Authors: Ken Auletta
Tags: #Industries, #Computer Industry, #Business & Economics
Googled (32 page)
For Google, Android represented a perfect storm—its idealistic desire to promote an open, more democratic system meshed with its business interests. The more people who had access to the Internet, the more Google searches or Google Maps would be used, and the more data collected. And those using the Android operating system for mobile phones might also use it for their laptops, allowing Google to charge for this software or share in the mobile ad revenues.
There was another issue to be addressed with mobile phones: spectrum space. All radio frequencies—whether for cell phone calls, broadcast television or radio signals, or other wireless devices—travel over spectrum space that is assigned and regulated by the Federal Communications Commission. Google lobbied to ensure that the new wireless space would be open and not controlled by just a few telephone giants. Ivan Seidenberg, the CEO of Verizon, disputed Google’s contention that his was a closed system: “Since we think we have the most reliable network, we’ll publish standards and let people connect to any device they want to.” The FCC sided with Google, and in July 2007 ruled that the telephone companies could not control what applications were used on this new spectrum. Soon after the FCC announcement, Google raised the stakes by threatening to bid in the January 2008 spectrum auction, establishing itself as a telephone company.
Google had no intention of providing telephone service or producing hardware for a Google phone. They would not say this publicly, however, because by fanning speculation—and the speculation was incendiary—they kept people guessing and increased their leverage over the wireless telephone companies. They also brought themselves closer to achieving three objectives: to make Google programs, including such new features as voice search, work on wireless devices; to reduce the cost of mobile phone service and Internet connections by allowing advertisers to subsidize them; and to extend to mobile devices the company’s dominance in online advertising. Google believes that ads on mobile devices could fetch premium prices. With GPS positioning married to Google’s immense database, an advertiser could know who purchased cashmere sweaters or golf clubs and if a consumer was outside a store that had a special sale on, an alert could appear on the mobile screen informing her. Because this would be what advertisers and Google excitedly describe as “a service” or “information” rather than a traditional ad, the hope was that consumers wouldn’t be annoyed by these intrusions. In November 2007, Google announced that it was working with thirty-three corporate partners, including T-Mobile, Samsung, Intel, and eBay, to launch Android as a free operating system.
In the auction, few companies could match the financial bids made by the giant telephone companies. Google could, though, and to enter the mobile phone business and ensure that Android would work seamlessly, they needed to. But Google didn’t want to become a telephone company. So it made a let‘s-hope-we-lose floor bid of $4.6 billion for a block of wireless spectrum, conditioned on the FCC’s agreement to guarantee that the winner of the auction open its hardware and services to third parties.
Of course, Google’s mobile phone ambitions would collide with powerful telephone companies and with Nokia, the world’s number one mobile phone manufacturer. They were allied in fear that their business model was under assault. They worried that their dominance would be diminished. Who would receive the advertising revenues? Who would claim ownership of the valuable data generated? Would their own hardware be cloned, like PCs? “Now that they want to dominate the planet on phone calls,” Seidenberg said of Google, “they’ve provoked the bear.”
Neither Seidenberg nor representatives from AT&T or Nokia joined in Google’s November announcement of the first truly open mobile operating system. A traditional Google corporate ally, Steve Jobs, also did not join because Apple’s iPhone provides a mobile operating system, one less open than Google’s. This was a little clumsy, because half of Apple’s eight directors serve as Google directors or advisers, among them Eric Schmidt, Bill Campbell, and Al Gore. At Apple board meetings, Schmidt told me he now recused himself from mobile phone discussions.
In the auction, that commenced in January, all bidders were instructed not to reveal their bids. When it was over, Verizon and AT&T had won, paying a total of $16.2 billion for two wide swatches of spectrum. In an April “all hands” meeting with Google employees, either attending or on a video hookup, Schmidt confessed, “We had the very good fortune of entering the spectrum auction for $4.6 billion, and not winning. We sweated it out!” Both Verizon and AT&T would pledge to open their networks. AT&T announced that it would sell phones with Google’s Android system, and Verizon announced that it was open to consider any Android prototype. (By the summer of 2009, Verizon had yet to submit an Android application; nor had any phone company, save T-Mobile.) One former federal official was cynical about what he called Google’s “fake bid.” He believed Google had a sweetheart deal with Verizon, that the telephone company knew all along Google would not make escalating bids and that all Google really wanted was assurance that Verizon would open its system to Android. He was dubious that Verizon’s system would be open for anyone but Google.
