Earlier today, I spent a delightful hour with Vinnie Mirchandani, a well respected analyst in the enterprise software industry, mostly because he knows how to figure out the impact of big technological trends on software. Accompanying him was George Gilbert, formerly an enterprise software analyst with Credit Suisse First Boston, a Wall Street firm.

While the conversation flitted from topic to topic, the main question they asked me was this: Can innovation survive against the backdrop of a broadband duopoly? Can we innovate when the plumbing of the network is controlled by only a handful of players, even when it comes to selling connections to corporations? Those are the very same questions that I have raised on numerous occasions, and you very well know that I am quite alarmed by new impositions such as silly bandwidth caps and attempts to do away with Net Neutrality.

The answer to that question isn’t that simple. However, as I told Vinnie, the incumbents are fighting a losing battle. It is obvious that Comcast’s 250 GB cap is a blatant attempt by the cable company to save its own video-on-demand franchise. It wants to make sure that video watchers buy video from Comcast (CMSCA), instead of Netflix (FLIX), Apple (APPL) or anyone else.

But Comcast has an indefensible position. Why? Because the innovators are going to figure out a way to beat those caps. Take Roku, which is making a special video player for Netflix. Tim Twerdhal, Roku’s VP of consumer products, told Chris Albrecht over on NewTeeVee, “We’ll be introducing same visual quality at lower bitrates in the future…There are lots of things going on with codecs and bitrates that make caps not as relevant as they may appear to be.” What will Comcast or any other incumbent do then? Lower their bandwidth caps even further? In all likelihood that is how they are going to react — a futile exercise, in my opinion.

Of course, you might have an entirely different opinion on the question. Will incumbents stifle innovation? Care to share with me?

It is not clear how old Google is - some argue that world’s largest search engine operator is 13 - after all it operated in stealth for about 3 years before launching in September 1998. Many major news organizations are going with September 2008 as the tenth anniversary so I am going to play along. Forbes.com even asked the question, Has Google Changed The World? from many well known people. For some odd reason they decided to seek my thoughts.

Gandhi changed the world. The steam engine changed the world. Heart transplants changed the world. The Internet changed the world. Google simply made a small (albeit important) contribution toward making Internet a better experience for all of us.

Google’s (s GOOG) contributions are still worthy of praise. It is no longer impossible to find relevant information on the fast-growing Internet. I remember tearing my hair out looking for relevant information. Today it is as simple as acting on our impulse to seek that knowledge–and that has infinitely changed the way we interact with the machines.

The article triggered a chain reaction and a trip down the memory lane. I had been a Google-addict for a while and loved its simple elegance over rivals such as AltaVista and Inktomi-powered searches. I had talked to the company earlier, but I didn’t meet the Stanford duo in person up until September 1999. The company had just raised about $25 million in venture money.

“I have never paid more money for so little a stake in a startup,” John Doerr of Kleiner Perkins Caufield & Byers was heard saying. Good thing he did - for he paid next to nothing for what could arguably be the Internet-equivalent of Alaskan oil and gas fields.

Larry Page & Sergey Brin had stopped by at the Forbes.com offices and we talked at length about the company. It ultimately resulted in this feature, How Google Is That? Larry still had the same disastrous haircut he supports today. Brin was measured and logical as always in his responses. They thankfully made no meaningless and “do-no-evil” hypocritical statements. They were just two guys out to change the world. I remember getting along with them famously, but never saw or talked to them since, though I have been to many Google press events.

Then & Now: You’ve come a long way baby

The company was 12-months old. They had just come up with their version of contextual-text advertisng system. They had 40 employees, were looking for an inhouse chef, and were doing about 4 million page views a day and about 4 million searches a day. That’s 45 searches per second. No one in the company owned a glider, though their venture backers had their own private planes. The company was housed in 165 University Avenue in Palo Alto and the co-founders were single.

In July 2008, Google registered 7.23 billion searches - about 242 million a day. That works out to about 4 10 million searches in an hour or over 1100 2772 searches per second. (Funny, it turned out to be much bigger than the market estimates used by Google.) It had sales of $5.4 billion in the second quarter of 2008 alone. It now employs over 19,000 people. Larry and Sergey are billionaires and own a Boeing 767 & a Boeing 757. They are both married. The company has offices in multiple locations and data centers that are sprinkled around the globe.

After meeting with them and discussing the merits of search-only approach versus portals, I came to this conclusion: “Perhaps the other Stanford duo, Yahoo! cofounders David Filo and Jerry Yang, should be a little concerned–their media ambitions have superseded their customers’ desire for a really smart search engine.” In hindsight, I am surprised I was able to get away with making that statement and my editor didn’t catch what clearly was an opinion - a no-no in the non-blog mediascape. After all, it seemed so stupid to suggest that because Yahoo (s YHOO) had 240 million page views a day and was literally printing money.

Brin tried to convince me that the text-based contextual advertising (first popularized by LinkExchange, a company that was bought by Microsoft) was their way of making money. “Banners are not working and clickthrough rates are falling, I think highly focused ads are the answer,” Brin said, and pointed out that Google would be in black in 24 months. By 2001, I could have kicked myself for doubting the kid!

