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Page As CEO. Is That What Google Really Needs?

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Just as Silicon Valley was starting to come to terms with the sudden departure of Apple founder and CEO Steve Jobs, another technology giant dropped a bombshell: Google CEO Eric Schmidt said he is stepping down to become executive chairman of the company. Schmidt says he will focus primarily on government relations, while Larry Page is going to take back the CEO role he held until Schmidt arrived to take the job in 2001. Although Schmidt will still be around to advise on various matters, the executive shuffle makes it clear that Larry Page is now in sole control of the web giant. But does he have what Google needs? That’s not obvious.

After the news broke Thursday afternoon, Schmidt posted a message on Twitter that linked to his blog post about the changes, also writing “day-to-day adult supervision no longer needed!” That comment was a reference to the fact that Schmidt — a former senior executive with Sun Microsystems (s orcl) — was seen by many as the “adult supervision” the two young billionaires needed in 2001, when they were planning the stock offering that eventually came in 2004. The memories of the tech implosion of the late 1990s were so fresh still that many clearly felt Page and Brin needed to be stopped before they blew all Google’s money, and since Schmidt looked the part of a senior executive, the company’s backers felt he would go over better with investors.

Over the past 10 years, Schmidt has repeatedly stressed — as he did in his announcement and on the earnings call — that although he was the chief executive, he and the two founders have functioned more or less as a triumvirate, advising each other and debating various courses of action. Schmidt has suggested this is because of the mutual respect each had for the other, but his role was undoubtedly also influenced by the fact that Page and Brin share ultimate voting control of the company, thanks to their majority ownership of Google’s multiple-voting shares.

Now, Page has taken the reins as CEO, and Schmidt made it clear in his blog post about the news that this was done “to simplify our management structure and speed up decision making.” After the split, each member of the triumvirate seems to be taking on the role for which he is arguably the best qualified: Schmidt, who is the most senior (and tends to wear a suit), becomes the public face of the company when it comes to government: meeting with senators who are investigating the company’s privacy infractions, for example, or appearing before congressional committees, the FTC, and so on. Page becomes the day-to-day leader, and Brin gets to spend time on the projects he enjoys (which may or may not include self-driving cars).

How Schmidt performs in the governmental role remains to be seen. He might have to tone down his penchant for inappropriate jokes about how people “can just move” if they don’t want their houses to be photographed by the Google StreetView car, or his comments about how “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” That’s probably not going to go over well in Washington.

The reality is, Google is facing challenges on a number of fronts. Yes, it turned in another stellar performance in the most recent quarter, with revenues climbing by 26 percent to $8.4 billion. The search-related advertising business is still doing extremely well, and that cash cow has allowed the company to do many other things, including promoting the Android operating system and running a number of popular (but money-losing) services such as Gmail and YouTube. But the tech giant has been unable to get much traction on the social-web front, and that has led to criticism that it’s losing the battle — or is at least in danger of losing the battle — for both users and advertisers to Facebook, whose share of the online-ad pie is growing at a phenomenal rate.

Critics are also getting more vocal about the rapid deterioration of Google’s search results, its core business, thanks in part to the contributions of “content farms” such as Demand Media, with many saying Google hasn’t done enough about the problem because it gains ad revenue from those publishers. Then there are the governmental hurdles Schmidt is expected to help the company leap: a potential antitrust investigation by the Department of Justice into Google’s proposed acquisition of travel-information provider ITA, along with pressure from Congress on the company’s approach to privacy, and continued difficulties with foreign governments like Italy and China.

Larry Page is taking the helm at what could be a turning point for Google. Its core business is under fire; it’s losing ground to Facebook in an important new market; and it’s still relying on search-related ads — a market getting long in the tooth — for 90 percent of its income. It has been unable to build any substantial new businesses, despite a number of attempts, including its recently rebuffed $6-billion acquisition offer for Groupon. As angel investor Chris Dixon put it, some Google watchers are probably asking: Is Page’s return like Steve Jobs coming back to Apple in 1997, or is it more like Jerry Yang’s return to Yahoo in 2007?

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28 Responses to “Page As CEO. Is That What Google Really Needs?”

  1. “search-related ads — a market getting long in the tooth”?

    Yes, that’s why their profits increased only about 30% over last year – or, to put it another way, the INCREASE in their PROFITS was greater than the speculated REVENUE for the incredible new company, Facebook. I’d take that long in the tooth market.

    Also, Page never left Google, and he has been involved in all important decisions.

