Googled Part 7

Irrational or not, Google was a.s.sailed from many sides and compelled to play an unaccustomed role: defense. Nick Grouf, CEO of Spot Runner, an advertising/marketing agency that counted among its investors Martin Sorrell's WPP Group, believed Google was engaged in too many battles. He said that traditional media woke up to the Google threat not when the company did its IPO or was sued by book publishers, but when it bought YouTube. "When you pay $1.6 billion for a site that is on the cover of every newspaper and magazine, and is the centerpiece of the zeitgeist as the future of media"-suddenly Google was widely perceived as a media company. By 2006 and into 2007, Grouf said, Google was battling with television and newspapers and book publishers and Microsoft and eBay and advertising agencies. "It's hard to compete on all fronts. And people start to whisper: 'These guys have gargantuan ambitions.'"

IN NOVEMBER, the FTC held a two-day town hall meeting on privacy, a series of tame panel discussions that became more a seminar than an inquisition, disappointing Jeff Chester. The commission decided that the often-baffling issue of privacy would be excluded from the decision of whether to approve Google's acquisition of DoubleClick. The focus, instead, was on whether the marriage was anticompet.i.tive. It was difficult to argue that the merger harmed compet.i.tion when, within months, companies such as Microsoft and Yahoo and AOL and the WPP all acquired digital advertising companies of their own. The FTC prefers "to wait for a violation before we act," an agency official said on the eve of the approval of the merger. The EU did compel Google to make concessions and to tighten its privacy policies, but it, too, would approve the merger.

By mid 2007, Google was worried about the many restive bears it had provoked. It began to reach out to Was.h.i.+ngton. To allay privacy concerns, the company announced that it would reduce from two years to eighteen months the information it keeps in its database about the Web search histories of its users. Claiming that privacy laws were out of date, Google put out a press release proposing uniform international privacy rules and perhaps laws that recognized how the Internet and technology posed new privacy challenges. Instead of one "uber cookie" that permanently tracks a user, Google said it was experimenting with "crumbled cookies" that would disappear over time.

The public battles probably made Google's executives somewhat wiser. Google was only guilty, they believed, of naivete, not arrogance. "The product brand was very strong," said Alan Davidson, Google's senior director of government relations and public policy, who is a computer scientist as well as a lawyer and who oversees Google's Was.h.i.+ngton office. "The political brand was very weak. Because we were not here to define it, it was being defined by our enemies." He paused a moment, and added, "Enemy "Enemy is a strong word. It was being defined by our compet.i.tors." Gigi Sohn, the president and cofounder of Public Knowledge, a nonprofit organization that lobbies for both an open Internet and more balanced copyright laws, said that like many Silicon Valley companies, Google chose to have a smaller presence in the nation's capital. But Google was more extreme, she said. "They were almost alone among Silicon Valley companies in failing to recognize that you have to play in the sandbox. If you want progressive spectrum policies, the free market does not ensure that." is a strong word. It was being defined by our compet.i.tors." Gigi Sohn, the president and cofounder of Public Knowledge, a nonprofit organization that lobbies for both an open Internet and more balanced copyright laws, said that like many Silicon Valley companies, Google chose to have a smaller presence in the nation's capital. But Google was more extreme, she said. "They were almost alone among Silicon Valley companies in failing to recognize that you have to play in the sandbox. If you want progressive spectrum policies, the free market does not ensure that."

Google's one-man operation in Was.h.i.+ngton expanded in 2007 to include twenty-two staffers. Among them were Jane Horvath, a former senior privacy attorney in the Bush administration's Justice Department; Johanna Shelton, former senior counsel to Democrat John Dingell, then chairman of the House Energy and Commerce Committee; Robert Boorstin, a former speechwriter for President Bill Clinton; and Pablo Chavez, former chief counsel to Republican senator John McCain. To advance its Was.h.i.+ngton agenda, Google had established its own PAC (NETPAC), and soon hired three outside firms to lobby on its behalf: the mostly Democratic Podesta Group; King & Spalding, where Google relied on former Republican senators Connie Mack and Dan Coats; and Brownstein Hyatt Farber Schreck, which had recently hired Makan Delrahim, a former deputy a.s.sistant attorney general who'd been in charge of the Ant.i.trust Division in the administration of George W Bush. "We've been under the radar, if you will, with government and certain industries," observed David Drummond, the Google senior vice president who oversees all of the company's legal affairs and policy interaction with governments. "As we've grown, we're engaging a lot more."

The most immediate concerns of Google's Was.h.i.+ngton office were the privacy issues raised by the acquisition of DoubleClick. By the end of 2007, Google was battling the image that it was the Microsoft of 2000. "No question that people here regularly discuss Microsoft's experience and use that as a cautionary tale," said Elliot Schrage, the vice president of global communications and public affairs. On the subject of Microsoft, Brin said, "Microsoft is a bit of an unusual company. They don't seem to like any of us being successful in the technology s.p.a.ce."

So Google sought to demonstrate that it was reaching out to media companies as well as to Was.h.i.+ngton. To preserve copyrights, YouTube announced that it was testing new antipiracy software to block unauthorized content from being uploaded and viewed. In an ec.u.menical spirit, the word partners.h.i.+p partners.h.i.+p was constantly invoked by Google executives. Repeatedly, they celebrated its "more than 100,000 partners," the more than three billion dollars it then distributed annually to Web sites and mostly small business partners in its AdSense program. As 2007 progressed, said General Electric's Beth Comstock, relations with Google thawed and by summer, G.E.'s NBC negotiated for Google to sell some of the network's remnant ads. "In the end, I was less concerned that Google was out to replace our entire sales force," she said. was constantly invoked by Google executives. Repeatedly, they celebrated its "more than 100,000 partners," the more than three billion dollars it then distributed annually to Web sites and mostly small business partners in its AdSense program. As 2007 progressed, said General Electric's Beth Comstock, relations with Google thawed and by summer, G.E.'s NBC negotiated for Google to sell some of the network's remnant ads. "In the end, I was less concerned that Google was out to replace our entire sales force," she said.

