survival.

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