BY THE SPRING OF 2008, Google was buoyant. Rejecting the one-trick pony charge, Schmidt said that with mobile phones, plus search, plus its array of software products, and YouTube, he explained why it was conceivable that Google could become the first media company to generate one hundred billion dollars in revenues. He described to me “a planning process where we said, is it mathematically possible for Google to become a hundred-billion-dollar corporation? And not over any particular period of time, just, is it possible, are the markets big enough?” He estimated the annual worldwide advertising market as “somewhere between seven hundred billion and a trillion dollars. Is it possible for Google to become ten percent of that? And the answer is yes, over a long enough period of time.”
How?
“First place, you’re not going to get there with small little advertising deals. You need these big initiatives ... the number one big one right in front of us is television. Big market, well monetized, easily automatable. Second one is ... mobile.” The third was “enterprise,” by which he meant web-based services—“cloud computing”—offering various software applications and IT services for corporate customers, organizations, and individual consumers.
Brave words, but throughout 2008 Schmidt’s company made no money from its mobile or YouTube or cloud-computing efforts. Google did not let up. It was still talking to cable companies, Schmidt said, about partnering to target advertising for cable’s digital set-top boxes, and for Android to become the operating system for cable mobile phones—should cable decide to enter the thriving wireless market. Google joined with cable companies, Intel, and wireless providers, such as Sprint Nextel Corporation, to invest a total of $3.2 billion in WiMAX, a technology promising faster wireless connections to the Internet than those offered by Verizon and AT&T.
Jeffrey L. Bewkes, the CEO of Time Warner, acknowledged his company’s discussions with Google and laid out the reasons they had not yet been resolved and might not be. On the one hand, he said, unabashedly, if the cable companies could get together they would have “a Google-type ability to do targeted digital advertising.” Google, he said, “has the search data and the cookies through its searches. But the cable companies not only have that, they have everything that you do on your cable broadband connection, they’ve got everything you’ve signed on and saw. And they have everything you watched on television. And they’ve got their customer’s name and credit card information.” On the other hand, he sighed, the cable companies have a difficult time acting in concert, and the data is useful only if they aggregate it. That’s where Google has the advantage. It is willing to organize cable companies’ data, combine it with its own, and extend it to all mobile devices. Which begs another question, he said: Who owns the data, the cable company or Google? And if the cable companies let Google in the door and grant them access to its data, “you can never build an alternative because Google’s will always be that much more efficient.”
Cloud computing was another new Google initiative. Like other corporate giants with massive data centers and servers—IBM, Amazon, Oracle—Google was intent on launching its “cloud” of servers. The cloud would allow a user to access data stored in the Google server from anywhere; it would reduce corporate costs because companies could outsource their data centers; and it would subvert more expensive boxed software sold by Microsoft and spur the development of inexpensive netbooks whose applications are stored in the cloud. Because all these software applications can function on a browser, escaping the dominance of Microsoft’s operating system, in the future, said Christophe Bisciglia, the twenty-eight-year-old chief of cloud computing, “The browser becomes the operating system. Applications have outpaced browsers, which is why we did it”—introduced a Google browser in 2008.
While cloud computing offered consumers portability, it potentially offered them less control. Just as a consumer loses access to the Internet every time a broadband connection is down—for instance, when YouTube was silenced for several hours on February 24, 2008, when the government of Pakistan tried to block a YouTube video critical of Islam and wound up shutting down the worldwide video service, or when Gmail’s one hundred million users were disrupted for just over three hours exactly one year later, on February 24, 2009, or when Google search and Gmail went dark for an hour on May 14, 2009. “We’re sometimes going to have problems,” Bisciglia admitted, “just as we do when our hard drive crashes.”
And what is the business plan?
“The more people on the Internet, the more clicks our ads get,” Bisciglia said.
