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Eric Schmidt's book is wrong about how Google works

163 points by mandeepj 12y ago

gilgoomesh 12y ago
If we take this article at face-value (that Google is as big as it is because of its monopoly in search) a related question is immediately raised: why is Google's search engine a monopoly? If the monopoly is due to superior technology, why are Google able to write a better search engine and maintain this search engine lead? If the monopoly is due to other effects (buying favored search-engine status in Safari, Firefox and pushing Chrome/Android) why don't the browsers have all the power? I guess I agree with the article that Google's power is search-engine derived but there's more to the source of that monopoly than I think the article discusses.
- mixmax 12y ago
  Google's monopoly is based on their early superior technology. That's it, pure and simple. I'm old enough to remember the web before google, and it was terrible. Back then we switched between hotbot, altavista, yahoo and a few others - and they all sucked. Some of them ranked searches alphabetically - try searching through 100.000 results that are ordered alphabetically. I remember the first time I ever used google. From the very first day I never used anything else, and recommended it to all my friends. If you haven't experienced the web before google I think it's hard to imagine what it was like. Pagerank made the difference.
  - jacques_chester 12y ago
    I remember the pre-Google search days too. > Pagerank made the difference. To search. But they don't make money directly from search. They were a superior technology that was doomed to go broke until AdSense and AdWords came along.
    - mixmax 12y ago
      That's of course correct. For the first few years they ran without an income model and hoped something would come along. That something was adwords, and it made all the difference. But an argument can be made that it was luck, google didn't start out with this income model, and kind of stumbled into it. A lot of people were initially opposed to the idea, but they tried it anyway, not thinking it would be a runaway succcess.
      - jacques_chester 12y ago
        That's the thing, though. Hoping something will come along is a terrible business model. Google actively sucks at every business except floating down the Mississippi of cash. Amazing technology and technologists, terrible business. They could double their workforce, or hire only people with comparative literature degrees, or force everyone in the company to speak Esperanto on alternating days with Klingon, or fire nearly everyone. It would be dramatic, but in terms of the bottom line it would be pretty close to irrelevant. Google is not a technology company. They are a cash pipeline operator.
        adekok 12y ago
        Google is very good at building tech to support search. That's no small feat. But they're terrible at sales, customer support, etc. People buy Google ads because everyone uses Google for search. So Google doesn't need to sell anything. People come to them. It's an amazing position to be in, but it's a very unusual one.
        mbesto 12y ago
        > Google actively sucks at every business except floating down the Mississippi of cash. > It would be dramatic, but in terms of the bottom line it would be pretty close to irrelevant. I'm assuming you're talking about all of the people in the driverless cars group, android, etc. Two things at work here: 1. As a business their size you either try to take every single dollar that floats down the mississippi or you make the river bigger. I would argue that pretty much every strategy decision that Google makes is to do those two things (example - driverless cars means more people using the internet - more people using the internet means more search - more search means more adwords. aka the mississippi gets bigger) 2. Ubiquity. Starbucks sucks, but it's on every corner. Google's strategy is no different.
  - twelvechairs 12y ago
    Unfortunately since this time results have gotten worse ( anecdotal I know, but I know many who agree). I think this is down to a mixture of issues - the SEO industry has made search optimisation much harder, googles probably been a bit complacent with no competition too. Also introducing big changes like search personalisation and localisation which (IMO) has taken away more than it adds.
    - joe_the_user 12y ago
      Well indeed, Google versus SEO is continuing fight. But point is that Google has ante'd up to maintain search as something that works easily, that finds what you want, etc., even while against countervailing factors. And bringing it back to the parent, the monopoly Google maintains is a dynamic process - they aren't always fighting against other search engines. Sometimes they are doing that and sometimes they are fighting against SEO and spam, sometimes they are competing with walled gardens and whatever forces would turn the Internet into an appliance, sometimes they are fighting to make search more compelling. But they don't fit the profile of a company just sitting on a monopoly even if they maintain is what mostly brings them revenue.
    - jodrellblank 12y ago
      Unfortunately since this time results have gotten worse ( anecdotal I know, but I know many who agree) Showing results for I know many who disagree. To search for what you typed in and wanted to search for, jump through {this hoop}.
      - username223 12y ago
        It's worse than trying to write a paper on the Teh tribe in the Amazon in Microsoft Word with autocorrect. The relationship between query terms and results is complex and opaque.
    - Animats 12y ago
      That's to some extent by design. When organic search works perfectly, the user goes directly from the search result to their desired destination. The search engine makes no money from that. This is the fundamental conflict of the search engine business. When Brin and Page originally tried to sell their technology to Yahoo, Yahoo rejected it because it was "too good" - users would immediately leave Yahoo. Now Google has that problem for itself. About a third of Google's revenue is from AdSense (non-search ads). It's not in Google's interest for their anti-spam efforts to be too tough on made-for-Adsense sites. They crack down only on the outrageous cases. This became very clear in the "Sportsdrugs.com" case, where Google was caught in an FBI drug sting and paid $500,000,000 to avoid prosecution. If you want to understand how Google really works, read the black hat SEO forums. Every time Google tries something new in search ranking, it's reverse engineered in a few weeks. Trying to detect SEO with machine learning based on page contents worked for a while, but now the SEO guys use machine learning too. "Automated SEO" tries to automatically reverse-engineer Google's anti-spam algorithms, then adjusts pages and links until the SEO's model of Google says the page is under the threshold where Google will consider it spam. It's not that hard to detect web spammers, if you're willing to do a quick background check on the company behind each web site. This can be automated; see our "sitetruth.com". Large numbers of spam domains trace back to the same source, so dealing with the problem on a per-business basis rather than a per-domain basis works. Google has a monopoly on mind share, but only about 2/3 of US search. Bing (including Yahoo, which resells Bing) has about half the search volume Google does. That's historically about where Chrysler has been relative to General Motors. Yet Chrysler is taken seriously as an competitor to GM, while Bing is not taken seriously as a competitor to Google. It's not clear why. There's no network effect in search; it matters if your friends are on Facebook, but not if they're searching with Bing. Bing has a very low public profile. It's hard to even find out who's in charge there. (Searching with Bing won't help.) Previously, it was Satya Nadella, who moved up to being CEO of Microsoft. There is no Bing CEO any more. Bing is under Microsoft's Online Services Division, headed by Qi Lu. Different parts of Bing are under four different parts of Online Services. (The Microsoft memo: http://www.geekwire.com/2014/internal-memo-microsoft-sets-leadership-applications-services-group/ http://www.geekwire.com/2014/internal-memo-microsoft-sets-le.... If that hadn't leaked, nobody would know who was in charge over there.)
