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Google as Global Wunderkind     Print Email

"Googled, The End of the World as We Know It," by Ken Auletta, will not be the last book written about Google, but it is likely to be the definitive word on Google as adolescent.

The company is only 11 years old, but it has burst into the digital revolution as one of the most creatively disruptive business forces in the 21st century.

It has become the trusted daily companion of almost every person on the planet who uses the internet. In a period of only 400 weeks, Google has lifted off, rocket-like, to annual revenue above $20 billion. In the words of Michael Moritz, it has become “the most visible service concocted by mankind. “ Arguably, a contender for that title could be the Ford motor company in the 20th century, but Mortitz, an early investor in the on-line search company, argues that Google wins out because of its singular leap over international borders from the outset of its business.

Ford, of course, proved to have staying power, at least until recently, and Google’s early successes have brought on growing pains and questions about how or whether it can transform itself from brash upstart to a more mature player. In the long run, can Google reach the goal set by its CEO Eric Schmidt -- to be the first $100 billion media company? Steve Jobs’ Apple still weighs in with only $32 billion revenue and SAP the German software maker that is Europe’s biggest player, by far, had 2008 revenue of $17 billion.

Anything that grows as fast as Google has high potential for bubble-burst. And any $20-billion company that claims as its slogan “do no evil,” is leading with its chin. Google needs to be careful, according to author Auletta, a leading U.S. reporter on the media: he warns that success has “waked the bears” stalking around Google.

The bears include governments, not only in the U.S. but also in Europe and Asia.Other bears are the large media conglomerates that find their advertising revenues being siphoned off by the internet. In Europe, Google has raised a special problem: book publishers (and cultural bureaucrats) view with dismay Google’s plan to digitize the world’s libraries: authors and their heirs, as copyright holders, join with privacy advocates in accusing Google of attacking the status quo – notably by Google’s advocacy of the notion that almost everything on the internet should be free. The argument of the cultural authorities in Europe is that Google seeks to acquire a position of global gatekeeper all the culture of all nations and thus impose a bias on current and future generations in favor of American materials as the core of global culture. France’s Culture and Communications Minister Frederic Mitterrand recently announced that the European Union will develop a plan to offer a public and pan-European alternative to Google’s book-scanning plan. Google has barely acknowledged the challenge, agreeing as a conciliatory gesture to meet with Mitterand on the issue early next year. On the other hand, Google has treated with distain Rupert Murdoch’s threat to prohibit Google access to News Corp properties like the Wall Street Journal and key European properties including the Times of London. “Publishers put their content on the web because they want it to be found,” said Google in a statement in response to Murdoch. “If publishers want their content to be removed from Google News specifically, all they need to do is tell us,” continued Google.

Already, Google is the most recent arrival in the international corporate lists as a truly global company – to an extent that often escapes even its critics. More than half its revenue (52 percent) now comes from outside the U.S., including 12 percent from Britain and another large portion from the rest of Europe. Google has more offices in Europe than in the U.S. (21 to 19) – and another 13 offices in Asia.

Auletta quotes Ivan Seidenberg, CEO of Verizon, the telecom giant, speaking about Google and no doubt anxious about Google’s move into telephony with its Android technology: “Once you get to a certain size, you have to figure out new ways of growing. And then you start leaking on everyone else’s industry. And when you do that, you sort of wake up the bears, and the bears come out of the woods and start beating the shit out of you.”

As the international market becomes increasingly important to Google, it is not evident that the Google’s act-first-and-ask-permission-later style will be a wining formula in the rest of world. Already in Europe, Google has had to curtail its book digitization-plan. It agreed that it would remove all European books that are still commercially available from the $125 million program to scan orphaned out-print-books in the U.S. and sell them online. This means that books that are no longer available to U.S. consumers but are still on sale in Europe will not be included in the Google catalogue unless the author expressly gives consent.

In Europe and the U.S., antitrust concerns have been raised by Google’s dominance in the on-line search market, where it holds 65 percent-plus share. Google acquisition of DoubleClick was closely scrutinized in the Europe and U.S. before final approval by the competition authority of the European Commission and by the Department of Justice. And a deal that Google was attempting to complete with Yahoo was abandoned after Google realized it would unleash an antitrust action in Washington.

In deference to local sensitivities, Google has complied with German laws not to disseminate Nazi literature. On an even broader sale in China, Google agreed to censor its search services, apparently a concession it had to make as the condition for operating in the world’s most populous market. Google justified the censorship by saying that while removing search results is inconsistent with its mission, providing no information is even more inconsistent.