    • Yes but it’s been at the expense of “quality” search results. They’ve let every tom, dick, and ad infested content farm take over. It’s starting to get noticed and that’s not good for the future.
      Even though android has a large market share, search on mobile is controlled by the mfg/carriers. Google has no control over them using Bing instead. So mobile search is not a given and they have no other money producing properties – or at least not of any significance. How long will it take them to recover their investment/expenses in YouTube now that it’s becoming somewhat profitable.

      • The search quality issue affects all engines, and I expect Google will be as successful as anyone else in addressing the problem.

        Google has already stated they have more than recovered the cost of developing and deploying Android from the ad revenue they get on those devices. I don’t expect that trend to slow down. People with iphones will still use google for search.

        I would bet their total investment/net profit on YouTube exceeds what investors have now put into Facebook ($2.3B), and that their profits from that will continue to grow.

        With Google profits and revenues continuing to grow at a pace most companies would love, I don’t understand the “google is fading” atmosphere. They continue to offer new products, and while they’re not all profitable, Google can afford to be patient with them.

      • @KenG…
        Search quality – I’ve been getting better results with Bing – Too many people (and press) notice this, there goes the cash cow – The only revenue stream that counts.
        Android – There is no guarantee android will continue on as it has – And there is this… – That type of thing might also become a problem with webM
        YouTube – You bet? Facts man or it doesn’t exist.
        Fading – Google is a one-trick pony – Until something else starts contributing “substantial” returns, they will continue to be.

  2. Larry isn’t Jerry or Steve (he’s probably more like Jerry since Jerry similarly co-founded Yahoo with David Filo).

    For those of you who are wondering what this means for “do no evil”, I think that vision statement will be less and less relevant as the shake-up is primarily to assuage investors and keep the company more relevant in social space.

    Google needs to make changes fast to compete with Facebook and emerging competitors like DuckDuckGo in search.

    They don’t need to keep up with Apple (who posts insane numbers) but perhaps start leveraging their investments like GMail and Google Voice and socializing their services heavily.

  3. Nathans Schor

    i agree, an succinct evaluation. But do you have a direct link to “core business is under fire”? Surprisingly, There is no search function on Kedrosky’s blog so I could not easily find it.

  4. I don’t believe this will have much, if any impact on the organization. Page and Brin have probably had final say in all major decisions since Schmidt came on board. Schmidt has been more of a consultant than the decision maker, the way it sounds. Google will still be an engineering focused company.

    Is this what Google needs? Are the shareholders happy with the direction of the company? Are the users happy? Largely I think they are, for now. Engineering focused companies can solve a lot of problems. But great engineering doesn’t always create a good user experience. That’s where Google needs to focus a bit more. Great products need both great engineering and great UI.

  5. Good article.
    Do you really think Page can be compared to Jobs ? Jobs has done a a lot while he was at Apple in the 70s and mid 80s. He proved himself again during the 90s with Pixar. And we all know how he became a legend in 2000s.
    Page is more like Jerry Yang. Smart but not an intimidating control freak. You really need to be smart, pushy, focused, strict and control freak to become Jobs.

    Looking at the face of Page I cannot think he has all those qualities.

    • Smart people with no people and business skills and hardly speaks (hardly seen) shouldn’t be CEO of a tech company that gets so much attention like Google. That’s what Page is. Why do you think he stepped aside as CEO to let Eric run the company in their early years.

      I don’t doubt Larry’s smarts coz he obviously is. I doubt his ability to run and lead a company.

    • It’s unclear what you mean by “Google has lost the war to Apple”?

      Are you talking about iOS vs Android? Google Search vs Apple? Google Social Media vs Apple?. Google’s new services like Talk, Nav etc. Vs. Apple?. Google’s Cloud and Enterprise Apps (Google App Engine, Google App Market VS Apple?)

      Apple in my mind is becoming more and more like Sony. A consumer hardware and software company, coupled with a media distribution business.

      Are you sure Google and Apple really compete in all the primary markets Google cares about?

  6. facebook is something which is keeping tech giants like google and yahoo to do every possible thing in order to save their business. lets see how the war goes. The sole benefit goes to the users only in terms of better service

  7. Among losing businesses, I would’ve expected to see something like Google Voice. I still don’t see how they make money out of it. I haven’t seen any breakdowns on Youtube or Gmail, but I think that Gmail does help Google create more specific profiles on its consumers.
    Fantastic post. I have a question about Sergey Brin. How long will it be before he leaves Google?