Google, however, was still clear-eyed about the inevitable gap between its engineers and traditional media. Google's engineering prowess would, inevitably, make the consumption of media and the selling of advertising more efficient, Larry Page told me one afternoon as we sat in the small, bare-walled conference room steps from his office. So was it inevitable, I asked, that "Google would sometimes b.u.mp into traditional media?"

Without hesitation, he corrected me. "I would say, always," he said in his deep baritone, emitting a subdued chuckle. His was not a boast; rather, it was a candid recognition of reality. He believes Google's engineers can eradicate most inefficiencies if given the time and resources.

Page had reasons to feel confident. Google had a great year in 2007. Measured by growth, it was Google's best year, with revenues soaring 60 percent to $16.6 billion, with international revenues contributing nearly half the total, and with profits climbing to $4.2 billion. Google ended the year with 16,805 full-time employees, offices in twenty countries, and the search engine available in 117 languages. And the year had been a personally happy one for Page and Brin. Page married Lucy Southworth, a former model who earned her Ph.D. in bioinformatics in January 2009 from Stanford; they married seven months after Brin wed Anne Wojcicki.

But Sheryl Sandberg was worried. She had held a ranking job in the Clinton administration before, joining Google in 2001, where she supervised all online sales for AdWords and AdSense, and was regularly hailed by Fortune Fortune magazine as one of the fifty most powerful female executives in America. Sandberg came to believe Google's vice was the flip side of its virtue. "We're an engineering company in that products come first," she said. "A lot of the reason we're winning is because our engineering is better." Reminded that she once was quoted as saying Google made a mistake in not speaking to publishers and answering their questions before announcing plans to digitize all books, she added, "Sometimes we make mistakes here because we move too quickly" magazine as one of the fifty most powerful female executives in America. Sandberg came to believe Google's vice was the flip side of its virtue. "We're an engineering company in that products come first," she said. "A lot of the reason we're winning is because our engineering is better." Reminded that she once was quoted as saying Google made a mistake in not speaking to publishers and answering their questions before announcing plans to digitize all books, she added, "Sometimes we make mistakes here because we move too quickly"

Eric Schmidt would, inadvertently, prove her point. In August 2007, he piloted his Gulfstream G550 to Aspen, Colorado, to give the keynote speech at a dinner held by the free-market oriented Progress and Freedom Foundation. In the speech, he described four "basic principles," as he referred to them, that he believes are vital for media and tech companies to embrace: freedom of speech, universal broadband access, net neutrality, and transparency. Missing from his prepared remarks were thoughts about privacy and copyright-and how far Google might push the permissible boundaries. (When, for instance, does antic.i.p.ating a user's wants become an intrusion? When does fair use become copyright infringement?) A few weeks later, seated in his tiny conference room on the Mountain View campus, I discussed that speech with Schmidt. Why, I asked, didn't he mention privacy in his Aspen talk?

There was a long pause before he said, "No particular reason. It's sort of a given. If we violate the privacy of our users, they'll leave us."

And why no mention of copyright?

"Maybe it was the alt.i.tude! I was just chatting away." Besides, he said, copyright "was not an absolute right" and had to be balanced by fair use.

Isn't it true that Google wants to push the envelope on privacy and copyright?

"That's probably correct," Schmidt conceded. "If there's a legal case, we're going to favor the legal one that favors users."

"Google, if it were a person, has all the flaws and all of the virtues of a cla.s.sic Silicon Valley geek," said Columbia's Tim Wu, who between jobs teaching law worked for a spell in the Valley. "In some ways, they are very principled." He cited Google's 20 percent time, saying that few "money-crazed companies would allow" such a thing. "But they have this total deaf ear to certain types of issues. One of them is privacy." Why? Because, he said, "They just love that data because they can do neat things with it."

CHAPTER ELEVEN.

Google Enters Adolescence (2007-2008).

For all its democratic ethos, its belief in "the wisdom of crowds," at Google the engineer is king, held above the crowd. The vaunted 20 percent time that is parceled out selectively by management to nonengineers is given universally to the half of Google employees who are technically trained. Salaries for engineers are relatively modest-a beginning engineer starts at around $100,000 (versus about $50,000 for nonengineers), and rises to about $300,000, including a bonus-but stock rewards are extravagant. Google rewarded its employees with $868.6 million in stock in 2007, a one-year increase of more than 90 percent.

The importance the company attaches to engineers is spotlighted by the time Google's founders and CEO Schmidt devote to meetings with them. Their Tuesday, Wednesday, and Friday afternoons are crammed with Google Product Strategy (GPS) reviews. Teams made up mostly of engineers meet in a long, dimly lit, low-ceilinged conference room named Mar rakesh, on the second floor of Building 43, next to the office that Page and Brin share. Industrial gray carpet covers the floor and melts into the gray walls. A ma.s.sive, pale oak custom-made rectangular table stretches almost the full length of the room; at one end are billowy red-velvet couches, and at the other, large, flat LCD screens. Whiteboards line the walls. There are two projectors, so time is not wasted unloading and reloading projectors during multiple presentations, and all cables and wires are color coded to minimize time locating the right connections for laptops and other electronic devices.

Meetings last from fifteen minutes to two hours, and are scheduled one after another, like airport takeoffs and landings. "If you want to talk to Larry or Sergey, you can at one of these meetings," said Vice President Megan Smith. "If you work at another company, can you get to the CEO within seven days? Probably not." Often at these meetings, said Tim Armstrong, "Larry is going to take one side of the argument and Sergey is going to take the exact opposite side, and what you're going to see is that everyone is going to argue in the middle and at some point it is going to be clear what the answer is." This is a process that allows Page and Brin to learn, he said, "who comes to the meeting prepared" and who has the pa.s.sion and guts to challenge them.

A meeting on October 9, 2007, did not quite follow this pattern. Brin and Page were to meet with an engineering team to review their proposal for an upgrade of AdWords 1.0. Since its introduction in early 2002, some parts of AdWords had been substantially upgraded while others had not. Small businesses complained that the system was too complicated. Larger customers, such as eBay or Amazon, complained that they wanted new features, including an ability to organize their accounts by products and to break out expenditures by country. To make these functions work, Google needed to enlarge its computers that retained data and enhance the speed of the advertising auctions. To demonstrate their commitment to a new architecture, the founders decided to skip 2.0 and christened this effort AdWords 3.0. The purpose of this session was to receive, and review, the new product teams' recommendations.

