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Google - Paper - Google Gears Down for Tougher Times By...

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Google Gears Down for Tougher Times By JESSICA E. VASCELLARO and SCOTT MORRISON MOUNTAIN VIEW, Calif. -- 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 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 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 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
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This note was uploaded on 12/07/2009 for the course MGMT 434 taught by Professor Roberttrumble during the Spring '09 term at VCU.

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Google - Paper - Google Gears Down for Tougher Times By...

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