  - mmahemoff 12y ago
    Pagerank was indeed a giant leap at the time, but some other things are frequently forgotten with that one-trick pony narrative. * Ownership structure - Google's founders had the front to IPO with a structure that gave them complete control of the company (10:1 voting rights over ordinary shareholders). That alone is why they can make huge long-term bets, from GMail to Android to robotics, instead of dumping inventory on the last day of each quarter to appease Wall St. * Ads - Colossal ad revenue wasn't a guaranteed point on the trajectory from Pagerank and should therefore be considered as an independent innovation. They initially monetised with the search appliance for intranets and there was a time when they were considering a charging model for companies to use Google search. * Superior ops - Google had to scale like crazy. The early crawlers were supposedly using 25% of Stanford's bandwidth after much pleading with admins, and the scaling never ended. Other startups might have partnered with some giant hardware company or bought into various commercial Unix offerings, but Google's early team figured out how to operate and distribute giant data centres on budget.
  - rodgerd 12y ago
    > I'm old enough to remember the web before google, and it was terrible. Yep. I worked for a newspaper when AltaVista was the best thing going and I'd help the librarians and research team craft queries to get information based on understanding the finer points of AltaVista. When the Google beta was available I showed it to them and was never called on again. It was like magic compared to what went before.
  - wpietri 12y ago
    That's not a sufficient explanation. It has been more than 15 years since they launched. I would argue that their monopoly isn't due to that initial insight but a) their relentless improvement of search over the years, b) their technology infrastructure that made large-scale computing much more manageable, and c) their early lead in dramatically reducing computing cost, allowing them to spend dramatically more computing power per search than their competitors. I'd add that another important choice was ignoring the modern business dogma of revenue maximization. They kicked the hell out of the early search advertising market by limiting things to well-chosen little text ads, something that was initially lower revenue but delivered much higher value to the users.
  - mickreggel 12y ago
    > Google's monopoly is based on their early superior technology. That's it, pure and simple. I'm sure you know that monopolies are illegal in the USA? Also, Google's search engine is not the sole reason for this monopoly. There's a political side to it which most Google fan boys prefer not to discuss.
    - skj 12y ago
      > I'm sure you know that monopolies are illegal in the USA? Not true: http://www.girardgibbs.com/antitrust-monopoly/ http://www.girardgibbs.com/antitrust-monopoly/
    - gabbo 12y ago
      No, monopolies aren't necessarily illegal in the USA. But they can be depending on the behavior of a monopolist. From http://www.girardgibbs.com/antitrust-monopoly/ http://www.girardgibbs.com/antitrust-monopoly/: > Monopolies are illegal if they are established or maintained through improper conduct, such as exclusionary or predatory acts. This is known as anticompetitive monopolization.
  - inthewoods 12y ago
    Pagerank definitely made a difference - but I've always argued that the speed of Google results also was a major factor in winning over consumers (and something I rarely hear people mention). I remember the first time I saw results from Google, I simply couldn't believe they could have delivered them that quickly. I think Google's success can be attributed to the "4x factor" - that is, that in order to change consumer behavior, you need a solution that is not the same or twice as good as current technology - you need a solution that is, at minimum, 4 times better. That's what Google Search delivered (and the iPhone, Uber, et al). So for me it is easy to understand why people don't switch to Bing or whatever - their results are maybe, at best, 1.5x as good as Google - not good enough to alter behavior.
  - timClicks 12y ago
    I would say that it was technology + design, rather than technology alone. It's also very important to remember that Google also looked different than Yahoo!, AltaVista, etc. They were large portals with huge numbers of links. It was pretty confusing. Google was very simple. There was a search bar on a clean white screen.
  - wmeredith 12y ago
    This point is really hard to overstate. I'd go so far as to say the majority of the usefulness of the modern web can be attributed to Google making it usable. It was like adding power to a circuit.
- jacques_chester 12y ago
  > why is Google's search engine a monopoly? It's not a monopoly. However, it has a massive network effect that has made it so far impossible for anyone to make a successful frontal assault on the two core businesses of AdWords and AdSense.
  - krapp 12y ago
    I think some people have redefined "monopoly" to mean "successful business."
    - jacques_chester 12y ago
      People are also giving Thiel credit for this insight. Michael Porter was probably the first to look over the fence of the Economics department, find out what the abusive behaviours of monopolists are, and to begin to teach them as strategy to be emulated.
  - krick 12y ago
    > impossible for anyone to make a successful frontal assault on the two core businesses Well, it's kinda definition of monopoly, which Google of course is.
    - jacques_chester 12y ago
      Except that there are hundreds, maybe thousands, of niche advertising platforms, markets, middlemen, services, systems, technologies, clearinghouses, inventories, sellers, buyers, brokers, verifiers, subverters ... The advertising ecosystem is actually very complex and diverse. Nobody is quite sure how big it actually is. But Google definitely has the two biggest chunks of it and nobody else is able to, for example, place keyword-based ads into Google's search results without Google taking their cut.
- yid 12y ago
  > If the monopoly is due to superior technology, why are Google able to write a better search engine and maintain this search engine lead? Answering because I feel like this is the bulk of the answer -- Adwords still constitutes a large chunk of Google revenue, and depends directly on how good the search engine is. As for the search engine itself, they take a ruthlessly scientific approach to improving it: strict measurement, hypothesizing about improvements, testing the hypotheses, and then some world-class implementation and quality monitoring. This is generally evident in the level of rigor seen in Google-published systems papers.