Why did they win?

Fast forward 9 years, and most of Google’s competitors have gone to the great technology graveyard, nary a tombstone. Simpli.com, Dogpile, Direct Hit and Northern Light were all part of the new search engines that were taking on the incumbents like Yahoo, Lycos and HotBot and wanted to make web searches simpler and more accurate.

“Google is essentially trying to categorize and catalog the web. We have a very different product and a different approach,” Jeffrey Stibel, cofounder and CEO of then Providence, R.I.-based Simpli.com told me for the Forbes.com story. He was taking a more exotic linguistic approach to search. It is now owned by Valueclick, an ad-network.

In comparison, Google’s analysis of the link structure of the World Wide Web and large-scale data mining and ability to ranks a page against similar pages turned out to be the right approach. Was it just the algorithm and a better monetization scheme? Was it a right solution at the right time? I think it was a bit of all that - but most importantly, it was a farsighted approach to infrastructure and the network.

It’s the infrastructure stupid.

This was the critical difference - I wrote about it recently - between winning and losing. I was reminded of this by an old PowerPoint presentation. They talked about using commodity compute infrastructure to out muscle everyone and doing analysis of the web like it has never been done before. It seems so obvious today - but back then it was an idea ahead of its time. The impact of pizza box servers was yet to be seen, and companies like Cobalt Networks (sold to Sun Microsystems for $1 2.4 billion) were selling early versions of Linux-powered thin servers, but they were not cheap by any means.

Many on Wall Street question why Google spends so much money on infrastructure. The question is why not - after all every millisecond of performance means more searches and more searches mean more advertising. More infrastructure means more crawling, more indexing and better results. I think that slide reminds us of the fact that infrastructure-as-an-advantage is in the DNA of Google. And that is unlikely to change - and that is why world’s smartest engineers and computer scientists still want to work there.

History has made a genius out of all who bet on Larry and Sergey - the investors, the employees, journalists who were enthralled by their story. In reality to those who built Google, it was the only option.

Tomorrow: What You, Me & Corporations Can Learn From Google

This week, Lookery, the ad network launched last July to serve über-cheap ads into Facebook applications, has announced a new $2.25 million round of funding. It’s a nice sum for the 14-month-old startup, which now sends Facebook some 3 billion ads a month, according to Lookery’s CEO, Scott Rafer.

But here’s what’s really interesting: Rafer and his cofounder, David Cancel, elected to raise the money almost entirely from angels, forgoing the traditional venture capital most companies would pursue at this stage. This is Lookery’s second funding event. In January, it raised a $1 million note, which converts to equity given in this deal.

The participant list is heady, including Salesforce.com founder Marc Benioff; Reed Hundt; Tickle founders James Currier and Stan Chudnovsky; and About.com’s Scott Kurnit. There are some notable VCs in the deal, too, but they’re participating individually, not with their firms: Ted Dintersmith, late of Charles River Ventures; Ravi Mhatre of Lightspeed; and Allen Morgan, of the Mayfield Fund, who is also a Lookery director.

Serial founders with good track records, Rafer (MyBlogLog) and Cancel (Compete.com) could have gone after marquee venture firms if they’d want to, but the pair has specific reasons for favoring angels. After the jump, Rafer explains why other founders ought to consider doing the same.

Lookery’s 5 Reasons to Go All Angel

1) Focus. Angels can concentrate on the individual strategy of your company, rather than the larger portfolio management strategy a VC must bear in mind (e.g. How deep are my fund reserves? How fast must I spend them?), most of which don’t apply to your company. “Founders want their startups managed as sovereign entities, not as portfolio segments, “ Rafer says.

2) Fewer confusing ownership terms. Angels don’t get the level of liquidation preferences VCs demand. Angels like convertible notes and often get what Rafer calls “thin preferreds,” but you’re unlikely to suffer the dreaded participating preferreds. Without a multi-tiered equity structure, every investor, including founders, gets paid in proportion to what they put in.

3) You will control negotiations on future funding rounds. You’re less likely to have a “dissonant chorus of voices between the common shareholders and preferred shareholders, each at the table and wrestling in a different direction” over the terms of the new round, Rafer says.

4) Transaction control. If a good purchase offer comes your way, you’ll get to decide when to sell. You won’t have to seek permission from investors who aren’t on your board or worry about what a VC needs to have happen vis á vis managing his limited partners. Chances are you’re not an LP, so why should you care? Angels have no LPs, so their agendas tend to be far more transparent.

5) Angels aren’t compensated in ratios. Angels get 100 percent of the profit they generate with their investment in your company. A VC only gets a fraction of the “carry” generated on your deal. This is one reason a VC might be motivated to urge you to sell bigger; they need the numerator in the exit math ratio to be bigger, or the denominator to be smaller, to maximize their piece of your deal. With an IRR compensation method, VCs get paid even more if you sell faster. But the thing to remember is that a VC is negotiating for the interests of others, not just himself. With angels, “it’s a merit-based discussion, or at least much more so, because the angel is actually getting the entire return,” Rafer says.