Not feeling so lucky?
A recent Wall Street Journal article provided a rundown of Google’s increasingly frugal philosophy, as it ratchets down its legendary frenzied hiring practices and even its lesser-known expenses, like paying to open numerous offices in college towns and other unorthodox locations. Other recent reports have revealed Google’s decision to cut 10,000 contract workers and reduce dining hours at its well-known free in-company cafeteria.
Even more interestingly, Google seems to be backing away from its legendary willingness to let employees pursue pet projects on company time. Now the company is focusing that strategy in a more streamlined and disciplined manner, by putting less promising projects on the back burner until better times.
The apparent chaos at the company has been one of my pet peeves about Google’s business over the years. Sure, innovation is fantastic, and taking smart risks can make great companies. But Google has too often launched projects that have been extremely difficult to monetize, if they even made any sense at all.
Online advertising, particularly in search, remains Google’s bread and butter. No problem there. But some of its launches have seemed to merely copycat other companies’ products. Google’s delivered a poke in the eye to Yahoo! (Nasdaq: YHOO), Time Warner’s (NYSE: TWX) AOL, and Microsoft (Nasdaq: MSFT) many times, with products such as Gmail, Google Docs, and Chrome. But it’s become harder to justify such projects when their ability to make any money is increasingly in doubt.
Google has also acquired countless small start-up companies, often with little obvious rhyme or reason. Again, it’s been unclear what kind of financial return — if any — those grabs have offered.
Growth vs. growing up
Google has always displayed a fair share of youthful hubris. In its IPO filing, it included a letter — inspired by Warren Buffett’s communications for Berkshire Hathaway’s (NYSE: BRK-A) (NYSE: BRK-B) annual reports — that pretty much addressed the company’s spending habits and told potential shareholders they could like it or leave it. Some tidbits from that document: “We will not hesitate to place major bets on promising new opportunities.” And: “Do not be surprised if we place smaller bets in areas that seem very speculative or even strange.”
There have been a lot of those “bets” going on, including the purchase of almost too many small companies to count. In 2007, I lifted an eyebrow when Google took a stake in 23andMe, an early-stage biotech company that just happened to be co-founded by Sergey Brin’s new bride.
But it’s possible that the company is starting to show signs of maturity. Its recent innovative worker-swap initiative with Procter & Gamble (NYSE: PG) shows that Google may be ditching some hubris and acknowledging that there are things to learn from other organizations.
Is Google really growing up?
A lean, mean Google machine?
Over the years of Google’s existence as a publicly traded company, I’ve become bearish on its pricey stock, not to mention on the media adulation and hype that seemed to follow its every move. For a while, I was excited like everybody else. But the constant hoopla got a little old after a while, especially if you started to ask, “But where’s the money in that new initiative?”
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