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> Mr Pichai’s foremost challenge is to prevent Alphabet from becoming what Mr Brin and Mr Page were so bent on avoiding—a “conventional company” that dies a slo

by s1t5 6y ago

> Mr Pichai’s foremost challenge is to prevent Alphabet from becoming what Mr Brin and Mr Page were so bent on avoiding—a “conventional company” that dies a slow death from lack of innovation and declining growth. I don't think that he's succeeding at the innovation part but that won't matter as long as their financials look good.

lalos 6y ago
That and the fact that the financials that look good come from a single faucet (around ~90 percent was ads last time I checked). Sounds like a "conventional company" with a strong cash cow.
- shazow 6y ago
  70% as revenue by Alphabet in 2019, 60% of that from Google and 10% from YouTube. https://dashboards.trefis.com/no-login-required/HMtQjcWW/Alphabet-s-Revenues-How-Does-Alphabet-Make-Money- https://dashboards.trefis.com/no-login-required/HMtQjcWW/Alp...
  - lalos 6y ago
    + 12.5% with Google Network, isn't that ads or am I misreading?
ChuckMcM 6y ago
From the article -- After The Economist went to press Alphabet was expected to report the first year-on-year decline in quarterly revenues in its history, hurt by the pandemic-induced tightening of marketing budgets. I think it is convenient here to blame the pandemic but it will be interesting to see how it plays out.
- asdfasgasdgasdg 6y ago
  > I think it is convenient Did you intend to imply that the revenues would have declined without the pandemic? That seems unlikely. https://www.statista.com/statistics/507742/alphabet-annual-global-revenue/ https://www.statista.com/statistics/507742/alphabet-annual-g... Sorry if I've read you wrong but that is the typical meaning of "convenient" in a sentence like the one you wrote.
  - ChuckMcM 6y ago
    Yes, I did mean to imply that Alphabet's revenues would have declined anyway. I've been watching Google's financials fairly close from when I joined the company in 2006 onward (I left in 2010). The driver of Google's profits has always been search advertising, nothing else in their portfolio has the margins that search ads had at one time. At the time of Bing's introduction (2011) Google's search advertising margin started to fall just as Bing's was increasing. That has continued to this day. To counter that, Google first started taking revenue away from their AdSense sites, then they started adding more paid placement and ads on their own sites, then they started "pre-showing" content in the search results that kept people from going to a web page that might be showing ads[1]. They introduced additional "taxes" (really fees) for people selling things to insure that they appeared in the top third of Google's search results even if they were the best organic result for the product being sold. All of these moves have kept the revenue growing at the cost of increasing user dissatisfaction with the quality of the service. Left to their own devices, users would migrate to other services but here Google has been aggressively paying for search portals (whether explicit "web search" pages, or implicit like a search bar on your phone) to send them traffic rather than send it to Bing. They have spent a record amount of money over the last year buying this sort of traffic. They can't keep paying more for traffic, eventually that gives them negative margins on search ads. While as Bing's cost per click grows they can pay more for traffic and still make their numbers. Google is having a harder and harder time squeezing more ads onto their pages without completely destroying the user experience. This trend means that eventually, they are going to run out of options, and their revenues are going to go down. Look at their financials and they don't have another business unit that can pick up the slack. There hasn't be a particularly novel improvement to search engine ranking over the last 10 years at least, and existing patents on maximizing ad revenues are reaching their expiration date. If Google doesn't find a way to re-invent itself it will go the way of tech giants before it, build a shiny headquarters monument to itself and then expire in a slow and painful death. I used to remind people when I was there that the "plex" was the headquarters for SGI, a Tech Giant before it was dead :-). It will be sadly poetic if Google has to sell off their shiny new headquarters to stay alive another couple of years down the road. [1] Since Google gets paid significantly less for ads on third party pages, even if they supply them, it is a win for them to keep people on Google's internal sites.
MayeulC 6y ago
I'd argue that's what conventional companies do. And is also conventionally the source of their ultimate demise: can't compete with new actors on the market because talent has left the place, so the company has to resort to lawsuits and acquisition until its cash flow dries out with its last cash cow. Arguably, Google still has a lot of in-house talent, but optimizing for the financial aspect usually ties talent down sooner or later.
- scarface74 6y ago
  The issue is that looking from the outside, they have a lot of “smart people” (tm). But not people talented enough to bring products to market that people want. Despite years of trying - almost all of their profit comes from display ads.
  - nerpderp82 6y ago
    If the hn consensus is that ideas have zero value, it should also be that a bulk of smart people also has zero value, in that it isn't the abstract but the concrete. Smart is mostly a bullshit term anyway, we need to be careful and precise in how we use it. Every company has lots of smart people, it is how it utilizes them that concretely matters.
    - scarface74 6y ago
      If you work at a for profit company, your “value” is measured by your contribution to the bottom line in how you help the company make money or save money.
    - Nasrudith 6y ago
      That only follows if smart is confined to pure ideas and none to implementation. The relevant "stable" of smart in that context are ones who can implement ideas successfully. Like the difference between trying to use a bunch of dutch style windmills, lodestones, and copper wire to try to generate baseload power as opposed to modern escalatingly large wind turbines.
  - 6y ago
MrBuddyCasino 6y ago
They write this as if that hasn't already happened. To put it bluntly, Pichai is no Nadella.
- Spartan-S63 6y ago
  Definitely not. This might be revisionist or not correct, but my impression is that Google after Eric Schmidt pivoted from seeing ads as the way to keep the lights on to ads being the core of the business with brief forays into other products/technologies that were analogous to dipping your toe in the water. They’ve jumped in feet first on very few ventures outside of their core business (ad tech) but they still have this air of innovation despite not actually contributing meaningfully to much of anything.
- MisterPea 6y ago
  I agree that it's already happened, but I disagree it's Pichai's fault. A lot of the company direction/culture that was put in place before Pichai was the cause of G to seemingly be behind other tech companies in innovation. Pichai was left with one of the hardest companies to manage imo. On the other hand, I truly believe Nadella was left with a golden basket. A lot of what Ballmer and Muglia left behind actually paved the path for what MSFT is today. Nadella has been excellent in executing the strategy, but in general I feel many people give him a lot more credit than he was responsible for.
  - emsal 6y ago
    I'm definitely not as savvy - can you expound on how the decisions that Ballmer and Muglia made paved the way for Nadella's success?
    - MisterPea 6y ago
      Yep, answered some points here: https://news.ycombinator.com/item?id=24004156 https://news.ycombinator.com/item?id=24004156
  - mav3rick 6y ago
1024core 6y ago
> as long as their financials look good. He's a McKinsey guy. That's all he knows: to make the financials "look good". Look at the Google search results page. It's chock full of ads if the query even remotely looks commercial. Gone are the days of the "10 blue links" and "get you out of here as quickly as possible". Now they want to keep you on Google's O&O properties, so they can sell you more stuff, as each pageview is looked at as an opportunity to show more ads to you.
- langitbiru 6y ago
  I like this term: "He's McKinsey guy". Then I wonder which product person is suitable to lead behemoth like Alphabet. On top of that, do the board trust a product person to become CEO of Google? I think, in mature stage of company, board trust MBA people more than engineers or product people unfortunately.
jayd16 6y ago
>I don't think that he's succeeding at the innovation part Why do you say this? Recent innovations include work in machine learning, Deepmind, a self driving car program, K8s, Go, Flutter, quantum computing chips, and more. Are these too old to count as recent?
- prewett 6y ago
  I'm not sure that a cross-platform GUI (Flutter) really counts as an innovation given Qt, wxWidgets, Tk, Dear ImGUI, and the innumerable largely-unused other GUI toolkits, but I assume the parent is talking about monetized-innovations. Google is doing a great job in CS research but I can't think of a revenue stream that uses one of those. The closest I can think of is voice recognition, but they don't seem to be getting revenue from it.

