The Google Guys (25 page)

Larry and Sergey will continue to jump on the latest trends, try to pioneer new products that leverage Google's strength in the search engine sphere, spend billions of dollars on acquisitions to broaden their reach, and pour millions of dollars into Internet technology in order to catalyze faster growth of the medium.

In fact, despite what its executives may say, Google is no longer just a search company; it's an Internet software company. Larry and Sergey are on a grand quest to provide software for every device that connects to the Internet. Google is, in short, the Microsoft of the Internet generation.

Despite a popular view that Google isn't as innovative as it once was, it has already established itself in many fields of technology that are being transformed by the Internet: web browsers, e-mail, online maps, blogging software, online video, mobile phone software, photo editing software, instant messaging, and online productivity tools, to name a few. And it's just getting started.

In the PC era, the battle came down to Microsoft vs. Apple. Microsoft's Windows was never quite as good as Apple's Macs (once Steve Jobs returned to Apple). Jobs's strategy was to control everything from hardware to software design himself. That made his products more expensive and limited Apple to the top end of the market—the Mercedes of computing. Microsoft's Bill Gates licensed his software to all PC makers, giving him a much larger mass-market share. A similar scenario is now taking shape in the market for Internet devices, but with Google in Microsoft's old role.

Google's Android phone operating system is taking off as Internet connections for smart phones become the hottest trend in electronics. In August 2010, a study by the Nielsen Company showed that Android phone sales have started outpacing every other smart phone operating system. The Blackberry by Research in Motion (RIM) and Apple's iPhone still hold the number one and two spots respectively, but the Android is catching up. In the second quarter of 2010, according to Nielsen, Android took 27 percent of smart phone sales, up from 6 percent at the end of 2009, while the iPhone took 23 percent, down from 34 percent. BlackBerry got 33 percent of the market, down from 39 percent. Microsoft's share dropped to 11 percent from 13 percent. The Android clearly has the momentum to take over the competition.

That could change, of course, as Apple and RIM release new designs, but the only phones with cachet are the iPhone and Android. Also, as the iPhone finally migrates to the Verizon network, releasing it from the limitation of only being available to AT&T customers, it could gain new momentum. But Jobs is sticking to his strategy of creating the entire phone himself, which means there is only one manufacturer, while Google is licensing its system to all of the phone makers except Apple.

A recent survey by a mobile-software tools provider called Appcelerator found that while the iPhone is the leader in downloadable applications right now, a majority of mobile phone “apps” developers see a bigger future in Google's Android mobile phone operating system. Why? The Android system is available on more than sixty devices and several mobile networks, and the applications do not have to be cleared by the man at the top.

Even Apple's customers are starting to feel that Google is taking the lead in smart phone features. A research firm called Vision Critical surveyed iPhone users to find out what they think their phones lack, and the list of features they came up with—the ability to run on a choice of wireless carriers, the ability to run on a 4G network, an 8 megapixel camera, a larger display, a removable battery, and a physical keyboard—reads like a list of the technology already available on the newest Android phones.

The other hot new trend is the iPad from Apple as standard netbooks, essentially small laptop computers, are a cooling trend. Once again, Steve Jobs has worked his magic to create a new category of computer. That could be trouble for Google and its Chrome operating system, which is targeted at netbooks. Further, an iPad competitor from RIM was scheduled to arrive in the first quarter of 2011, a prospect that drove up the company's stock by 40 percent from August to December 2010, despite the fact that nobody was sure how well the new device would sell. Google is likely to revamp its own netbook design in order to directly compete with these new tablet computers, probably under Sergey's leadership. The release of the first Chrome OS devices was delayed by six months to mid-2011, so it will have to play catch-up to Apple. However, that's a page directly out of Microsoft's old playbook: keep redesigning until the product is competitive. Microsoft, of course, is also trying to enter this category.

Google is also taking on Amazon's Kindle e-book reader. After Google's troubles with publishers over digitizing out-of-print books, it has adopted the strategy of helping publishers and brick-and-mortar bookstores compete with Amazon. Jeff Bezos is a hard negotiator and has been pressuring publishers to sell him books at cut-rate prices in order to pass on savings to customers. Google and Apple are both selling e-books on their own, on terms more favorable to publishers, which has decreased the pressure on publishers to accede to Amazon's demands. Google is also offering independent bookstores the opportunity to sell its e-books on their own Web sites, which could take more market share from Amazon if the independent sellers attract loyal customers to their sites. Of course, it's still very uncertain how all this will play out.

There's one important market in which Google is struggling. Larry and Sergey are intensely interested in cracking the social networking market, but have not yet been able to come close to Facebook's prominent position. In November 2010, Google changed its Terms of Service so that other companies could not access Google's contact list—which lets users import their Gmail contacts—unless the other company reciprocates. Facebook has so far refused to let its users export their contact lists to Google, although it does have deals allowing both Yahoo and Microsoft's Hotmail to access Facebook contacts. Both Facebook and Google are trying to integrate social networking with e-mail, instant messaging, games, and other online products, but Google is struggling to come up with a smooth system that pleases its customers. Its projects in this area have been variously called Google Me, +1, and Google Games, and reports say the company is having trouble bringing it all together.

One possible scenario is that Google would use its considerable resources to buy Facebook. So far, that idea has been a nonstarter with Facebook founder and CEO Mark Zuckerberg. Zuckerberg is not willing to give up control of a company with so much promise for its own IPO and his personal wealth, and he's enjoying his prestige;
Time
magazine named him 2010's Person of the Year.

