Are Google's Best Days Behind It?

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Following, Not Leading

A company with pockets as deep as Google's can shrug off a few such missteps, but not forever. After a while, it's only natural to forsake novelty and take your inspiration from your competitors -- even for a company that prides itself on its engineering culture, as Google does.

Take Google+, for example. It's Google's most buzzed-about launch in recent memory, but it's hardly the company's first foray into social networking. (It's the fourth, if you count Buzz, Wave, and Orkut.) It is, however, the first time Google has unabashedly aped its top rival. The Google+ Stream layout is a virtual clone of Facebook's News Feed -- ditto for its profile pages. Squint your eyes and the Google+ favicon even looks like Facebook's "F."

That's quite a turnabout for Google, which earlier this year accused Microsoft of copying its search results. While imitation may be the sincerest form of flattery, the risk is that users may not find Google's offering sufficiently different enough to switch. So far there has been no mass migration from Facebook; although Google+ gained 20 million users in its first three weeks, its momentum already appears to be slowing.

In its quest for growth, Google may also tend to redouble its emphasis on existing offerings, such as Gmail, YouTube, and especially search. Of the $28.1 billion Google earned from advertising in 2010, two-thirds came from Google's own sites, rather than its ad networks. The risk there is that too much emphasis on its core products could put Google on the same road as Microsoft: For all its recent attempts to innovate in new markets, the Redmond-based giant has never managed to shake its reliance on Windows and Office, which still account for more than half its revenue.

Some critics already see evidence of calcification at the Googleplex. Former Google engineer Dhanji Prasanna describes the company's much-hyped software infrastructure as "10 years old, aging and designed for building search engines and crawlers"; for other purposes, he says, it is "well and truly obsolete." Similarly, Prasanna says the house-built tools that power Google's products are "ancient, creaking dinosaurs" that make prototyping new products excessively difficult.

A Tangled Legal Web

Technology aside, Google's ability to innovate is also constrained by legal concerns. Tech companies are increasingly using the courts as a means to gain competitive advantage, particularly in the more hotly contested markets. As a result, Google and its partners must answer to multiple ongoing lawsuits over patents and other intellectual property.

Google's Android smartphone OS has become a particular snake pit of litigation. Most prominently, Oracle claims Android's Dalvik virtual machine violates several key Java patents and is seeking billions in damages. Meanwhile, Gemalto is suing Google and its partners HTC, Motorola, and Samsung over patents related to its Java Card technology. NTP alleges Google has violated its wireless email delivery patents. Microsoft has signed patent licensing agreements with at least five Android device makers, while Apple is seeking an injunction banning HTC from importing its handsets.

It seems anyone involved with building Android devices can expect to find themselves in court sooner or later, and the patent-licensing toll may soon rise high enough that it negates any cost advantage of the otherwise "free" OS. Google's recent purchase of 1,000 patents from IBM may slow the tide, but won't stem it.

Then there are the antitrust probes. As Google has grown larger and its commanding share of the Web search market has solidified, it has drawn ever closer scrutiny from antitrust regulators, both in the United States and abroad. The Federal Trade Commission has probed Google over its purchase of mobile ad provider AdMob, its acquisition of travel industry software maker ITA, and an ad-sharing partnership with Yahoo. The first two deals were approved; the last was not. The agency now says it is ready to press forward with a more formal antitrust investigation, citing questions about Google's search and advertising businesses. European regulators launched a similar investigation in November.

Individuals Can't Innovate

None of this bodes well if you're a Google staffer with big ambitions. Famously, Google engineers are encouraged to spend 20 percent of their hours working on what they think will most benefit the company, irrespective of their regular duties. But as Google has grown more cautious and its management structure has grown more rigid, 20 Percent Time projects are less and less likely to become full-fledged products. Larger development teams have become the norm, and decisions require countless rounds of meetings and conferences. In 2009, former CEO Eric Schmidt observed, "There was a time when three people at Google could build a world-class product and deliver it, and it is gone."

Little wonder, then, that Google has gradually scaled back its commitment to 20 Percent Time. In 2008, Valleywag reported that managers were curbing the practice when mission-critical projects fell behind schedule. This year Google shut down Google Labs, a hub that allowed the public to experiment with 20 Percent projects and give feedback.

Google insists that the death of Google Labs won't mean the end of 20 Percent Time. Yet a neutered, ineffectual 20 Percent program may be the worst of both worlds. On the one hand, Google has burdened itself with an engineering staff that operates at just 80 percent efficiency, given its growing reluctance to experiment. On the other, engineers whose personal projects go nowhere may resent that their entrepreneurial instincts are wasted at Google. Combine that resentment with inefficiency, micromanagement, overwork, underutilization, and a rising corporate bureaucracy, and they may ultimately seek work elsewhere.

Wars of Attrition

Former CEO Eric Schmidt flatly denies any brain drain at Google, insisting the company's attrition rate remained constant throughout his tenure. But that stability is hard won; in recent years Google has offered hefty raises and six-figure bonuses to stave off its competitors' overtures. In November 2010, it increased its entire pay scale by 10 percent.

Where Googlers go when they leave is no surprise. Many of them turn up at its closest competitors. Microsoft is reportedly engaged in an all-out hiring war with the search giant, as is Facebook, which has poached at least 142 Google staffers, including its top chef. Still others find new homes at startups.

Curiously, throughout it all Google has persisted with some of the most arduous hiring practices in the industry. While lots of tech companies claim to want the best and brightest, Google has refined its screening process to such a degree that some critics feel it may actually be sabotaging its own recruitment efforts. Although Google says it's on a "hiring high," not everyone need apply.

Hiring at Google typically involves multiple meetings with teams of Google staffers, over weeks or even months. Academic achievement is particularly stressed. Even administrative and HR positions are likely to be staffed by graduates of top schools. Interviews focus on brain teasers and mental gymnastics rather than on-the-job experience. Commenters on the career community site describe being asked to show their college and even high school GPAs, despite decades of professional experience. Little effort is made to sell seasoned candidates on a job at Google; often, prospects won't even be told what actual work they're being interviewed for.

A New Page for Google?

All this is in keeping with Google's origins as a Stanford University project, as well as the tone Larry Page has set for the company. Page's predecessor as CEO, Eric Schmidt, liked to joke that he was brought in to provide "adult supervision" for Page and Brin. He was only half kidding.

In meetings, the co-founders have been known to pace the room, climb on furniture, play with Lego, or simply sit silently. During his own first tenure as CEO, the retiring Page reportedly told his PR staff that he would only give them eight hours of his time for appearances and speaking engagements for an entire year. He's also not known for his practicality; once, when told that Microsoft employed about 25,000 engineers, he announced, "We should have a million."

Such eccentricities might be endearing in the founder of a startup, but in the CEO of a multi-billion-dollar public company they inspire little confidence. If ever there was a time that Google needed grown-up leadership, it is now.

Google director of research Peter Norvig describes the search giant's culture as "a cross between a startup and grad school," where employees get the perks of both. But in reality Google is neither. It is a large and growing corporation, with obligations to its shareholders, its customers, and its staff. Among those obligations are to use its resources wisely, to compete vigorously, and to protect the interests of its customers, including their privacy. But perhaps above all else, it must also learn to assess itself honestly and recognize that its days as an arcadia for hacker savants may be coming to an end. It's time for Google to graduate.

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