- weisser 12y ago
  It's a monopoly because of multiple factors (some of which you've expounded on already. A main reason Google's search engine is a monopoly is due to switching costs and the fact that all of our habits are built around using it. Another way of putting it: once the word google became a verb they had solidified the monopoly.
- ChuckMcM 12y ago
  Good questions, and there are some reasonable guesses at the answers, I paraphrased your first one as: > How did Google get a search engine monopoly? Technology, Timing, and Momentum. Google exploited the social signal of linking to organize the list of web pages by those considered most valuable by the people linking to them. That relatively simple fact made their search results much better than the others. And of course they patented it (PageRank). They arrived at a time when advertisers were just learning that they would have to advertise on "the net", and they offered advertisers something that other channels could not provide, feedback on views. As the 'biggest' web site (by pageviews) they get the majority of the advertising dollars from advertisers, and they combined that with only showing ads about '<X>' when people were searching for '<X>' (fill in your product) The environmental piece of the puzzle was that the number of advertising dollars is finite. A lot of people don't understand that. If you create a web site for someone to advertise on, new "inventory" as they call it, to get someone to pay to advertise on it you have to pull those ads from someone else's web site.[1] And because of that Google's success sucked a lot of oxygen out of the online advertising ecosystem. My first start up after Sun was a web magazine and the 'best' banner ads came from Yahoo who could pay you top dollar to show them and Alta Vista was the best search engine. When Google launched search advertising the value of a Yahoo! banner revenue went down by 95%. Like a Redwood dropping sap on the ground to kill off seedlings underneath it, Google's success was making it hard to succeed without it's ad juice. Now everyone can do PageRank type search, and in blind tests Bind and Google results are indistinguishable. But momentum keeps Google on top. Interestingly, Facebook could take 10 or 20 billon out of Google's market cap by doing search in addition to social, but for what ever reason they have, they don't. Your second question is thus: > Why don't the browsers have all the power? And the answer is they do, and of late "Apps". Once Bing search results achieved parity with Google, people stopped switching "back" to Google from their non Google searches. Microsoft market share has grown on the back of IE doing Bing search by default when you type in the address bar. And now Mozilla has chosen to show Bing results (via Yahoo) as the default. It will be interesting to see how many people switch it back to Google. If you look at Google's quarterly results you will see they break out a number that is called "paid distribution." That is code for money Google pays for others to send search to their engine so they can advertise on it. Its gone from a miniscule amount in 2005 to nearly a billion dollars a quarter this year. Paying others like Apple to send searches on your iDevice to Google. I generally interpret that as a sign the monopoly is eroding. The headline though, that Eric doesn't understand how Google works is incorrect. He knows exactly how Google works. But the book he wrote isn't about that, rather it is a "narrative" which describes things in a way that imputes knowledge and wisdom and greatness. The point is to make him and Jonathan look good in the eyes of the public and to tell a good story. I think it succeeds on both counts. How many people would buy a book about how luck and timing made people billionaires and in nearly 20 years of trying they still haven't come close to duplicating it? Imagine the autobiography of someone who won the lottery, pretty ordinary life, some personal triumphs, sudden massive wealth, a lot of sudden "friends" by people who would seek to influence that sudden wealth. Guess what, if you have a private jet and offer to fly friends to Cannes to catch the film festival, you will get your choice of people who will fly there with you :-) [1] Yes, there is a infinite supply of 'remainder' ads, where people will pay 1 - 3 cents for an ad like stock brokers who put in open limit buy orders for .01 to catch to flash crash bounces. Those ads won't even cover the electricity cost of the page to host them.
- sparkzilla 12y ago
  I actually think the algorithmic search engine era is coming to a close, and that Google could quite easily lose its market dominance. Google search is 10-year-old technology that doesn't give good answers to the most popular searches. I wrote a longish post about it a few days ago, if you are interested. http://newslines.org/blog/googles-black-hole/ http://newslines.org/blog/googles-black-hole/
BrandonM 12y ago
> I would love to see one single company that isn’t dominating a market with no cash cow in-flow that can succeed without strict discipline, sharp focus, hard work, and hands-on management. I would not work for this person. It's ironic that he thinks Schmidt is the one that has it wrong.
- gumby 12y ago
  I disagree with you (even despite the fact that the author describes himself as a buzzwordy "Enterprise SaaS Executive" -- he writes better than someone with a description like that should be able to). It's no secret, within Google or without, that Google is not particularly well run. This article cites the sales team (without backing up the talk) but talk to any of the tech folks and most will tell you the same thing. And as the article says, the Street seems to think so too. What Google _does_ get right are two things. First, they do get the core stuff right: search, search infrastructure, and adsense. That's sine qua non and they aren't bozos! Second, at the other end, the stuff that's flakyest is the stuff that _should_ be flaky: Google X (and as the article says, it's a tiny amount of money). In between, however, the company isn't great. Not a mess, but mediocre on execution. The article says that the company's killing of products is a sign they are trying to get their house in order. I don't see it, but it could certainly be true. The good news for Google is that they have a huge cash flow so can actually afford to take their time to fix things. The bad news is that they have a huge cash flow which removes any sense of urgency. Big cash flow covers a multitude of sins. Big cash flow kills a lot of companies. In such a circumstance hard to do anything new, especially since while it's new it doesn't move the needle on revenue. That's why great, paranoid companies like Intel and Microsoft that had dominant cash flow suddenly struggled when the tide went out. In the case of IBM they had an existential (near death) experience and it forced them to get their act together. The point of books like these is to be talismanic. The company is successful so others look for the surface gimmicks that made it successful. It almost doesn't matter what is inside them, since the readers generally aren't looking for insight but rather validation (they are the business equivalent of self help books).