Another Google product, Street View, an enhancement to Google maps showing a vivid 360-degree ground-level photographic view from any address, is bumping up against Swiss and German privacy laws that probably render the service illegal in those countries. (Google has not given up on this one.) The Google juggernaut appears stalled only in one country, Russia, which is the only European nation where domestic search-services are more popular than Google.

Auletta is clearly smitten by the romance of the Google story. And he is an admirer of Google’s achievements. After some effort he was able to get full cooperation from Google, including multiple interviews with Schmidt and founders Sergey Brin and Larry Page. He attended internal meetings and has wonderful insider info. He claims that his interview requests were accepted by every company employee except one unnamed vice-president. When asked by Googlers (as Google employees call themselves) whether they would like the book, Auletta said that if he did his job there would be things that would displease them.

The resulting book is unlikely to displease Google. But the book does balance a full and glowing catalog of Google triumphs and innovations with a probing look at some potential problems: a serious risk of internal ‘burn-out” and the danger from counterattacks by strong antagonistic forces it has aroused in government circles and in traditional media and other businesses that feel threatened by Google’s seeming insatiable ambitions. The book raises questions – never really answered -- about how Google should manage itself and its business going forward and whether it is anything more that a “one- trick pony” as it has been dismissively labeled by Microsoft CEO Steve Ballmer.

Auletta does a wonderful job teasing out the conflicts generated by Google’s successes. With respect to Google’s core product – search -- Auletta quotes a university law professor: “If they had a copyright lawyer among their founders they never would have started the company. The basic business of a search engine is to copy everything… [so] the first thing that happens, arguably is infringement of copyright law.” The web is always about copying, says the professor, but copyright law is all about making copying illegal. There is, says Auletta, an unavoidable potential conflict between the two – or at the least a disconnect.

The copyright issue is another example of how Google bumps into the status quo with its high-sounding plan for digitizing 20 million of the world’s printed books. The project demonstrates a naivety that seems almost charming on the part of Brin and Page – first, for even contemplating a task of such monumentality and, second, for feeling bewildered at the storm of protest from publishers and authors when the program actually got seriously underway. In the U.S., Google was sued, both by the Authors Guild and by he Association of American Publishers. In court, a settlement was ultimately reached (now in the final stages of judicial approval). Perhaps as a result of that run-in, Google seems to be more self-aware of its position on the wider stage of opinion and legislation and is showing increased corporate skill and awareness of the need for public relations. The company finally opened a “government affairs” office in Washington last year to lobby on issues in its field.

Apparently responding to a new public mood that questions some aspect of Google, one of the company’s founders -- Russian-born Brin, who adheres to the motto that “data is virtuous” – recently published a rare but well-argued opinion piece in the pages of the New York Times arguing that Google represents progress for civilization. His piece concludes with a sweeping argument about the value of digitization, not only for preservation but also for access. Noting that the great library at Alexandria burned down three times before the invention of printing and the emergence of printed books and that a Library of Congress fire in 1885 destroyed two-thirds of its collection, Brin concluded that the digital library has become a guardian repository of civilization and knowledge. “I hope that such destruction never happens again, but history would suggest otherwise.” Equally importantly, he noted, “even if our cultural heritage stays intact in the world’s foremost libraries, it is effectively lost if no one can access it easily.”

Very similar issues arise with privacy. There is often an inherent conflict between privacy and Google’s belief in the “virtue of data.” It is of course true that the more Google knows about a user, the better the search results for that user will be. For example, without an implanted electronic “cookie,” an English- speaker in France will get, at least initially, his search results in French, not English. But how much information is enough and at what point does Google’s thirst for knowledge about personal matters trip the privacy land-mine?

Indeed, “privacy is an atomic bomb,” says one unnamed Google executive. “Our success is based on trust.” And Google knows it must walk a fine line between the compilation of data and the privacy bomb. But to find that line, says Auletta, requires a degree of sensitivity not always found in engineers. The more data that is collected, the more ingenious things that can be devised by creative engineers. Developments in the emerging field of “behavioral targeting” have ad-men salivating about being able to tap into the data profiles that internet-users unavoidably generate about themselves. But the development and spread of this type of marketing, requiring ever increasingly detailed knowledge about the end user, entails obvious risk of abuse and damage to the public’s interest.