Everyone around the conference table sat on gray-mesh ergonomic swivel chairs. Page was wearing his usual jeans, and a gray T-s.h.i.+rt under a black sports jacket; he sat in the middle of the table, a coffee cup in hand. Brin arrived a few minutes late in jeans and a black crewneck sweater, and plopped in the seat beside Page. More nattily attired in a blue V-necked sweater over a light blue dress s.h.i.+rt and gray slacks, Schmidt sat at the head of the table with a translucent container of salad and a Diet c.o.ke. Schmidt opened the meeting by calling on the team leader, vice president of engineering Sridhar Ramaswamy, to describe the teams' recommendations.

The upgraded system they proposed, said Ramaswamy, would be less complicated for advertisers, would produce search results faster, and would be "scalable" in that it would allow for the retention of more data. But, he cautioned, it was not quite the gut renovation that had been requested; it would be too expensive and require diverting too many engineers to both speed up AdWords, as Page had urged them to, and to make the sweeping computer changes needed to accommodate Page's database growth projections.

To a nonengineer, the hour-long discussion was often incomprehensible-"three-tier architecture," "middle-tier API," "UI tier," "end-to-end solutions," "no latency," "Java script bindings for third parties," "10 percent CTR," "SQL base." But no translator was required to observe that Page and Brin were unhappy. At first, the founders were stonily silent, sliding lower in their chairs, and occasionally leaning over to whisper to each other. Intermittently, Page looked away from the engineers; Brin, appearing alternately distracted and irritated, would rise and stretch his legs on the empty chair beside his. Schmidt began with technical questions to the product team, but then he switched roles and tried to draw out Page and Brin, saying, "Larry, say what's really bugging you."

The room was quiet for perhaps ten seconds before Page responded. When he did, he scolded the engineers, saying they were not ambitious enough. Brin concurred, adding that the proposal was "muddled" and un-Google-like in its caution. "I named this 3.0 for a reason," Page interjected. "We wanted something big. Instead, you proposed something small. Why are you so resistant?"

The engineering team leader held his ground. Ramaswamy said that his entire team concurred that the founders' proposed changes would be too costly in money, time, and engineering manpower. Page countered that a significantly improved AdWords would make it easier for advertisers and result in greater revenues. "You are polis.h.i.+ng up the program. I wanted to have a redesign."

Schmidt stepped in to summarize their differences. He noted that Brin and Page were focused on the outcome, while the product team focused first on the process, and concluded that the engineering improvements would prove too "disruptive" to achieve the goal.

Brin said that neither he nor Page wanted to add patches to the system, something Microsoft has been criticized for when they stuff more code into their already bloated operating system. "I'm just worried that we designed the wrong thing," Brin said. "And you're telling me you're not designing the optimum system. I think that's a mistake.... I'm trying to give you permission to be bolder."

Schmidt achieved a cease-fire by asking the product team to make its slide presentation. It demonstrated how the new product would actually work for advertisers, allowing them to manage their accounts. The discussion now went round and round with Schmidt finally stepping in to summarize the technical changes that would be made, the engineering challenges, the different approaches proposed by the team and by the founders. As he spoke, I kept wondering: When Terry Semel was CEO of Yahoo, or John Sculley CEO of Apple, could either of those nonengineers understand what their engineers were saying? Could they challenge them? (I would ask this question of Semel, who said the Yahoo founders, Jerry Yang and David Filo, both engineers, often accompanied him to similar meetings. Besides, he said, "I'd make people describe things in Englis.h.!.+") Semel brought good judgment and people skills to Yahoo when he arrived in 2000, but the question begs to be asked: Did Yahoo slip technologically because the CEO could not wrap his brain around the technology? Was that why Apple slipped technologically after Steve Jobs had been fired? (While Jobs does not possess an engineering degree, he seems not to need a translator.) Schmidt, sensing that a resolution was not possible at this Google meeting, told the product team to report back with a detailed design "which is responsive to Larry and Sergey's criticism," one that laid out "what it takes to build a good product," and what it would cost in time and money. He took care to balance this rebuke with praise: "But this is very well done. I love it when people show me the flaws in our products."

Neither founder was happy after the meeting. "I hope they try to do something a little more ambitious," Brin said two days later. He compared the project to renovating a house. "Once you get into it, you know it's going to take some time and effort, so you may as well do as good a job as you can. We prefer not to do too many small things when we know where we'd like to get to." Page was disappointed in what he described as the engineering team's "self-imposed, bureaucratic response." He sounded harsh, and a few seconds later he softened his words: "It's hard when you're so focused to see the big picture. It's sort of easy for us. We just say, 'If you're going to make changes at that rate, we're going to go out of business. It's just not OK. It's all of our revenue. We're obviously doing some things wrong. We need some sort of reasonable plan to fix these things in our lifetime. Our lifetime means years, not multiple years.'" Ultimately, Ramaswamy and his team came back with an AdWords 3.0 proposal that went more than halfway toward the one proposed by the founders; Google has been rolling out the new system in stages.

THE MEETING DEMONSTRATED that the ethos that had launched the Google rocket-to shoot for the moon, not the tops of trees-was intact, no matter how much the company had grown. Page and Brin's pa.s.sion for technology was apparent, as was the way they push engineers to act boldly. At meetings they feed off each other, punis.h.i.+ng engineers and product managers who think they have devised a "new" solution when, the founders say, they have merely devised a "cute" solution, not a fundamental one. Or as Schmidt said, "They think about what should be, and they a.s.sume it is possible."

Page describes his and Brin's role as supplying the "big picture," and by way of ill.u.s.trating what he sees as a management rather than a technological innovation, he cites the work of Gordon Moore at Intel and his Moore's law. "People think it's this wild statement about how the universe is, but it's actually a management innovation. Moore's law was a statement saying, 'We're going to double the performance [of integrated circuits or computer chips] every eighteen months, and let's get organized to do it.' They spent billions of dollars doing that. If you didn't have Moore's law, you wouldn't have that advancement. It's actually causal in another way." The management pressure to double performance helps a.s.sure it.

