Google Gears Down For Tougher Times
Corporate austerity is reaching one of the most extravagant spenders of the boom years. Google Inc. has begun to tighten its belt.
For much of its 10-year history, Google spent money at a pace that was the marvel of Silicon Valley. It hired by the thousands and dished out generous perks, including three free meals a day, free doctors, ski trips and laundry facilities, and subsidized personal trainers. It let engineers spend 20% of their time pursuing pet projects. The company's goal was to develop new products that would reduce its nearly total reliance on selling ads connected to Internet searches.
But revenue growth has slowed dramatically over the past year. Products such as Google Checkout, a Web payment service, and Google TV Ads, which sells television advertising time, haven't generated significant revenue, leaving online ads still accounting for 97% of revenue. Google's share price has fallen to $275.11 in trading Tuesday on the Nasdaq Stock Market, less than half its record close of $741.79 in November 2007.
So with the U.S. economy in a recession, Google is ratcheting back spending and cutting new projects. 'We have to behave as though we don't know' what's going to happen, says Google Chief Executive Eric Schmidt. The company will curtail the 'dark matter,' he says, projects that 'haven't really caught on and aren't that exciting.' He says the company is 'not going to give' an engineer 20 people to work with on certain experimental projects anymore. 'When the cycle comes back,' he says, 'we will be able to fund his brilliant vision.'
Last month, it pulled the plug on SearchMash, a Web site it used to experiment with new ways to organize search results. This month, it plans to do the same with Lively, a 'virtual world' launched this summer where online users can create characters and rooms for them to hang out in. Google explained that it wants to 'prioritize our resources and focus more on our core search, ads and apps business.'
Google is also rethinking its practice of providing some Web services without ads, so that it can generate more revenue. On Nov. 17, Google began running ads on Google Finance, a financial-news site, and said it would soon start showing ads to some users of its Google News site as well.
Google's years of rapid growth were fueled almost entirely by a single business: sales of search ads, the small text ads that appear next to search results cranked out by its Internet search engine. The company realized that the torrid growth couldn't continue forever. So far, it hasn't come up with any big new revenue streams.
'Letting a thousand flowers bloom and letting many of them stall and go nowhere has worked well to this point,' says Thomas Eisenmann, a professor at Harvard Business School. 'But if you want to be the dominant advertising network across every medium, you need more top-down management.'
Google executives say they started preparing for slower growth more than a year ago. But the economic crisis is forcing them to step up their efforts.
In recent weeks, Mr. Schmidt has held meetings with top executives to determine where to focus investment more narrowly. Top priorities include display ads, which use graphics and appear on Web pages; advertising on mobile phones; and its online business software.
Mr. Schmidt says the company is shifting more engineering and sales resources to those areas, and away from less-promising projects. Teams on projects the company is merely 'fiddling with,' he says, will get 'naturally smaller as people get plucked off.'
This fall, the company announced plans to 'significantly' reduce its roughly 10,000 contract workers, whose jobs range from engineering to food services. While the timing and focus of the cuts remain unclear, Google employees already are joking that it's getting easier to find a spot in the company's crowded parking lots.
Google has also begun chipping away at perks. In recent months, it reduced the hours of its free cafeteria service and suspended the traditional afternoon tea in its New York office. A Google spokesman says its core culture is not changing. 'Our unique culture is an essential part of what makes Google Google,' he says.
Google is coping with a problem that has befallen other tech companies before it, from Microsoft Corp. to eBay Inc.: adjusting to the end of runaway growth. Revenue grew by a robust 31% in the third quarter from the year-earlier period, but that's down from 92% annual growth in 2005. Still, with $14 billion in cash and roughly 30% of the U.S. online-ad market, Google is in a much better position than its competitors to withstand this downturn, Wall Street analysts say.
Nevertheless, the internal changes represent a big shift for Google. Early in its life, the company said that it would always put long-term objectives ahead of shareholders' short-term interests. It wooed the best engineers with generous perks, workplaces that feature pool tables and volleyball courts, and a promise they could spend time pursuing side projects. Inside the company, it was considered crass to talk about whether a project would eventually make money, say current and former product engineers. The measure that mattered most was whether a new idea would be good for the Internet user's experience.
That anything-goes culture fostered thousands of projects. The company launched a program to digitize and search millions of books; a social-networking site called Orkut; Google Base, a classified-listings service; Google Earth for browsing satellite images of the Earth; and a way to get answers to search queries via text messages on mobile phones. Some, such as Google's email service, called Gmail, became big hits. Many others, such as experiments with offering digital music and an online data-storage service, never took off.
