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At Google, Innovation Is Not Just Fun, Games

June 12, 2006|Chris Gaither | Times Staff Writer

MOUNTAIN VIEW, Calif. — Eric Schmidt has a message: Don't let the lava lamps fool you. Google Inc. is serious.

As Google's chief executive, Schmidt presides over a headquarters filled with trinkets, pets, free food and bouncy-ball chairs. But the whimsical workplace belies the company's focus on cold, hard numbers.

Schmidt, 51, oversees operations -- a crucial role as the company hires voraciously to improve the search engine and launch a dizzying variety of products, such as the online spreadsheet program released last week.

Along with founders Larry Page, 34, and Sergey Brin, 33, Schmidt has shepherded the company from a money-losing start-up to an Internet giant with a market value of $117 billion in five years. With their holdings each worth billions of dollars, the three executives draw annual salaries of $1.

But rivals such as Yahoo Inc. and EBay Inc. are teaming up to counter Google, even as it increasingly encroaches on the turf of software powerhouse Microsoft Corp. The federal government has pressed Google and other Internet companies to turn over data on users' e-mail and search habits. Newer programs such as Gmail crash often. And a recent internal review found that Google had failed to invest enough resources in its bread-and-butter product: the search engine.

Schmidt -- a former executive at Novell Inc. and Sun Microsystems Inc. -- met with The Times last week to discuss Google's growth strategy and the competition.

Question: We're seeing so many Internet companies forming alliances: Google invested in AOL last year, Yahoo and EBay recently teamed up, Microsoft is trying hard to strike deals. Is the industry maturing?

Answer: The industry is going to develop as a partnering industry, not as a monopoly industry. It will not end up in a structure with one dominant company. It won't be Google and it won't be Microsoft and it won't be Yahoo. It will be a collection of companies.

It's not going to end up in the PC model that everybody talks about. The reason is because the advertising industry, which monetizes it, is not a single-solution space.

After a hundred years of consolidation, the media industries are down to five mega-media companies. It seems like every day you hear some component is sold or purchased or retargeted and transferred from one large company to another.

That's the more normal structure of large industries. We should expect that should be the eventual structure of this industry.

Q: Is Google a media company or a technology company?

A: It's better to think of Google as a technology company. Google is run by three computer scientists, and Google is an innovator in technology in our space. We're in the advertising business -- 99% of our revenue is advertising-related. But that doesn't make us a media company. We don't do our own content. We get you to someone else's content faster.

Q: You're rapidly adding people, real estate, servers and infrastructure. How long do you foresee that happening?

A: We are subject to something called the law of diminishing returns. You can't continue to double between here and infinity. There are no counterexamples in humanity. All business growth rates eventually slow. We don't know whether that's 10 years from now, 20 years, we just don't know. It's not worth predicting.

It's interesting conversation. We can chat about it in the hallway. But in terms of running the business, we're better off to take advantage of the growth now to invest. So we inform our decisions based on our ability to grow our market share and hire great people to solve new problems.

Q: How do you personally oversee that growth?

A: We're very analytical. We measure everything, and we systematized every aspect of what's happening in the company. For example, we introduced a spreadsheet product this week. I've already received my hourly updates on the number of people who came in to apply to use the spreadsheet, the number of people who are actually using it, the size of the spreadsheets.

Q: You're the CEO. Is that important for you to know?

A: Absolutely. Because I want to know how well it's doing. It's a very interesting product. We give the impression that, because of the lava lamps and all the [bouncy] balls, we're not paying attention to these things. And while that's very nice myth-making, it's not true. We are just ruthless with respect to watching all these metrics, so we know what's going well and what's going poorly. You can tell very quickly in an online world.

Q: How do you make decisions?

A: Our culture is a consensus-based culture. If a decision is not forthcoming, then I try to get a decision to come out. In rare cases then I will force a decision.

A traditional company would be hierarchically managed; it would have very clear chains of command. All of these things would be very well articulated. We function more quickly and more creatively in this consensus-driven culture, with a lot of data. Since you asked me specifically what I do: At the end of the day, I catch the ball.

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