IN SPITE OF GOOGLE'S RAPID GROWTH, or because of it, by 2007 the company had become a target for lawsuits and sneers. Leading the chorus was Microsoft CEO Steve Ballmer. In 2007, he had labeled Google "a one-trick pony," and had derided the company at nearly every public opportunity since, telling reporters, "they have one product that makes all their money, and it hasn't changed in five years.... Search makes ninety-eight percent of all their money." Irwin Gotlieb, who is not in Ballmer's adversarial camp, nevertheless shared the view that Google's attempt to broaden its reach had been a failure. "Google is extremely good with search," he said. "They are good with AdSense. They are not as good with display advertising. I believe they've lost a fortune on selling radio ads, they've lost a fortune on selling print ads, and they are now losing a fortune on selling television ads." Tad Smith, the CEO of Reed Business Information, which produces eighty publications and Web sites, asked, "Where is the new pony? Apple came up with a new pony, the iPod and iPhone. Microsoft came up with Office. Google is throwing a lot of things against the wall, and so far only one has stuck to the wall. And Google's search growth will slow."

Eric Schmidt had a ready rejoinder to Ballmer: "I like the trick!" And justifiably so: the trick yielded more than sixteen billion dollars in revenues and four billion dollars in profit in 2007. Schmidt went on, "The Google model is one-trick to the extent that you believe targeted advertising is one-trick." Google now had about 150 products available, and he believed the other efforts-You Tube; DoubleClick; mobile phone products; cloud computing; selling TV, radio, and newspaper ads-could sell targeted advertising. Yet with almost all of its revenues pumping from only one of 150 wells, the question-can Google find another gusher?-was "a legitimate question," as top Google executives like Elliot Schrage conceded at the time.

At the start of 2008 there was evidence that the gusher was tapering off. Search advertising was slowing. In January and February, comScore, a research firm that tracks online activity, reported that Google searchers were clicking on fewer text ads. Wall Street a.n.a.lysts predicted Google's revenue rise would stall, and the stock price dropped; from its pinnacle of $742 on November 6, 2007, it had plunged 40 percent by March 2008. The press, l.u.s.ting for a new narrative, fixed on this one: the Google rocket was cras.h.i.+ng. "Goodbye, Google," read the headline in Forbes.com. Reporters buzzed, incessantly, about dire days ahead. Google was spinning them, they believed, when people like Tim Armstrong explained that the company was trying to make the ads "more relevant" and had deliberately reduced the number of ads appearing with search results to reduce clutter and produce better information. Google said clicks without purchases meant the ads were not useful to the user, so they were eliminated. Reporters were deeply skeptical when chief economist Hal Varian in early 2008 cautioned, "The clicks are not what is relevant. The revenue is." Reporters buzzed, incessantly, about dire days ahead. Google was spinning them, they believed, when people like Tim Armstrong explained that the company was trying to make the ads "more relevant" and had deliberately reduced the number of ads appearing with search results to reduce clutter and produce better information. Google said clicks without purchases meant the ads were not useful to the user, so they were eliminated. Reporters were deeply skeptical when chief economist Hal Varian in early 2008 cautioned, "The clicks are not what is relevant. The revenue is."

But events would demonstrate that the press and Wall Street a.n.a.lysts are often handicapped by two imperatives: don't be late with bad news, and don't be the lone blackbird left on the pole. In April 2008, when the company released its first-quarter results, the narrative changed. Google's revenues had surged 42 percent compared to the first quarter of 2007; its profits had jumped 30 percent, and as Varian had suggested, its ad clicks had risen 20 percent. "Google Inc's Go-Go Era Apparently Isn't Over," said a report in the Wall Street Journal. Wall Street Journal. The The Times Times headline was: "Google Defies the Economy and Reports a Profit Surge." As the report showed, Google hogged three quarters of all U.S. search advertising dollars, compared to only 5 percent for Steve Ballmer's Microsoft. headline was: "Google Defies the Economy and Reports a Profit Surge." As the report showed, Google hogged three quarters of all U.S. search advertising dollars, compared to only 5 percent for Steve Ballmer's Microsoft.

Yet Ballmer had a point. Google had not figured out how to make money on its surfeit of products. YouTube accounted for one of every three videos viewed online, three billion of the nine billion viewed in January 2008. The impact of this new medium would forever change the way politics are conducted. Seven of the sixteen candidates who ran for president in 2008 announced their candidacies on YouTube, and more people saw a taped version of the July 2007 Democratic presidential debate there than live on CNN. YouTube succeeded in democratizing information. It became a viral hub where a candidate's flubs or fibs were exposed by a video. When Mitt Romney became a born-again crusader against abortion, videos were posted of the former governor of Ma.s.sachusetts championing a woman's right to an abortion. Overseas, when Venezuelan strongman Hugo Chavez shut down El Observador, El Observador, an opposition newspaper, it began broadcasting on YouTube. an opposition newspaper, it began broadcasting on YouTube.

However, YouTube made no money. Its bandwidth and computer costs were steep, and it paid for some of its content. Three senior Google executives with knowledge of these figures said at the time that YouTube would lose money in 2008, and these losses would grow in 2009, with revenues initially projected at about $250 million and losses totaling about $500 million. There were those, like Gotlieb, who believed "they'll never make money on YouTube." He thought online display ads would annoy viewers, and that most advertisers sought predictably ad-friendly settings for their ads, something a site dominated by user-generated content could not ensure. Like many Valley start-up founders, Chad Hurley and Steve Chen believed, as Google's did when they launched, that if they first built traffic, money would follow. By February 2008, Schmidt said he had summoned teams from YouTube and Google to "start working on monetizing it."

"You didn't tell us to work on it," a surprised Hurley said, recalled Schmidt.

"Well, times have changed," said Schmidt.