The failures didn't matter much when money was rolling in: Revenue grew 92% in 2005 and 73% in 2006. But in July 2007, the company said it had overspent on hiring, causing second-quarter operating income to fall from the prior quarter, a rare misstep. Even so, revenue grew by 56% that year.
Google hired a new vice president of financial planning and analysis, Francois Delepine, who sought to standardize and more tightly manage the budget process. Finance teams started allocating more new hires to groups that generated the most revenue per head, say people familiar with the matter. To better predict revenue, the company implemented quotas for ad-sales representatives and tied the pay of more employees to performance, these people said. Different departments were required to budget the same amount for the same item, whether it was a server computer or a business-class ticket to Europe.
The company stopped the pell-mell hiring of virtually any employee who met its qualifications, focusing instead on adding heads only where they were needed. Hiring slowed to 889 new employees in the fourth quarter of last year, down from around 1,300 in the year-earlier period.
To better manage projects in development, top executives asked engineering vice presidents to rank the 20 most promising projects within their units; those that made the lists were granted the bulk of the resources, say former Google product managers. Projects not on the lists were far less likely than before to get technical support.
In last year's fourth quarter, the company's revenue and net income fell short of analysts' expectations, amplifying concerns about the impact of an economic slowdown on online advertising. But the company's profit jumped 30% in the first quarter and 35% in the second as it continued to steal search-market share from competitors. Google said it had not yet felt any impact from the weakening economy. It was well-positioned to continue to thrive, it argued, because its search ads provided the best, and the most measurable, return for advertisers.
But U.S. Internet-advertising revenues for the industry totaled $5.9 billion in the third quarter, up just 2% from the prior quarter, according to the Interactive Advertising Bureau. Google has said it is seeing weaker spending from auto-financing, home-financing and real-estate advertisers.
The financial crisis has created a new sense of urgency within the company. Top executives say they remain committed to projects they believe hold long-term potential, but are prepared to 'starve' lesser ones. Among the projects whose future is uncertain are Google Notebook, a site for storing and taking notes on Web pages, and Google Audio Indexing, which allows users to search for phrases within online video footage, say people familiar with the matter.
The company also has moved to merge overlapping products. Google Page Creator, a service that allowed users to create their own Web pages, was quietly discontinued in September, effectively merged into a similar product called Google Sites.
Employees say they're unsure which products will make the cut. 'It's not exactly clear where that bottom line is now,' says a current operations manager. 'I don't think they know that either.'
Jessica E. Vascellaro / Scott Morrison
但过去一年谷歌的收入增长显著放缓。谷歌开发的诸多产品，例如网络支付服务Google Checkout和销售电视广告时间的Google TV Ads，都没有带来显著的收入；互联网广告仍然占谷歌总收入的97%。周二在纽约证交所，谷歌股价已经跌到了275.11美元，还不到2007年11月创出的历史收盘价741.79美元的一半。
谷歌也在重新审视其一些没有附带广告的网络服务，以便能够带来更多的收入。11月17日，谷歌开始在财经新闻网站Google Finance上推出广告，并表示即将开始对一些新闻网站Google News用户显示广告。
谷歌也在应对着已经降临到微软(Microsoft Corp.)、eBay Inc.等其他科技公司头上的一个严峻问题：努力适应强势增长时代的结束。谷歌第三财季收入较上年同期增长31%，但表现明显不及2005年高达92%的年增长率。不过华尔街分析师们表示，谷歌拥有140亿美元现金，占据着美国网络广告市场大约30%的份额。在眼下的困难面前，谷歌的状况要明显好于竞争对手。
在这种随心所欲的文化氛围下诞生了数千个项目，有将数百万本书籍进行数字化并可供搜索的项目；名为Orkut的社交网站；名为Google Base的分类目录服务；名为Google Earth的地球卫星照片浏览服务；以及一种通过手机短信答复搜索查询的功能。其中一些项目，如谷歌的Gmail电邮服务获得了巨大成功。也有许多诸如提供数字化音乐的尝试和在线数据储存服务之类的项目一直未能推出。
不过据Interactive Advertising Bureau称，第三季度全美网络广告收入为59亿美元，只比上季度增加2%。谷歌也表示，已发现汽车金融、房屋金融和房地产广告有所走弱。
金融危机在谷歌唤起了一股新的迫切感。高管们表示，仍致力于具有长期潜力的项目，但已有“瘦身”的准备。据知情人士称，前景难料的项目中包括网络日记网站Google Notebook及视频字幕搜索业务Google Audio Indexing。
谷歌还开始着手合并有交叉的产品。如个人网页生成服务Google Page Creator就在9月份悄然停运，与名为Google Sites的类似产品合二为一。