Engineering and the engineering culture are central to Google, as Auletta clearly explains. Founders Brin and Page were computer science “nerds” at Stanford when they created the company in Silicon Valley. (CEO Eric Schmidt has brought managerial skills that offer “adult supervision” for this tumultuous corporate baby, but he is also a trained computer scientist.) As a result, at Google no translators are necessary between working engineers and top management -- huge benefit to the company. Engineers are formally expected to devote 20 percent of their time to developing new products not necessarily related to their primary task. This visceral appreciation for technology is part of the explanation for the cascades of new products and services that emerge from Google. At the same time the engineering focus can render the company insensitive to public-policy issues that are increasingly arising as Google’s impact becomes more alarming to some.

Auletta quotes Stephen Arnold, a consultant who prepared a report sold to other media companied: “While Google may have started out to ‘do no evil,’ it has, to some, morphed from a friendly search engine into something more ominous. Googzilla, fueled by technical prowess, is now on the move.” Note the coinage “Googzilla.” He continues, “Google stalks a market…then strikes quickly and in a cold-blooded way…Googzilla is voracious, and it will consume companies presently unaware” that they are being stalked before being devoured.

Google’s management is deliberately chaotic, and many observers doubt that this approach can continue to work as Google scales up its operations by orders of magnitude. For example, Page and Brin, who still share a single office at corporate headquarters in Mountain View, California, both continue to believe that assistants are a waste of time in view of email and computer calendars. But the result is, says Auletta, that it is sometimes hard to know where they are and what part they are going to play in important decisions. At the same time, Auletta relates some telling anecdotes about micro-management by Page and Brin: both got involved in resolving the issue of whether Google masseuses (who have been an employee perk almost since the beginning of the company) should or should not become full-time employees under the terms of California law.

Any such growing pains cannot not diminish Google’s accomplishment in earning the trust of its customers. That, Auletta writes, is “something that sets the best companies apart.” Google regularly is listed among the world’s most respected corporate brands, and Google remains committed to the founders’ commitment to “placing the user first.” That sentiment figured prominently in Google’s unconventional and wildly successful IPO when the company went public in 2004: “Google is not a conventional company. We do not intend to become one,” wrote Brin and Page. They said they would focus on users and not investors. Protecting Google’s “core values” would be more important than paying dividends --- incidentally, the company has never paid (but its shares have multiplied almost tenfold in value).

Today CEO Schmidt continues to talk about the importance of the company being a “moral force.” An incredible range of free services to users, refusal to allow advertisers to rent space on the home page and Google’s practice of getting users to their destination rather than trapping them with the Google server – all these free public goods proffered by Google reinforce the trust enjoyed by the company and tend to give credence to its claims to be a “moral force.”

Google is on what is probably the right side of several major trends. One is “cloud computing” -- meaning data storage designed to allow users to tap into their data and programs from any machine anywhere. (Google is developing its own operating system, to rival Microsoft, to take advantage of this trend.) Videos on the net is another.

In this sense, the most important trend involves the migration of advertising from print media to the internet. Although Google has already enjoyed the benefit of extensive movement of advertising from print to the net, there is likely more to come. In a report last year, cited by Auletta, Mary Meeker of Morgan Stanley produced a chart that advertising expenditures don’t conform to where consumers spend their time. Newspapers consume eight percent of readers’ time, yet receive 20 percent of advertising. By comparison, the internet garners 29 percent of our time, yet attracts just eight percent of advertising dollars. At some point, those ad dollars are likely to shift away from traditional media to the Internet. And Google will be a major beneficiary.

While a slowdown has hit the growth of its key ad business, AdWords and AdSense, Google places a high priority on monetizing the astounding power of YouTube, which it acquired in 2006 for $1.65 billion. Two-thirds of all videos on the web are aired on YouTube. Seven of the sixteen candidates who ran for president in 2008 announced their candidacy on YouTube; more people saw a taped version of the July 2007 democratic presidential debate there than on live as broadcast by CNN. YouTube has, however, never made Google a penny of profit: its projected loss this year is some $500 million. Schmidt tells Auletta (and others) that Google is close to finding a way to monetize YouTube, a prospect that may partly account for the fact that Google stock is back from a recession crash to double its value three years ago.

In narrating this extraordinary contemporary saga of a company on mental steroids, Auletta concludes that the bears are up and stirring, but that Google is “surfing a huge wave that seems not to have crested. “ In the still-young internet age, he writes, “we are racing through a revolution comparable to the one ushered in by Herr Gutenberg’s printing press in the 15th century. The outcome is as unclear today as it was then.” Picking up a point expounded by media scholar Clay Shirkey, he notes this: in history, it is only in retrospect that “experiments” are revealed to have been turning points. Shirkey was examining the history of newspapers and asking what is going to happen to them in the digital age. But the same concept -- about the limits of dominance and the unpredictability of innovation -- will probably apply to the fate of digital companies as well.