Hubristically, Google engineers were convinced they could devise a system to successfully sell ads for YouTube. So far at least, they’ve failed. Why? They failed to comprehend the fear major advertisers have of placing their ads alongside potentially unfriendly user-generated content, and they failed to sufficiently anticipate that users would find ads intrusive. In early 2008, when Eric Schmidt envisioned employing a Google sales force of a thousand to sell ads for radio, Danny Sullivan was dubious. “They have no experience,” he said, echoing Mel Karmazin’s comments from his 2003 visit. “They may be able to cut costs, but a lot of people at Google don’t understand that selling other ads is not like a search auction. They don’t understand it is an art, not a science.” In late 2008 and early 2009, a somewhat humbled Google canceled its print ads and its audio ads programs, and pared two hundred sales and marketing jobs.
Frantically, Google adopted a new approach to YouTube. With the site then on course to lose about five hundred million dollars in 2009, Schmidt transferred Salar Kamangar, who had crafted Google’s first business plan and shepherded AdWords, to YouTube headquarters to work closely with its founders to design a monetization plan. And the management team at Google recognized that to attract advertising, YouTube could not rely on user-generated videos or three-minute clips from the networks. They needed long-form content, and in April 2009 made ad-sharing deals with the Universal Music Group, the world’s largest music company, to create a music video channel on YouTube, and with several Hollywood studios and CBS to air movies and a library of TV shows. More ads appeared when Google accepted that YouTube needed more professional content, and its losses were shrinking.
Size is a concern for a company with more than twenty thousand employees. Venture capitalist Fred Wilson, a principal in Union Square Ventures, unhesitantly believes Google “is a great company.” But he also believes: “They are a big company Maybe they can’t innovate anymore. It takes them meetings and processes to make decisions. Things don’t get launched as quickly. They missed the whole video thing. YouTube beat them to it. They had to buy YouTube. They missed the whole social networking thing. Facebook beat them to that.”
Losing focus is another danger for a company this large and wealthy. “My sense is that Google is like that fourteen-year-old who suddenly gets to wear grown-up clothing and maybe looks old enough to get a drink at a bar,” said Strauss Zelnick, CEO of ZelnickMedia, which invests in and manages an array of media properties. “There’s really nothing that doesn’t look cool and interesting to a fourteen-year-old with an Amex card and no spending limit. Do you remember Michael Armstrong?” Zelnick recalled that Armstrong, the former CEO of AT amp;T, once boasted of spending a hundred billion dollars on acquisitions over four months. “I said, ‘He’s done.’ No one does that well. Focus. Google has done a phenomenal job. Right now they can afford to, but at some point in time they are going to need to have a crisp vision of who they are and where they’re going, and focus on that.”
Although Mary Meeker believes Google is a great company, she offers another caution: the power and precariousness of a culture shaped by its founders. When founders stay involved in the enterprise-she cited Steve Jobs of Apple and Larry Ellison of Oracle-they often maintain the core values and mission of the business and bring something invaluable to the enterprise. But Jobs and Ellison lost focus, and watched their companies suffer. They also profoundly learned from their ordeals, while Page and Brin have yet to “experience nasty failure” and its concurrent ability to teach, as Al Gore also noted. And now with wives, and a son born to Brin in early 2009 and Page expecting his first child in the fall of 2009, and with incomprehensible wealth and two huge airplanes more conveniently at their disposal-Brin and Page persuaded NASA to waive its prohibition on private planes parking or using the nearby NASA facility-both young men are in the office less, jumping on their planes to take photographs in Africa, to explore the wilds of Alaska; Page likes to tool around in his Tesla electric car or fly his own helicopter and Brin to spend time building his own kite-powered sailboat. Will their attention wander from Google?
Today, Google appears impregnable. But a decade ago so did AOL, and so did the combination of AOL Time Warner. “There is nothing about their model that makes them invulnerable,” Clayton Christensen, Harvard business historian and author of the seminal The Innovators Dilemma, told me. “Think IBM. They had a 70 percent market share of mainframe computers. Then the government decided to challenge them. Then the PC emerged.” Seemingly overnight, computing moved from mainframes to PCs. For a long while, Microsoft seemed unstoppable, he said, only to be diverted by government intervention and the emergence of Linux and open-source software. “Lots of companies are successful and are applauded by the financial community,” Christensen said. “Then their stock price stalls because they are no longer surprising investors with their growth. So they strive to grow but forget the principles that made them great-getting into the market quickly, not throwing money at the wrong thing. When you have so much money you become so patient that you wait too long. Again, look at Microsoft. No one can fault them for not investing in growth ideas. But none of these have grown up to be the next Windows.” Maybe, he added, we are now beginning to “see this at Google.” The company has poured money into YouTube and Android and cloud computing and the Chrome browser, but has yet “to figure out the business model for each.”
Of course, these are the what-ifs. Today, and for the foreseeable future, few of Google’s detractors would disagree with Fred Wilson, who said of Google, “There is no end in sight to the value they are creating.” The value can be measured in rising profits and searches, but to quantify Google’s success just in this fashion is to view the young company through a zoom lens rather than a wide-angle. The close-up misses how Google has transformed how we gather and use information, given us the equivalent of a personal digital assistant, made government and business and other institutions more transparent, helped people connect, served as a model service provider and employer, made the complex simple, and become an exemplar of the oft-stated but rarely followed maxim, “Trust your customer.” Because it is free, Google will be difficult to assail.
No one can predict with certainty where Google and the digital wave is heading, when it will crest, or who it will flatten. If the public or its representatives come to believe Google plays favorites, aims to monopolize knowledge or its customers, invades their privacy, or arrogantly succumbs, in the words of Clayton Christensen, “to the falsehood that you can grow and grow because of network effects,” then it will be more vulnerable. If Google maintains its deposit of public trust-continuing to put users first-and if it stays humble and moves with the swiftness of a fox, it will be difficult to catch.
Other companies have profoundly disrupted the business landscape. Think of the Ford automobile or the Intel chip. We can, however, be certain of this: Nowhere in the three billion daily searches it conducts, the two dozen or so tetabits (about twenty-four quadrillion bits) of data it stores, the more than twenty million books it plans to digitize, will we find another company that has swept so swiftly across the media horizon.
ACKNOWLEDGMENTS
This book was born two and one half years ago. I aspired to profile a company at the epicenter of the digital revolution, a company whose rise would also tell the story of how “new” media disrupted “old,” and offer a glimpse into the future of media. Google was my chosen vehicle, but the company was reluctant to cooperate. Google’s founders and many of its executives share a zeal to digitize books, but don’t have much interest in reading them. They worried that cooperating on a book was an “inefficient” use of their time. I made the argument that my task was to understand and explain what they do and how they were changing the media world, and that they should look upon my project much as they look upon search. If my book was good, it would rise to the top of search results, becoming a common reference. After months of my kicking at the door, they opened it.