  - BrandonM 12y ago
    I wasn't responding to the entire article. I agree that he got a few things right. The specific part I quoted, though, stands out to me as a rather old-fashioned management philosophy, one that is unlikely to attract and retain top talent in a competitive hiring market.
fivedogit 12y ago
> the authors are confusing causation and correlation... they are all consequences of Google’s success. For example the authors write: “Their plan for creating that great search engine... Hire as many talented software engineers as possible, and give them freedom.” Well, this worked because the search was already successful enough to fund that freedom. This is the key point and the clickbait-y headline notwithstanding, it's a very valid point. People look at Google and say "wow they have super-smart engineers and let them work on whatever they want with 20% of their time" and tons and tons of products sprung up all over the place. But after a while, management seemed to back off of that philosophy quite a bit. In 2011, Google killed off many of its less successful projects, including Google Labs, and I read in some nook or cranny of the Internet that the 20% time has been quietly deemphasized over a number of years. So the idea that you can just hire smart people and magic will happen, though often copied and lionized, is not all it's cracked up to be. <Insert quip about monkeys, typewriters and Shakespeare here.>
- deciplex 12y ago
  For an even more dramatic example, look at Valve. Great company to work for, no doubt, and open allocation which makes 20% time look like a death march. They can fund this because of the money fountain that is Steam. But improvements to the Steam client are underwhelming and come at a snail's pace, if they come at all (e.g. Steam has been delaying my shutdowns in Windows now for two years). They are about a year behind now with SteamOS, and have pissed off most of their potential partners with SteamBox delays as well. And, of course, Half Life 3, which should be renamed Half Life Pu-239 based on when we should expect it to be released. (How is episodic gaming working out?) "Freedom" certainly makes a place nice to work for. It might even get you some really good technology. And it probably can, eventually, indirectly, maybe eventually manage to achieve some of a company's goals. But if it is the most efficient way to do this, I am struggling to come up with any good examples.
  - cpks 12y ago
    Conversely, neither Valve nor Google are digging their graves, like much of the rest of the industry does over time. See the prior post about Dell. Look at Microsoft. Focus helps, but good people make a bigger difference. The overhead, be that 20% time or whatever else, is peanuts in comparison.
millstone 12y ago
I would disagree with characterizing GOOG's P/E (27.5) as "low" or "not on par with its financial performance." That's well above the average. The comparisons are suspect: Facebook is an outlier, MSFT in the 90s was surely overvalued along with most tech stocks, and Amazon is deliberately pursuing growth at the expense of profitability. Why not compare instead to other mature tech companies today: Microsoft, IBM, HP, Cisco? Or Apple, who has had a P/E under 20 for the last five years, yet whose stock has outperformed GOOG by 3x over the same period?
wahsd 12y ago
Interesting article. It also adds more validation to my theory that Google is "successful" in spite of itself in many ways. I really think Google's search supremacy is vulnerable, although there is no one really positioned to disrupt Google's domination in search quite yet.
candybar 12y ago
This article is aggressively awful. His entire premise: "According to the company’s 2013 financial filings, 83 percent of Google’s revenue came from ads, about 7 percent from Motorola (which is now gone), and 10 percent from everything else. In other words, when you add up all the revenue from Google Apps (Gmail, Docs, Drive, Maps, etc.) together with the Android and other mobile businesses, and then add Chromebooks, Chromecast, Chromeboxes, and everything hardware and everything Chrome, Google Developers Network, Google+, Google cars, Google robots and drones, Google Glass and other wearables, Google Cloud, and everything else in the Google world, you get $5 billion or 10 percent of Google’s revenue." is completely wrong because Google's ad revenue cannot be separated from its products outside of Search. Google+, Gmail, Docs, Drive, Maps, Android and Chrome are all designed to add to their ad revenue. Saying that Google's ad revenue is the vast majority of their non-Motorola revenue, therefore Google's non-Search products must not be adding much to the bottom line is to conflate Google's advertising businesss with their Search product, when Search is one of their many products that lead to their advertising revenue. Once you destroy this premise, this whole notion that Search is the only thing Google does well (or makes a lot of money from) becomes obviously absurd. Gmail, Google Maps, Android, Youtube and Chrome are all market leaders in absolutely gigantic markets. Edit: The synergy between many of Google's products and advertising should be obvious. They all capture information about the user, which improves their ability to display "relevant" ads or at least ads that advertisers will pay more money for. They also prevent other dominant players in that space from getting a foothold in advertising. Chrome and Android ensure that Google's various services are not a disadvantage on the web and in mobile computing respectively and may gradually be used to advantage their services over competitors'. Edit2: jjoonathan, your point regarding Amazon and competitive threats they face is correct, but it has very little to do with the article, which is taking Google's successful position for granted and asking how they got there. And the idea that Gmail, Maps, Android and Chrome haven't helped and won't help in the future is fairly absurd. Edit3: Multiple downvotes seem a little fishy, as does this article getting voted to the top of Hacker News. Edit4: Another thing the article is ignoring is that Google's continued dominance in search and web advertising is a massive accomplishment that was not at all guaranteed from its initial success. And its massive investment in engineering that the author sees as excess I'm sure has a lot to do with how it was able to sustain that dominance.