Schmidt was not unhappy with YouTube or its founders. He believed YouTube was becoming nearly as ubiquitous a Web activity as e-mail. But Schmidt wanted a business plan; he announced that his "highest priority" in 2008 was to figure out a way for YouTube "to make money." He knew that online video ads had to be different from television ads. Ads that appeared before a video started would be annoying. Internet users wanted to see the video as soon as they clicked on it. Thirty-second ads anywhere in an online setting were too long. The ads couldn't feel like an interruption, certainly not a long interruption. Schmidt's joint teams came up with several novel advertising schemes. Schmidt said he didn't know if they'd work, but "if any of them hit, it is a billion-dollar business. Of course, it's now zero." To minimize insecurity at YouTube's headquarters in San Bruno, he dispatched Coach Campbell to visit regularly and to calm the troops and help coax a monetization plan.

There was another potential cash cow to pursue. In 2007, Google began to aggressively move to claim a slice of the mobile phone business, which then counted three billion users worldwide-three times the PC market-a number Schmidt expected to grow by another billion in four years. The success of Apple's revolutionary iPhone, with its easy access to the Internet, was an eye-opener: the iPhone delivered fifty times more search queries, Google found, than the typical so-called smartphone. A mobile device was no longer just a telephone or a PDA, and portable access to the Internet advanced Google's interests; the more people went online, the more Google benefited.

But Google was frustrated that many of its programs functioned poorly on mobile phones. They were frustrated that telephone companies, not consumers, decided which applications would appear on their mobile phones. "As compared to the Internet model, where we've been able to make software that basically is able to run everything and works for people pretty well, it's been very difficult to do that on phones," Page said. Google's mobile quarterback was Andy Rubin. A former Microsoft employee, Rubin had left to cofound a mobile software company called Android, which Google had acquired in 2005. As the senior director of mobile platforms for Google, Rubin set out to make Android an open-source operating system-open to improvements from any software designer because the source code was visible, not proprietary, and peers could collaborate to offer and improve different software applications. This was a direct a.s.sault on the telephone companies, which policed what software applications could be displayed for consumers.

Rubin likened the current mobile market to what happened in the early eighties to PCs. Original hardware makers, such as w.a.n.g or DEC, were supplanted by IBM, which in turn was supplanted by the manufacturers of clones. As the hardware became commoditized, the price of the PC dropped. At the same time, the cost of the software rose, because a single company, Microsoft, controlled it. "Unless there is a vendor-independent software solution," said Rubin, expressing the ethos not just of Google but of the Valley culture at large, "the consumer isn't going to be well served. What I mean by 'vendor-independent' is you can't have a single source. Microsoft was a single source. What Android is doing is trying to avoid what happened in the PC business, which was to create a monopoly." That is why, he said, Android is an open-source system that "no single ent.i.ty can own." He is openly disdainful of phone companies like Verizon and AT&T, though he doesn't name them, and obviously feels the same way about Apple's closed iPhone system. "The thing I carry around in my pocket every day," he said, gripping his yet to be released Android phone manufactured by T-Mobile, "is as powerful as the PC was five years ago. So how can I take advantage of that and make it do what I want it to? I'm the one who paid for it! Just because I have a service plan with some whacky wireless carrier doesn't mean they get to dictate what I do with my product that I paid for. Another thing: It shouldn't cost four hundred dollars. That's absurd. If you add up all the components, somebody is making a lot of money."

For Google, Android represented a perfect storm-its idealistic desire to promote an open, more democratic system meshed with its business interests. The more people who had access to the Internet, the more Google searches or Google Maps would be used, and the more data collected. And those using the Android operating system for mobile phones might also use it for their laptops, allowing Google to charge for this software or share in the mobile ad revenues.

There was another issue to be addressed with mobile phones: spectrum s.p.a.ce. All radio frequencies-whether for cell phone calls, broadcast television or radio signals, or other wireless devices-travel over spectrum s.p.a.ce that is a.s.signed and regulated by the Federal Communications Commission. Google lobbied to ensure that the new wireless s.p.a.ce would be open and not controlled by just a few telephone giants. Ivan Seidenberg, the CEO of Verizon, disputed Google's contention that his was a closed system: "Since we think we have the most reliable network, we'll publish standards and let people connect to any device they want to." The FCC sided with Google, and in July 2007 ruled that the telephone companies could not control what applications were used on this new spectrum. Soon after the FCC announcement, Google raised the stakes by threatening to bid in the January 2008 spectrum auction, establis.h.i.+ng itself as a telephone company.

Google had no intention of providing telephone service or producing hardware for a Google phone. They would not say this publicly, however, because by fanning speculation-and the speculation was incendiary-they kept people guessing and increased their leverage over the wireless telephone companies. They also brought themselves closer to achieving three objectives: to make Google programs, including such new features as voice search, work on wireless devices; to reduce the cost of mobile phone service and Internet connections by allowing advertisers to subsidize them; and to extend to mobile devices the company's dominance in online advertising. Google believes that ads on mobile devices could fetch premium prices. With GPS positioning married to Google's immense database, an advertiser could know who purchased cashmere sweaters or golf clubs and if a consumer was outside a store that had a special sale on, an alert could appear on the mobile screen informing her. Because this would be what advertisers and Google excitedly describe as "a service" or "information" rather than a traditional ad, the hope was that consumers wouldn't be annoyed by these intrusions. In November 2007, Google announced that it was working with thirty-three corporate partners, including T-Mobile, Samsung, Intel, and eBay, to launch Android as a free operating system.

In the auction, few companies could match the financial bids made by the giant telephone companies. Google could, though, and to enter the mobile phone business and ensure that Android would work seamlessly, they needed to. But Google didn't want to become a telephone company. So it made a let's-hope-we-lose floor bid of $4.6 billion for a block of wireless spectrum, conditioned on the FCC's agreement to guarantee that the winner of the auction open its hardware and services to third parties.

Of course, Google's mobile phone ambitions would collide with powerful telephone companies and with Nokia, the world's number one mobile phone manufacturer. They were allied in fear that their business model was under a.s.sault. They worried that their dominance would be diminished. Who would receive the advertising revenues? Who would claim owners.h.i.+p of the valuable data generated? Would their own hardware be cloned, like PCs? "Now that they want to dominate the planet on phone calls," Seidenberg said of Google, "they've provoked the bear."