While these aggressive Google efforts resemble those of other corporations’ always angling to continually grow profits, they were also reminders of the “Don’t be evil” idealism that animated the company. In its annual letter to shareholders released on the last day of 2007, Google announced it was entering the energy sector, investing tens of millions of dollars in new technologies with the goal of making renewable energy cheaper than coal-fired plants. “If we are successful,” the founders declared, “we will not only help the world, but also make substantial profits.” Their profits would rise because the energy costs to operate Google’s data centers would fall. They acknowledged that solar power is “more expensive,” yet vow to use it to power a third of the Googleplex and to subsidize it for seven years. Consistent with their fervor to spare the environment, Page and Brin made personal investments in Tesla Motors, a Valley company intent on producing an electric sports car.
They established a philanthropic arm,
Google.org
, and recruited an esteemed epidemiologist and world health expert, Dr. Larry Brilliant, to run it. They pledged to divert to this foundation one percent of Google’s profits, with three goals: to ascertain the quality of water and health care and other services country by country; to gather enough information to try to predict and prevent catastrophes, whether these be forces of nature or disease; and to make energy-renewable investments. Page and Brin sound more like social workers than hardheaded businessmen when they extol Google Earth as a vehicle to spot imminent disasters and offer to make “a gift” of this technology to disaster relief organizations. Google put up thirty million dollars to fund the X Prize Foundation’s Google Lunar X Prize, which would be awarded to the private team that designs the best robotic rover to traverse the moon’s surface and send high definition video images back to earth.
Google.org
, and recruited an esteemed epidemiologist and world health expert, Dr. Larry Brilliant, to run it. They pledged to divert to this foundation one percent of Google’s profits, with three goals: to ascertain the quality of water and health care and other services country by country; to gather enough information to try to predict and prevent catastrophes, whether these be forces of nature or disease; and to make energy-renewable investments. Page and Brin sound more like social workers than hardheaded businessmen when they extol Google Earth as a vehicle to spot imminent disasters and offer to make “a gift” of this technology to disaster relief organizations. Google put up thirty million dollars to fund the X Prize Foundation’s Google Lunar X Prize, which would be awarded to the private team that designs the best robotic rover to traverse the moon’s surface and send high definition video images back to earth.
Google also launched Google Health, an effort much like the one announced by Microsoft and by AOL cofounder Steve Case’s Revolution Health Group LLC. Each aimed to give citizens a safe place to store health records online and share them with doctors, and search for the best medical advice online. Google recruited Dr. Roni Zeiger, a primary care physician who returned to Stanford for an advanced degree in medical informatics, hoping to devise ways to democratize medical information. He joined Google in January 2006, after a typically rigorous interview. “They asked for my high school grades!” Zeiger laughed. He was dead serious about his mission. “Google gets more health questions than anyone on the planet,” he said. Zeiger realized that “Google’s skills could help people organize their own health information.” He vowed, “We’ll never sell anyone’s health records.” And in a March 2008 speech, Eric Schmidt promised to keep the site free of all advertising.
There is a shared, and perhaps blinding, belief on the Google campus that Google was altruistic, an attitude reflected in “Don’t be evil.” On a stage he shared with Page at the Global Philanthropy Forum after Google embraced the slogan, Brin declared that ‘“don’t be evil’ serves as a reminder to our employees,” but it “was a mistake. It should really say, ’Be Good.‘”
One can interpret Brin’s remarks as a reflection of his idealism, or his naïveté—or both. To simply say a corporation should be good ignores the range of choices a company is compelled to make in conducting its business. How “good” was Google when it complied with German laws not to disseminate Nazi literature? Google’s searches were following German law, which is good. It was censoring search results, which is bad. When in 2008 Google closed its Phoenix office and laid off a handful of employees because the company did not believe the office was essential, it was being good to shareholders. But those employees most certainly did not see Google’s action as good.
Other books
My Last - Riley & Chelle by Melanie Shawn
Sweet Love (The Sweet Series Book 1) by K. C. Lynn
You'll Always Be Mine by Verne, Lara
Mob Rules by Cameron Haley
Range of Ghosts by Elizabeth Bear
Brainrush 04 - Everlast 01: Everlast by Bard, Richard
Sheer Blue Bliss by Lesley Glaister
Denton Little's Deathdate by Lance Rubin