AndrewKemendo 12y ago
Being dominant is not the same as being a monopolist. I wish people would quit bringing that term up anytime a company is at the top of a market because it has legal and social implications. I have even heard people say that they have a natural monopoly which is just silly if you understand how natural monopolies work. In fact Google isn't a monopolist on any terms, but they do currently dominate search. My guess is they could be knocked off their perch fairly swiftly if someone came along with an amazing recommendation service (not like what we see now) that was more advisory than search as it would necessarily absorb search.
leoc 12y ago
"First off, the authors are confusing causation and correlation. Schmidt points out a series of characteristics of Google as a company and presents them as the reasons for Google’s success, but in my opinion, they are all consequences of Google’s success. For example the authors write: “Their plan for creating that great search engine, and all the other great services was equally simple: Hire as many talented software engineers as possible, and give them freedom.” Well, this worked because the search was already successful enough to fund that freedom. [...] The key is market dominance. If you have a de facto position of a monopoly in your market, money pours in, and you can afford to give your employees even more than 20 percent of their time free." This is itself backwards, yes? ISTR that http://blogoscoped.com/archive/2007-09-03-n78.html http://blogoscoped.com/archive/2007-09-03-n78.html AdWords — and thus the profitability of Google's search business, if (arguably) not the search monopoly itself — was the product of early Google's 20% time and employee freedom, rather than the other way round. (Oh, and they got GMail into the bargain.) Similarly for: "I would love to see one single company that isn’t dominating a market with no cash cow in-flow that can succeed without strict discipline, sharp focus, hard work, and hands-on management." I thought that Google's 20% time was modelled after practises at 3M and Hewlett-Packard? I have no doubt that in their day these were companies that enjoyed comfortably high margins on many of their products, but from my limited knowledge I don't have the impression that they were monopolists sitting on their laurels from one of two huge hits. (As Xerox apparently was.) I also don't know how reasonable it would be to claim that private-project time didn't contribute anything to the bottom line of these companies either: 3M itself tends to claim that the Post-It note was a product of its 15% time http://solutions.3m.com/innovation/en_US/stories/time-to-think http://solutions.3m.com/innovation/en_US/stories/time-to-thi... . Accordingly I'm unsure why this article has been voted to the top of HN. None of which is to say that How Google Works is a model of candour and insight, or to suggest that Google has no problems with how it handles innovation, of course.
zobzu 12y ago
" “Their plan for creating that great search engine, and all the other great services was equally simple: Hire as many talented software engineers as possible, and give them freedom." Man I so dislike these. Its pure bullshit. (its a quote from the book, mind you).
abalone 12y ago
> why have the majority of initiatives at Google either failed or been financially inefficient and unprofitable? If they were standalone startups, they would have most likely already been dead. It takes a lot of experimentation to produce hits. Even the best companies are going to have a lot of failed projects. One reason Google "appears" to have so many failures is that they're more open then other companies. No doubt Apple has tons of internal failures. Projects that don't see the light of day, get canceled if they're not looking good. Tim Cook even talks about it in interviews. I do think that Apple's producing more hits overall, but the point here is that they are not failure-free; they just don't ship crap. Google likes to publicly experiment. In the startup world this experimental function is fulfilled by the startup pool as a whole. Most will fail. Most winners have "focus, discipline, hands on management", but I'm sure that's true for most product teams at Google too.. where "management" = the local team's product & engineering management, which is more equivalent to a startup's executive team than the CEO of Google. If bigger companies want to stay innovative I think there's still a lot of value to supporting experimentation and freedom within the company. It's going to look like a lot of failure. But then so does the startup universe.
deleted 12y ago
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bronbron 12y ago
Hmm. Preface: I do not work at Google. > I would love to see one single company that isn’t dominating a market with no cash cow in-flow that can succeed without strict discipline, sharp focus, hard work, and hands-on management I've worked for plenty. I'm not going to name them because it's tactless, but they were both huge monolithic corporations and small-ish companies that were pretty profitable. I'm sure others have too. Those companies that you think to yourself, "how the fuck are we making money when we're so fucked up?". I wouldn't say it's a rare scenario. The idea of companies as "hyper-efficient market machines" is pretty laughable. In fact, I've met plenty of people who worked at IBM (the company he alludes to being one of these strict discipline companies) who said IBM was/is a complete mess. > why have the majority of initiatives at Google either failed or been financially inefficient and unprofitable The majority of initiatives full stop are failures, or unprofitable. This is kind of pointless without comparing Google to other companies. > When interacting with sales people at Google, I am shocked to see how untrained and inefficient they are This is admittedly one of Google's faults: they're awful at customer support and the like in general. Well known, but it seems to be working out fine for them. > If there are known companies with great sales cultures such as Oracle, Google is doing considerably better than Oracle in most senses of the word. One possible conclusion is the author's, that Google succeeds in spite of this because of their search monopoly. The alternative is that maybe a strong sales culture doesn't mean as much as the author thinks for the bottom line. > everything else in the Google world, you get $5 billion or 10 percent of Google’s revenue. Peanuts! Peanuts? Facebook's revenue last year was $8 billion. > Google is in a situation of monopoly with its search business Why do they continue to be a monopoly? There are certainly competitors. One explanation is because they continually offer the best results, because they hire the best software engineers, because they have free food, and offer "20% time", and etc...
jpatokal 12y ago
Another special characteristic of Google is its sales force. When interacting with sales people at Google, I am shocked to see how untrained and inefficient they are. Did the author just make a wild generalization about a very large number of people, backed up with no evidence whatsoever? Why yes they did. Come on, the least they could do is offer up an anecdote to justify that bizarre claim.
mickreggel 12y ago
"As a fan of his, I’ve followed most articles, interviews, and slides about his latest book" The author of this piece of shit is a fan of Eric Schmidt??? WTF? Someone needs a life. This article is the biggest load of bullshit I've ever read.
mathattack 12y ago
He had me at "Correlation doesn't equal causality" but it rapidly went downhill. I get that the concept of "Cut loose smart creatives" is not universally successful, but the article seems to go rapidly downhill from there.
jackmaney 12y ago
I know that the old saying of "don't judge a book by its cover" has been around a long time for a very good reason, but I honestly can't get past the title of this article. I find myself incapable of taking it seriously.
ajhsieh 12y ago
Its certainly not in Schmidt's interest to proclaim in a book that Google has a search monopoly even if he did realize it.
dang 12y ago
We changed the title in a somewhat feeble attempt to make it less baity. If anyone suggests a better title, we'll edit it again.
rajlalwani 12y ago
Google is one of the most innovative companies. It has successfully maintained agility (start up culture) even after becoming multi billion dollar giant. What Eric might be hinting and what author of the article sees may not be contrary! ... It's perceptual difference deliberately created.