Neither Seidenberg nor representatives from AT&T or Nokia joined in Google's November announcement of the first truly open mobile operating system. A traditional Google corporate ally, Steve Jobs, also did not join because Apple's iPhone provides a mobile operating system, one less open than Google's. This was a little clumsy, because half of Apple's eight directors serve as Google directors or advisers, among them Eric Schmidt, Bill Campbell, and Al Gore. At Apple board meetings, Schmidt told me he now recused himself from mobile phone discussions.

In the auction, that commenced in January, all bidders were instructed not to reveal their bids. When it was over, Verizon and AT&T had won, paying a total of $16.2 billion for two wide swatches of spectrum. In an April "all hands" meeting with Google employees, either attending or on a video hookup, Schmidt confessed, "We had the very good fortune of entering the spectrum auction for $4.6 billion, and not winning. We sweated it out!" Both Verizon and AT&T would pledge to open their networks. AT&T announced that it would sell phones with Google's Android system, and Verizon announced that it was open to consider any Android prototype. (By the summer of 2009, Verizon had yet to submit an Android application; nor had any phone company, save T-Mobile.) One former federal official was cynical about what he called Google's "fake bid." He believed Google had a sweetheart deal with Verizon, that the telephone company knew all along Google would not make escalating bids and that all Google really wanted was a.s.surance that Verizon would open its system to Android. He was dubious that Verizon's system would be open for anyone but Google.

BY THE SPRING OF 2008, Google was buoyant. Rejecting the one-trick pony charge, Schmidt said that with mobile phones, plus search, plus its array of software products, and YouTube, he explained why it was conceivable that Google could become the first media company to generate one hundred billion dollars in revenues. He described to me "a planning process where we said, is it mathematically possible for Google to become a hundred-billion-dollar corporation? And not over any particular period of time, just, is it possible, are the markets big enough?" He estimated the annual worldwide advertising market as "somewhere between seven hundred billion and a trillion dollars. Is it possible for Google to become ten percent of that? And the answer is yes, over a long enough period of time."

How?

"First place, you're not going to get there with small little advertising deals. You need these big initiatives ... the number one big one right in front of us is television. Big market, well monetized, easily automatable. Second one is ... mobile." The third was "enterprise," by which he meant web-based services-"cloud computing"-offering various software applications and IT services for corporate customers, organizations, and individual consumers.

Brave words, but throughout 2008 Schmidt's company made no money from its mobile or YouTube or cloud-computing efforts. Google did not let up. It was still talking to cable companies, Schmidt said, about partnering to target advertising for cable's digital set-top boxes, and for Android to become the operating system for cable mobile phones-should cable decide to enter the thriving wireless market. Google joined with cable companies, Intel, and wireless providers, such as Sprint Nextel Corporation, to invest a total of $3.2 billion in WiMAX, a technology promising faster wireless connections to the Internet than those offered by Verizon and AT&T.

Jeffrey L. Bewkes, the CEO of Time Warner, acknowledged his company's discussions with Google and laid out the reasons they had not yet been resolved and might not be. On the one hand, he said, unabashedly, if the cable companies could get together they would have "a Google-type ability to do targeted digital advertising." Google, he said, "has the search data and the cookies through its searches. But the cable companies not only have that, they have everything that you do on your cable broadband connection, they've got everything you've signed on and saw. And they have everything you watched on television. And they've got their customer's name and credit card information." On the other hand, he sighed, the cable companies have a difficult time acting in concert, and the data is useful only if they aggregate it. That's where Google has the advantage. It is willing to organize cable companies' data, combine it with its own, and extend it to all mobile devices. Which begs another question, he said: Who owns the data, the cable company or Google? And if the cable companies let Google in the door and grant them access to its data, "you can never build an alternative because Google's will always be that much more efficient."

Cloud computing was another new Google initiative. Like other corporate giants with ma.s.sive data centers and servers-IBM, Amazon, Oracle-Google was intent on launching its "cloud" of servers. The cloud would allow a user to access data stored in the Google server from anywhere; it would reduce corporate costs because companies could outsource their data centers; and it would subvert more expensive boxed software sold by Microsoft and spur the development of inexpensive netbooks whose applications are stored in the cloud. Because all these software applications can function on a browser, escaping the dominance of Microsoft's operating system, in the future, said Christophe Bisciglia, the twenty-eight-year-old chief of cloud computing, "The browser becomes the operating system. Applications have outpaced browsers, which is why we did it"-introduced a Google browser in 2008.

While cloud computing offered consumers portability, it potentially offered them less control. Just as a consumer loses access to the Internet every time a broadband connection is down-for instance, when YouTube was silenced for several hours on February 24, 2008, when the government of Pakistan tried to block a YouTube video critical of Islam and wound up shutting down the worldwide video service, or when Gmail's one hundred million users were disrupted for just over three hours exactly one year later, on February 24, 2009, or when Google search and Gmail went dark for an hour on May 14, 2009. "We're sometimes going to have problems," Bisciglia admitted, "just as we do when our hard drive crashes."

And what is the business plan?

"The more people on the Internet, the more clicks our ads get," Bisciglia said.

While these aggressive Google efforts resemble those of other corporations' always angling to continually grow profits, they were also reminders of the "Don't be evil" idealism that animated the company. In its annual letter to shareholders released on the last day of 2007, Google announced it was entering the energy sector, investing tens of millions of dollars in new technologies with the goal of making renewable energy cheaper than coal-fired plants. "If we are successful," the founders declared, "we will not only help the world, but also make substantial profits." Their profits would rise because the energy costs to operate Google's data centers would fall. They acknowledged that solar power is "more expensive," yet vow to use it to power a third of the Googleplex and to subsidize it for seven years. Consistent with their fervor to spare the environment, Page and Brin made personal investments in Tesla Motors, a Valley company intent on producing an electric sports car.

