Google Gears Down for Tougher Times
JESSICA E. VASCELLARO
MOUNTAIN VIEW, Calif. -- Corporate austerity is reaching one of the most extravagant spenders of the boom years.
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 really 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
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
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 service 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