163 points by mandeepj 12y ago

If we take this article at face-value (that Google is as big as it is because of its monopoly in search) a related question is immediately raised: why is Google's search engine a monopoly? If the monopoly is due to superior technology, why are Google able to write a better search engine and maintain this search engine lead? If the monopoly is due to other effects (buying favored search-engine status in Safari, Firefox and pushing Chrome/Android) why don't the browsers have all the power? I guess I agree with the article that Google's power is search-engine derived but there's more to the source of that monopoly than I think the article discusses.

mixmax 12y ago
Google's monopoly is based on their early superior technology. That's it, pure and simple. I'm old enough to remember the web before google, and it was terrible. Back then we switched between hotbot, altavista, yahoo and a few others - and they all sucked. Some of them ranked searches alphabetically - try searching through 100.000 results that are ordered alphabetically. I remember the first time I ever used google. From the very first day I never used anything else, and recommended it to all my friends. If you haven't experienced the web before google I think it's hard to imagine what it was like. Pagerank made the difference.
- jacques_chester 12y ago
  I remember the pre-Google search days too. > Pagerank made the difference. To search. But they don't make money directly from search. They were a superior technology that was doomed to go broke until AdSense and AdWords came along.
  - mixmax 12y ago
    That's of course correct. For the first few years they ran without an income model and hoped something would come along. That something was adwords, and it made all the difference. But an argument can be made that it was luck, google didn't start out with this income model, and kind of stumbled into it. A lot of people were initially opposed to the idea, but they tried it anyway, not thinking it would be a runaway succcess.
    - jacques_chester 12y ago
      That's the thing, though. Hoping something will come along is a terrible business model. Google actively sucks at every business except floating down the Mississippi of cash. Amazing technology and technologists, terrible business. They could double their workforce, or hire only people with comparative literature degrees, or force everyone in the company to speak Esperanto on alternating days with Klingon, or fire nearly everyone. It would be dramatic, but in terms of the bottom line it would be pretty close to irrelevant. Google is not a technology company. They are a cash pipeline operator.
      - adekok 12y ago
        Google is very good at building tech to support search. That's no small feat. But they're terrible at sales, customer support, etc. People buy Google ads because everyone uses Google for search. So Google doesn't need to sell anything. People come to them. It's an amazing position to be in, but it's a very unusual one.
      - mbesto 12y ago
        > Google actively sucks at every business except floating down the Mississippi of cash. > It would be dramatic, but in terms of the bottom line it would be pretty close to irrelevant. I'm assuming you're talking about all of the people in the driverless cars group, android, etc. Two things at work here: 1. As a business their size you either try to take every single dollar that floats down the mississippi or you make the river bigger. I would argue that pretty much every strategy decision that Google makes is to do those two things (example - driverless cars means more people using the internet - more people using the internet means more search - more search means more adwords. aka the mississippi gets bigger) 2. Ubiquity. Starbucks sucks, but it's on every corner. Google's strategy is no different.
- twelvechairs 12y ago
  Unfortunately since this time results have gotten worse ( anecdotal I know, but I know many who agree). I think this is down to a mixture of issues - the SEO industry has made search optimisation much harder, googles probably been a bit complacent with no competition too. Also introducing big changes like search personalisation and localisation which (IMO) has taken away more than it adds.
  - joe_the_user 12y ago
    Well indeed, Google versus SEO is continuing fight. But point is that Google has ante'd up to maintain search as something that works easily, that finds what you want, etc., even while against countervailing factors. And bringing it back to the parent, the monopoly Google maintains is a dynamic process - they aren't always fighting against other search engines. Sometimes they are doing that and sometimes they are fighting against SEO and spam, sometimes they are competing with walled gardens and whatever forces would turn the Internet into an appliance, sometimes they are fighting to make search more compelling. But they don't fit the profile of a company just sitting on a monopoly even if they maintain is what mostly brings them revenue.
  - jodrellblank 12y ago
    Unfortunately since this time results have gotten worse ( anecdotal I know, but I know many who agree) Showing results for I know many who disagree. To search for what you typed in and wanted to search for, jump through {this hoop}.
    - username223 12y ago
      It's worse than trying to write a paper on the Teh tribe in the Amazon in Microsoft Word with autocorrect. The relationship between query terms and results is complex and opaque.
  - Animats 12y ago
    That's to some extent by design. When organic search works perfectly, the user goes directly from the search result to their desired destination. The search engine makes no money from that. This is the fundamental conflict of the search engine business. When Brin and Page originally tried to sell their technology to Yahoo, Yahoo rejected it because it was "too good" - users would immediately leave Yahoo. Now Google has that problem for itself. About a third of Google's revenue is from AdSense (non-search ads). It's not in Google's interest for their anti-spam efforts to be too tough on made-for-Adsense sites. They crack down only on the outrageous cases. This became very clear in the "Sportsdrugs.com" case, where Google was caught in an FBI drug sting and paid $500,000,000 to avoid prosecution. If you want to understand how Google really works, read the black hat SEO forums. Every time Google tries something new in search ranking, it's reverse engineered in a few weeks. Trying to detect SEO with machine learning based on page contents worked for a while, but now the SEO guys use machine learning too. "Automated SEO" tries to automatically reverse-engineer Google's anti-spam algorithms, then adjusts pages and links until the SEO's model of Google says the page is under the threshold where Google will consider it spam. It's not that hard to detect web spammers, if you're willing to do a quick background check on the company behind each web site. This can be automated; see our "sitetruth.com". Large numbers of spam domains trace back to the same source, so dealing with the problem on a per-business basis rather than a per-domain basis works. Google has a monopoly on mind share, but only about 2/3 of US search. Bing (including Yahoo, which resells Bing) has about half the search volume Google does. That's historically about where Chrysler has been relative to General Motors. Yet Chrysler is taken seriously as an competitor to GM, while Bing is not taken seriously as a competitor to Google. It's not clear why. There's no network effect in search; it matters if your friends are on Facebook, but not if they're searching with Bing. Bing has a very low public profile. It's hard to even find out who's in charge there. (Searching with Bing won't help.) Previously, it was Satya Nadella, who moved up to being CEO of Microsoft. There is no Bing CEO any more. Bing is under Microsoft's Online Services Division, headed by Qi Lu. Different parts of Bing are under four different parts of Online Services. (The Microsoft memo: http://www.geekwire.com/2014/internal-memo-microsoft-sets-leadership-applications-services-group/ http://www.geekwire.com/2014/internal-memo-microsoft-sets-le.... If that hadn't leaked, nobody would know who was in charge over there.)