They established a philanthropic arm, Google.org, and recruited an esteemed epidemiologist and world health expert, Dr. Larry Brilliant, to run it. They pledged to divert to this foundation one percent of Google's profits, with three goals: to ascertain the quality of water and health care and other services country by country; to gather enough information to try to predict and prevent catastrophes, whether these be forces of nature or disease; and to make energy-renewable investments. Page and Brin sound more like social workers than hardheaded businessmen when they extol Google Earth as a vehicle to spot imminent disasters and offer to make "a gift" of this technology to disaster relief organizations. Google put up thirty million dollars to fund the X Prize Foundation's Google Lunar X Prize, which would be awarded to the private team that designs the best robotic rover to traverse the moon's surface and send high definition video images back to earth.

Google also launched Google Health, an effort much like the one announced by Microsoft and by AOL cofounder Steve Case's Revolution Health Group LLC. Each aimed to give citizens a safe place to store health records online and share them with doctors, and search for the best medical advice online. Google recruited Dr. Roni Zeiger, a primary care physician who returned to Stanford for an advanced degree in medical informatics, hoping to devise ways to democratize medical information. He joined Google in January 2006, after a typically rigorous interview. "They asked for my high school grades!" Zeiger laughed. He was dead serious about his mission. "Google gets more health questions than anyone on the planet," he said. Zeiger realized that "Google's skills could help people organize their own health information." He vowed, "We'll never sell anyone's health records." And in a March 2008 speech, Eric Schmidt promised to keep the site free of all advertising.

There is a shared, and perhaps blinding, belief on the Google campus that Google was altruistic, an att.i.tude reflected in "Don't be evil." On a stage he shared with Page at the Global Philanthropy Forum after Google embraced the slogan, Brin declared that '"don't be evil' serves as a reminder to our employees," but it "was a mistake. It should really say, 'Be Good.'"

One can interpret Brin's remarks as a reflection of his idealism, or his naivete-or both. To simply say a corporation should be good ignores the range of choices a company is compelled to make in conducting its business. How "good" was Google when it complied with German laws not to disseminate n.a.z.i literature? Google's searches were following German law, which is good. It was censoring search results, which is bad. When in 2008 Google closed its Phoenix office and laid off a handful of employees because the company did not believe the office was essential, it was being good to shareholders. But those employees most certainly did not see Google's action as good.

BUT THE SPEED OF GOOGLE'S ascent and its expansive commercial ambitions came to overshadow its n.o.ble ambitions. Google grew up very fast. In their first annual letter to shareholders, in 2004, Page and Brin wrote of Google: "If it were a person, it would have started elementary school late last summer, and today it would have just finished the first grade." Three years later, Search Engine Land's Search Engine Land's Danny Sullivan thought Google had prematurely entered its awkward teenage years. "The story of Google today is perhaps the adolescent period they are going through. How do they deal with the challenges of the growth they are going through? You are going to go through this wave of people leaving Google. They don't need to work there anymore. And it's not going to be fun, which will change the culture." Danny Sullivan thought Google had prematurely entered its awkward teenage years. "The story of Google today is perhaps the adolescent period they are going through. How do they deal with the challenges of the growth they are going through? You are going to go through this wave of people leaving Google. They don't need to work there anymore. And it's not going to be fun, which will change the culture."

"Google's become a big company," said Paul Buchheit, who left Google in 2006 to start Friendfeed.com. "It's a very different environment." As with most big companies, he said "priorities become based more on what looks good internally. You become distant from the users. When you get bigger, some engineer comes up with this crazy project, but he's four or five layers from Larry. These layers in between are going to serve up all sorts of weird barriers." There's little incentive, he said, for individuals to innovate because the bureaucracy becomes cautious, overwhelmed with a terror "not to look dumb." Asked for a more concrete example, the engineer who distilled Google into a powerfully simple slogan retreats to this sweeping a.n.a.logy: "It's an entire system. Think about the Soviet Union. They had lots of brilliant people. But there was an economic system there that encouraged certain kinds of behavior. They failed to innovate because the system was wrong." Buchheit's critique is echoed by Scott Heiferman, CEO and cofounder of the social network site Meetup.com, who has hired some former Googlers who left the company because it got too big. "Google did not invent YouTube. They tried and failed with Google Video. Google did not invent Facebook. They tried and failed with Orkut." Aside from search, Heiferman said, "Google has actually failed at most things."

Ask Google executives to describe their biggest future concern, and more often than not they say size. Growing too big and losing focus is Omid Kordestani's foremost worry. At Netscape, he said, the company drifted away from founder Jim Clark's vision of it as a company whose browser enabled Internet communication. "Suddenly we became more of an enterprise company than a Web company, even though we started the browser." When Netscape rushed too quickly to issue an IPO in 1995, he said, pressure was on to generate more revenues, to perform on a very public stage for the press, to "focus on quarter to quarter" performance.

"For the last year my biggest worry was scaling the business," Schmidt said in May 2007. "The problem is we're growing so quickly. When you bring in people so quickly there's always the possibility you'll lose the formula. How do you manage engineering teams that are not on one campus? How do you manage across time zones? How do you keep the culture?"

IN ADDITION TO the natural concerns with rapid growth, critics both inside and outside Google believe the company has real management weaknesses. Paul Buchheit believes Google has succ.u.mbed to the disease of bigness that he says afflicts "every big company" and has become bureaucratic. There are many bottlenecks at Google. A former Google executive criticizes "micro management at the top," and said a prime example is that the founders and Schmidt, or their designees, "have to sign off on each hire. That's OK when you are hiring five new employees." In 2007 and early 2008, Google was hiring 150 people per week. Because most decisions about new employees, deals, or policy "have to go to the top," the process is slowed. Echoing a common thought, an executive who is a Google corporate ally and works closely with them said, "In many ways, it's a very disorganized company. It looks to me like they are caught in this interesting conflict between a company that is overmanaged and undermanaged. They have a control mechanism at the top that has inordinate control. And at the same time, there is too much freedom." He lists two complaints: "You can't get answers out of Google when you want to schedule something," so there are long waits. And "they are structured to allow way too many people to partic.i.p.ate," which results in endless meetings.