by s1t5 6y ago

lalos 6y ago

That and the fact that the financials that look good come from a single faucet (around ~90 percent was ads last time I checked). Sounds like a "conventional company" with a strong cash cow.

shazow 6y ago
70% as revenue by Alphabet in 2019, 60% of that from Google and 10% from YouTube. https://dashboards.trefis.com/no-login-required/HMtQjcWW/Alphabet-s-Revenues-How-Does-Alphabet-Make-Money- https://dashboards.trefis.com/no-login-required/HMtQjcWW/Alp...
- lalos 6y ago
  + 12.5% with Google Network, isn't that ads or am I misreading?

ChuckMcM 6y ago

From the article -- After The Economist went to press Alphabet was expected to report the first year-on-year decline in quarterly revenues in its history, hurt by the pandemic-induced tightening of marketing budgets. I think it is convenient here to blame the pandemic but it will be interesting to see how it plays out.

asdfasgasdgasdg 6y ago
> I think it is convenient Did you intend to imply that the revenues would have declined without the pandemic? That seems unlikely. https://www.statista.com/statistics/507742/alphabet-annual-global-revenue/ https://www.statista.com/statistics/507742/alphabet-annual-g... Sorry if I've read you wrong but that is the typical meaning of "convenient" in a sentence like the one you wrote.
- ChuckMcM 6y ago
  Yes, I did mean to imply that Alphabet's revenues would have declined anyway. I've been watching Google's financials fairly close from when I joined the company in 2006 onward (I left in 2010). The driver of Google's profits has always been search advertising, nothing else in their portfolio has the margins that search ads had at one time. At the time of Bing's introduction (2011) Google's search advertising margin started to fall just as Bing's was increasing. That has continued to this day. To counter that, Google first started taking revenue away from their AdSense sites, then they started adding more paid placement and ads on their own sites, then they started "pre-showing" content in the search results that kept people from going to a web page that might be showing ads[1]. They introduced additional "taxes" (really fees) for people selling things to insure that they appeared in the top third of Google's search results even if they were the best organic result for the product being sold. All of these moves have kept the revenue growing at the cost of increasing user dissatisfaction with the quality of the service. Left to their own devices, users would migrate to other services but here Google has been aggressively paying for search portals (whether explicit "web search" pages, or implicit like a search bar on your phone) to send them traffic rather than send it to Bing. They have spent a record amount of money over the last year buying this sort of traffic. They can't keep paying more for traffic, eventually that gives them negative margins on search ads. While as Bing's cost per click grows they can pay more for traffic and still make their numbers. Google is having a harder and harder time squeezing more ads onto their pages without completely destroying the user experience. This trend means that eventually, they are going to run out of options, and their revenues are going to go down. Look at their financials and they don't have another business unit that can pick up the slack. There hasn't be a particularly novel improvement to search engine ranking over the last 10 years at least, and existing patents on maximizing ad revenues are reaching their expiration date. If Google doesn't find a way to re-invent itself it will go the way of tech giants before it, build a shiny headquarters monument to itself and then expire in a slow and painful death. I used to remind people when I was there that the "plex" was the headquarters for SGI, a Tech Giant before it was dead :-). It will be sadly poetic if Google has to sell off their shiny new headquarters to stay alive another couple of years down the road. [1] Since Google gets paid significantly less for ads on third party pages, even if they supply them, it is a win for them to keep people on Google's internal sites.