- mmahemoff 12y ago
  Pagerank was indeed a giant leap at the time, but some other things are frequently forgotten with that one-trick pony narrative. * Ownership structure - Google's founders had the front to IPO with a structure that gave them complete control of the company (10:1 voting rights over ordinary shareholders). That alone is why they can make huge long-term bets, from GMail to Android to robotics, instead of dumping inventory on the last day of each quarter to appease Wall St. * Ads - Colossal ad revenue wasn't a guaranteed point on the trajectory from Pagerank and should therefore be considered as an independent innovation. They initially monetised with the search appliance for intranets and there was a time when they were considering a charging model for companies to use Google search. * Superior ops - Google had to scale like crazy. The early crawlers were supposedly using 25% of Stanford's bandwidth after much pleading with admins, and the scaling never ended. Other startups might have partnered with some giant hardware company or bought into various commercial Unix offerings, but Google's early team figured out how to operate and distribute giant data centres on budget.
- rodgerd 12y ago
  > I'm old enough to remember the web before google, and it was terrible. Yep. I worked for a newspaper when AltaVista was the best thing going and I'd help the librarians and research team craft queries to get information based on understanding the finer points of AltaVista. When the Google beta was available I showed it to them and was never called on again. It was like magic compared to what went before.
- wpietri 12y ago
  That's not a sufficient explanation. It has been more than 15 years since they launched. I would argue that their monopoly isn't due to that initial insight but a) their relentless improvement of search over the years, b) their technology infrastructure that made large-scale computing much more manageable, and c) their early lead in dramatically reducing computing cost, allowing them to spend dramatically more computing power per search than their competitors. I'd add that another important choice was ignoring the modern business dogma of revenue maximization. They kicked the hell out of the early search advertising market by limiting things to well-chosen little text ads, something that was initially lower revenue but delivered much higher value to the users.
- mickreggel 12y ago
  > Google's monopoly is based on their early superior technology. That's it, pure and simple. I'm sure you know that monopolies are illegal in the USA? Also, Google's search engine is not the sole reason for this monopoly. There's a political side to it which most Google fan boys prefer not to discuss.
  - skj 12y ago
    > I'm sure you know that monopolies are illegal in the USA? Not true: http://www.girardgibbs.com/antitrust-monopoly/ http://www.girardgibbs.com/antitrust-monopoly/
  - gabbo 12y ago
    No, monopolies aren't necessarily illegal in the USA. But they can be depending on the behavior of a monopolist. From http://www.girardgibbs.com/antitrust-monopoly/ http://www.girardgibbs.com/antitrust-monopoly/: > Monopolies are illegal if they are established or maintained through improper conduct, such as exclusionary or predatory acts. This is known as anticompetitive monopolization.
- inthewoods 12y ago
  Pagerank definitely made a difference - but I've always argued that the speed of Google results also was a major factor in winning over consumers (and something I rarely hear people mention). I remember the first time I saw results from Google, I simply couldn't believe they could have delivered them that quickly. I think Google's success can be attributed to the "4x factor" - that is, that in order to change consumer behavior, you need a solution that is not the same or twice as good as current technology - you need a solution that is, at minimum, 4 times better. That's what Google Search delivered (and the iPhone, Uber, et al). So for me it is easy to understand why people don't switch to Bing or whatever - their results are maybe, at best, 1.5x as good as Google - not good enough to alter behavior.
- timClicks 12y ago
  I would say that it was technology + design, rather than technology alone. It's also very important to remember that Google also looked different than Yahoo!, AltaVista, etc. They were large portals with huge numbers of links. It was pretty confusing. Google was very simple. There was a search bar on a clean white screen.
- wmeredith 12y ago
  This point is really hard to overstate. I'd go so far as to say the majority of the usefulness of the modern web can be attributed to Google making it usable. It was like adding power to a circuit.
jacques_chester 12y ago
> why is Google's search engine a monopoly? It's not a monopoly. However, it has a massive network effect that has made it so far impossible for anyone to make a successful frontal assault on the two core businesses of AdWords and AdSense.
- krapp 12y ago
  I think some people have redefined "monopoly" to mean "successful business."
  - jacques_chester 12y ago
    People are also giving Thiel credit for this insight. Michael Porter was probably the first to look over the fence of the Economics department, find out what the abusive behaviours of monopolists are, and to begin to teach them as strategy to be emulated.
- krick 12y ago
  > impossible for anyone to make a successful frontal assault on the two core businesses Well, it's kinda definition of monopoly, which Google of course is.
  - jacques_chester 12y ago
    Except that there are hundreds, maybe thousands, of niche advertising platforms, markets, middlemen, services, systems, technologies, clearinghouses, inventories, sellers, buyers, brokers, verifiers, subverters ... The advertising ecosystem is actually very complex and diverse. Nobody is quite sure how big it actually is. But Google definitely has the two biggest chunks of it and nobody else is able to, for example, place keyword-based ads into Google's search results without Google taking their cut.
yid 12y ago
> If the monopoly is due to superior technology, why are Google able to write a better search engine and maintain this search engine lead? Answering because I feel like this is the bulk of the answer -- Adwords still constitutes a large chunk of Google revenue, and depends directly on how good the search engine is. As for the search engine itself, they take a ruthlessly scientific approach to improving it: strict measurement, hypothesizing about improvements, testing the hypotheses, and then some world-class implementation and quality monitoring. This is generally evident in the level of rigor seen in Google-published systems papers.
weisser 12y ago
It's a monopoly because of multiple factors (some of which you've expounded on already. A main reason Google's search engine is a monopoly is due to switching costs and the fact that all of our habits are built around using it. Another way of putting it: once the word google became a verb they had solidified the monopoly.