In the meantime, Google has been investing in other social networking companies. It bought Social Deck, a social gaming company for mobile phones, paid some $200 million for social game maker Slide, and bought a payment platform called Jambool for $70 million to make it easier for customers to pay for social networking games. Additionally, it invested a reported $150 million to $200 million in social gaming company Zynga (the maker of Farmville). A report in
businessinsider.com
says Sergey championed this deal.

Aside from these big deals, Google has a $100 million venture fund to invest in smaller companies in fields as diverse as online advertising, smart grid technology, biotechnology, and green vehicles. Altogether, Google has bought at least eighty-five companies since its founding, according to a Wikipedia list.
¹

Larry and Sergey are also trying to use the company's wealth to push for better development of Internet access technology across the United States. In its role as an industry catalyst, Google announced a contest among cities in the United States with the prize being a free ultra-high speed broadband network. It will be a fiber-based network with speeds up to one gigabit per second, one hundred times the speed most people in the United States have access to. On Google's blog, the project's managers noted the real goal of the contest is “to experiment with new ways to help make Internet access better and faster for everyone.”
²
Maybe this initiative will force U.S. phone and cable companies to start investing in decent Internet access for everyone.

Finally, Google TV has been making news lately. It's an Android-based set-top box technology built directly into new TV sets that will bring together Internet and television programming, computer applications, and digital video recording into one device. The device's competition, Apple TV, is now starting to gain more traction than Google's version, although it does not have as many features as Google TV. Google's product clearly needs refinement. Perhaps this will be made a priority under Sergey's leadership. One big advantage Google may have is the ability to search for programs online and on the cable networks. Comcast is trying to fend off Google TV with its own alternative, called Xcalibur, and some networks are resisting giving Google access to their programs unless it pays for them. But this is a device that could radically transform the way we use television and force the Internet into sharper competition with TV programming.

Of course, becoming such a powerhouse has placed a lot of attention on Google. Government agencies around the world are scrutinizing its moves for antitrust violations. In early July, 2010, the European Union's antitrust chief said he was looking “very carefully” at allegations that Google unfairly ranks competitors' sites lower in search results. The irony here is that one of the main reasons Google became successful in the first place is that among all the major search engines, Google was the only one to refuse to bias its search results. There is no discernible evidence that Larry and Sergey have changed their strategy now. Type any company stock ticker name into Google, for example, and Yahoo Finance appears first. Larry and Sergey have always been adamant that search results must always be unbiased. But competitors complain and regulators, wary of Google's increasing power, will listen.

Other controversies surrounding Google's tactics continue unabated. News organizations such as Rupert Murdoch's News Corp. are still threatening Google with lawsuits for stealing snippets of news from its publications. In addition, Viacom was dealt a setback in its suit against YouTube over copyright infringement when a U.S. court ruled against Viacom in June 2010, but Viacom says it will appeal.

More and more people are also becoming skeptical of Google's “Don't Be Evil” philosophy. That philosophy is being put to its biggest test now as it struggles with the Chinese government over censorship. When hackers broke into Google customers' e-mail accounts in China in early 2010, Sergey was irate. Saying that the hack targeted Chinese dissidents, he made it clear that he thought the attack had government backing. This event pushed Sergey too far and he announced that Google was no longer willing to censor itself in China. Google moved its operations to Hong Kong, where the laws are more liberal, and stopped censoring its search results. But it has to renew its license to continue doing business in China every year. Google submitted its application on June 30, 2010, the last day it could file, and Chinese officials were slow to approve it, but did so in the end. Google will face tough scrutiny on this from China every year. It would not be surprising to see Google lose its license sometime in the near future.

However, leaving China would be an enormous blow to Google's future. Microsoft CEO Steve Ballmer has made it clear that he has no problem doing business in China and censoring his company's search results, and the Chinese search engine Baidu continues to gain market share. If Google drops out of China completely, it will be giving up a huge and growing market. If it compromises, its reputation as a corporation fighting against evil will take a big hit. The battle of wills is going to be intense and important to Google's future. For Larry and Sergey, it is a constant fight between revenue and principle.

Nevertheless, Google's momentum will continue to grow along with the challenges it faces. Becoming the new Microsoft may not be the description Larry and Sergey would like to have, but it is inevitable. Years ago when Microsoft's then-CEO Bill Gates was asked if new developments in technology could make his company obsolete, he scoffed, asserting (with an amazing lack of insight to the rising danger of the Internet) that as long as there were computers in the world, Microsoft's opportunities would stay strong. Now Larry and Sergey could make a similar claim: As long as the Internet is a powerful force in computing, Google's prospects—and the controversies it faces—are limitless.

All first-person accounts and quotes for this book, unless otherwise identified, are from interviews conducted by the book's author, or by Kim Girard or Andrea Orr for this book. Some of the interviews were conducted as early as June 2004. Some of the interviews at Stanford were also used for an article in
Stanford
magazine, “Net Assets: How Stanford's Computer Science Department Changed the Way We Get Information,” by Richard L . Brandt, referenced elsewhere in these notes.

1
John Ince, Podcast: “Lost Google Tapes,”
http://www.podventurezone.com
, posted January 5, 2007.

2
“Sergey Brin and Anne Wojcicki Get Married,”
Commongate.com
,
http://web2.commongate.com/post/Sergey_Brin_and_Anne_Wojcicki_Get_Married/
, posted May 13, 2007.

3
Clint Boulton, “Has Chrome Pushed Google over the Evil Edge?” Google Watch,
http://googlewatch.eweek.com/content/crystal_ball/has_chrome_pushed_google_over_the_evil_edge.html,postedDecember13
, 2008.

4
Clint Boulton, “The Evil of Google Is Steeped in Perception, Potential,” Google Watch,
http://googlewatch.eweek.com/content/evil_google/the_evil_of_google_is_steeped_in_perception_potential.html
, posted January 5, 2009.