MayeulC 6y ago

I'd argue that's what conventional companies do. And is also conventionally the source of their ultimate demise: can't compete with new actors on the market because talent has left the place, so the company has to resort to lawsuits and acquisition until its cash flow dries out with its last cash cow. Arguably, Google still has a lot of in-house talent, but optimizing for the financial aspect usually ties talent down sooner or later.

scarface74 6y ago
The issue is that looking from the outside, they have a lot of “smart people” (tm). But not people talented enough to bring products to market that people want. Despite years of trying - almost all of their profit comes from display ads.
- nerpderp82 6y ago
  If the hn consensus is that ideas have zero value, it should also be that a bulk of smart people also has zero value, in that it isn't the abstract but the concrete. Smart is mostly a bullshit term anyway, we need to be careful and precise in how we use it. Every company has lots of smart people, it is how it utilizes them that concretely matters.
  - scarface74 6y ago
    If you work at a for profit company, your “value” is measured by your contribution to the bottom line in how you help the company make money or save money.
  - Nasrudith 6y ago
    That only follows if smart is confined to pure ideas and none to implementation. The relevant "stable" of smart in that context are ones who can implement ideas successfully. Like the difference between trying to use a bunch of dutch style windmills, lodestones, and copper wire to try to generate baseload power as opposed to modern escalatingly large wind turbines.
- 6y ago

MrBuddyCasino 6y ago

They write this as if that hasn't already happened. To put it bluntly, Pichai is no Nadella.

Spartan-S63 6y ago
Definitely not. This might be revisionist or not correct, but my impression is that Google after Eric Schmidt pivoted from seeing ads as the way to keep the lights on to ads being the core of the business with brief forays into other products/technologies that were analogous to dipping your toe in the water. They’ve jumped in feet first on very few ventures outside of their core business (ad tech) but they still have this air of innovation despite not actually contributing meaningfully to much of anything.
MisterPea 6y ago
I agree that it's already happened, but I disagree it's Pichai's fault. A lot of the company direction/culture that was put in place before Pichai was the cause of G to seemingly be behind other tech companies in innovation. Pichai was left with one of the hardest companies to manage imo. On the other hand, I truly believe Nadella was left with a golden basket. A lot of what Ballmer and Muglia left behind actually paved the path for what MSFT is today. Nadella has been excellent in executing the strategy, but in general I feel many people give him a lot more credit than he was responsible for.
- emsal 6y ago
  I'm definitely not as savvy - can you expound on how the decisions that Ballmer and Muglia made paved the way for Nadella's success?
  - MisterPea 6y ago
    Yep, answered some points here: https://news.ycombinator.com/item?id=24004156 https://news.ycombinator.com/item?id=24004156
- mav3rick 6y ago

1024core 6y ago

> as long as their financials look good. He's a McKinsey guy. That's all he knows: to make the financials "look good". Look at the Google search results page. It's chock full of ads if the query even remotely looks commercial. Gone are the days of the "10 blue links" and "get you out of here as quickly as possible". Now they want to keep you on Google's O&O properties, so they can sell you more stuff, as each pageview is looked at as an opportunity to show more ads to you.

langitbiru 6y ago
I like this term: "He's McKinsey guy". Then I wonder which product person is suitable to lead behemoth like Alphabet. On top of that, do the board trust a product person to become CEO of Google? I think, in mature stage of company, board trust MBA people more than engineers or product people unfortunately.

jayd16 6y ago

>I don't think that he's succeeding at the innovation part Why do you say this? Recent innovations include work in machine learning, Deepmind, a self driving car program, K8s, Go, Flutter, quantum computing chips, and more. Are these too old to count as recent?

prewett 6y ago
I'm not sure that a cross-platform GUI (Flutter) really counts as an innovation given Qt, wxWidgets, Tk, Dear ImGUI, and the innumerable largely-unused other GUI toolkits, but I assume the parent is talking about monetized-innovations. Google is doing a great job in CS research but I can't think of a revenue stream that uses one of those. The closest I can think of is voice recognition, but they don't seem to be getting revenue from it.