The founders get diverted by issues that should not require their attention. Eric Schmidt described a Monday management committee meeting in March 2008 during which they discussed how, under California labor laws, a review was necessary to determine whether their many ma.s.sage therapists should become full-time employees. The significant plus was that they would receive full benefits. The significant minus was that tipping would be prohibited. The issue had first been raised at the TGIF meeting the previous Friday. The founders, ma.s.sage regulars, were agitated. Schmidt, who said he has "never had a ma.s.sage at Google, and never will," was impatient, and blurted, "You guys are in charge of this."

"'We're on it!'" they said.

That afternoon, Page and Brin scheduled another meeting to resolve the issue. "This is where the team really works well," Schmidt explained. "I knew what I wanted, which was to get the h.e.l.l out of the meeting! Larry and Sergey knew they had to get involved in an employee issue." The founders resolved the issue by making them "variable part-time employees" and allowing tipping to be continued as long as it was reported. This incident can be viewed as an example of teamwork; it can also be seen as an example of micromanagement.

The founders' zeal for efficiencies extends to the unusual way they manage their time. They used to share three a.s.sistants. No longer. They share an office on the second floor of Building 43 without secretaries or a.s.sistants to guard the entrance, keep them on schedule, or answer phones (which don't ring anyway). A staircase whose banister is festooned with a large green kite leads from their regular office on the main level to a gla.s.sed loft where they work on desktop computers with oversized screens, circled by unpacked cartons on the floor, a large ma.s.sage chair, and gym equipment so that Brin can stretch his cranky back. A helmeted s.p.a.cesuit with the name Sergey Brin on a breast pouch is splayed on a hanging stand facing the offices below. (Brin has applied and left a $5 million deposit for one of the six seats on s.p.a.ce Adventures' Soyuz Soyuz s.p.a.cecraft's 2012 orbital trip.) Another staircase allows them to slip out of the building and to the parking lot where they daily leave their commuting vehicles, including two Priuses, two $109,000 Tesla Roadster electric sports cars from the company they've each invested in, and a couple of bicycles. s.p.a.cecraft's 2012 orbital trip.) Another staircase allows them to slip out of the building and to the parking lot where they daily leave their commuting vehicles, including two Priuses, two $109,000 Tesla Roadster electric sports cars from the company they've each invested in, and a couple of bicycles.

Asked why they have no a.s.sistants, Page gave a revealing answer. They do have an a.s.sistant "from time to time," he said, but "the amount of time it takes me to actually schedule is not very high because of Google Calendar. Occasionally, I have to go back and forth with somebody, but usually they'll meet when I want to meet anyway. It's not like I have to negotiate very much." He laughed, gently. "I'm not sure it would work for everybody, but for me it's worked pretty well. Also, it's actually allowed me to have more time. People are willing to ask an a.s.sistant: 'Will Larry come and talk at this thing?' But if they actually have to e-mail me about it, they think twice. It's not that anybody in the company can't e-mail me. It's that they realize they shouldn't be using my time that way. So the number of requests I've gotten has gone down, which is kind of nice."

What isn't so nice for Google executives is that they often don't know where the founders are, or if they will attend meetings. Page and Brin resist being tied to someone else's schedule. With no a.s.sistant to contact, the way executives learn if one or both founders will attend a meeting is if they see that Page or Brin has placed the meeting on his online Google Calendar, which senior Google executives share. Sometimes, Schmidt said, the founders show up unscheduled for the wrong meetings. Sometimes they disappear-Larry suddenly to tour a cafeteria to make sure it seats no more than one hundred and fifty, which he insists is the maximum size to inspire a team culture; Sergey or Larry to disappear from the office (if the wind has picked up) to pursue their kite-surfing hobby, which relies on a small surfboard and wind to propel the kite and skim across the water.

Schmidt defends management chaos, or at least a degree of it, as a style that fits the founders, and he offered an ill.u.s.tration. For months he tried to get the founders to craft a corporate strategy memo for the future, believing their "brilliance" produces unique insights. He couldn't pin them down. Finally, on a business trip to Seville, he opened his e-mail and up popped a draft from Brin. "Perfect," he thought, and shared it with Page, who was on the trip. Page made his edits, then Schmidt did some edits and circulated the draft to Google's management with a "What's missing?" note. "Why couldn't I get them to write this in a normal way?" Schmidt asked. "That's not the way their minds work. Their ideas are much better than mine. I can't write the memo, and in that you see why they are the founders."

Whatever their brilliance, each member of the troika running Google has the same liability, said an industry insider who knows them well. "None is an inspirational leader, a great salesman, or a great speaker." Their brilliance and success move people, but not their words or the symbols they evoke. They are not Steve Jobs, not gifted salesmen or evangelical leaders.

Page and Brin differ from Jobs in another significant way. Al Gore, who has had a ringside seat at the management of both Apple and Google, said that he deeply admires the founders of each company, but "a genius like Steve comes along only once in several generations." Jobs has demonstrated his genius over a longer period of time than Page and Brin, he believes, and also has benefited from something the Google founders lack: "Steve has the great if painful experience of failing, and coming back." The wisdom that comes from failure has not yet punched Page and Brin.

It was time in the spring of 2008 for executives to make tough choices among the 150 products Google produced. Why 150 products? "That can be stated as criticism, but it can also be stated as strategy," Schmidt responded. "The goal of the company is customer satisfaction. You should think of Google as one product": customer satisfaction. This response summons memories of Yahoo's famous Peanut b.u.t.ter Manifesto. Composed in November 2006 as an internal memo by Yahoo senior vice president Brad Garlinghouse, it was leaked and caused a stir in the Valley. Garlinghouse wrote: We lack a focused, cohesive vision for our company. We want to do everything and be everything-to everyone.... I've heard our strategy described as spreading peanut b.u.t.ter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.

Search gives Google more of a focus than a self-proclaimed "media company" like Yahoo might have. Yet a departed Google executive, who like many who voice criticism of Google's management chooses to do so anonymously, said, "Google could do fewer products and make less investments. They are doing too many products and peanut b.u.t.tering everything."