ChuckMcM 12y ago
Good questions, and there are some reasonable guesses at the answers, I paraphrased your first one as: > How did Google get a search engine monopoly? Technology, Timing, and Momentum. Google exploited the social signal of linking to organize the list of web pages by those considered most valuable by the people linking to them. That relatively simple fact made their search results much better than the others. And of course they patented it (PageRank). They arrived at a time when advertisers were just learning that they would have to advertise on "the net", and they offered advertisers something that other channels could not provide, feedback on views. As the 'biggest' web site (by pageviews) they get the majority of the advertising dollars from advertisers, and they combined that with only showing ads about '<X>' when people were searching for '<X>' (fill in your product) The environmental piece of the puzzle was that the number of advertising dollars is finite. A lot of people don't understand that. If you create a web site for someone to advertise on, new "inventory" as they call it, to get someone to pay to advertise on it you have to pull those ads from someone else's web site.[1] And because of that Google's success sucked a lot of oxygen out of the online advertising ecosystem. My first start up after Sun was a web magazine and the 'best' banner ads came from Yahoo who could pay you top dollar to show them and Alta Vista was the best search engine. When Google launched search advertising the value of a Yahoo! banner revenue went down by 95%. Like a Redwood dropping sap on the ground to kill off seedlings underneath it, Google's success was making it hard to succeed without it's ad juice. Now everyone can do PageRank type search, and in blind tests Bind and Google results are indistinguishable. But momentum keeps Google on top. Interestingly, Facebook could take 10 or 20 billon out of Google's market cap by doing search in addition to social, but for what ever reason they have, they don't. Your second question is thus: > Why don't the browsers have all the power? And the answer is they do, and of late "Apps". Once Bing search results achieved parity with Google, people stopped switching "back" to Google from their non Google searches. Microsoft market share has grown on the back of IE doing Bing search by default when you type in the address bar. And now Mozilla has chosen to show Bing results (via Yahoo) as the default. It will be interesting to see how many people switch it back to Google. If you look at Google's quarterly results you will see they break out a number that is called "paid distribution." That is code for money Google pays for others to send search to their engine so they can advertise on it. Its gone from a miniscule amount in 2005 to nearly a billion dollars a quarter this year. Paying others like Apple to send searches on your iDevice to Google. I generally interpret that as a sign the monopoly is eroding. The headline though, that Eric doesn't understand how Google works is incorrect. He knows exactly how Google works. But the book he wrote isn't about that, rather it is a "narrative" which describes things in a way that imputes knowledge and wisdom and greatness. The point is to make him and Jonathan look good in the eyes of the public and to tell a good story. I think it succeeds on both counts. How many people would buy a book about how luck and timing made people billionaires and in nearly 20 years of trying they still haven't come close to duplicating it? Imagine the autobiography of someone who won the lottery, pretty ordinary life, some personal triumphs, sudden massive wealth, a lot of sudden "friends" by people who would seek to influence that sudden wealth. Guess what, if you have a private jet and offer to fly friends to Cannes to catch the film festival, you will get your choice of people who will fly there with you :-) [1] Yes, there is a infinite supply of 'remainder' ads, where people will pay 1 - 3 cents for an ad like stock brokers who put in open limit buy orders for .01 to catch to flash crash bounces. Those ads won't even cover the electricity cost of the page to host them.
sparkzilla 12y ago
I actually think the algorithmic search engine era is coming to a close, and that Google could quite easily lose its market dominance. Google search is 10-year-old technology that doesn't give good answers to the most popular searches. I wrote a longish post about it a few days ago, if you are interested. http://newslines.org/blog/googles-black-hole/ http://newslines.org/blog/googles-black-hole/

BrandonM 12y ago

> I would love to see one single company that isn’t dominating a market with no cash cow in-flow that can succeed without strict discipline, sharp focus, hard work, and hands-on management. I would not work for this person. It's ironic that he thinks Schmidt is the one that has it wrong.

gumby 12y ago
I disagree with you (even despite the fact that the author describes himself as a buzzwordy "Enterprise SaaS Executive" -- he writes better than someone with a description like that should be able to). It's no secret, within Google or without, that Google is not particularly well run. This article cites the sales team (without backing up the talk) but talk to any of the tech folks and most will tell you the same thing. And as the article says, the Street seems to think so too. What Google _does_ get right are two things. First, they do get the core stuff right: search, search infrastructure, and adsense. That's sine qua non and they aren't bozos! Second, at the other end, the stuff that's flakyest is the stuff that _should_ be flaky: Google X (and as the article says, it's a tiny amount of money). In between, however, the company isn't great. Not a mess, but mediocre on execution. The article says that the company's killing of products is a sign they are trying to get their house in order. I don't see it, but it could certainly be true. The good news for Google is that they have a huge cash flow so can actually afford to take their time to fix things. The bad news is that they have a huge cash flow which removes any sense of urgency. Big cash flow covers a multitude of sins. Big cash flow kills a lot of companies. In such a circumstance hard to do anything new, especially since while it's new it doesn't move the needle on revenue. That's why great, paranoid companies like Intel and Microsoft that had dominant cash flow suddenly struggled when the tide went out. In the case of IBM they had an existential (near death) experience and it forced them to get their act together. The point of books like these is to be talismanic. The company is successful so others look for the surface gimmicks that made it successful. It almost doesn't matter what is inside them, since the readers generally aren't looking for insight but rather validation (they are the business equivalent of self help books).
- BrandonM 12y ago
  I wasn't responding to the entire article. I agree that he got a few things right. The specific part I quoted, though, stands out to me as a rather old-fashioned management philosophy, one that is unlikely to attract and retain top talent in a competitive hiring market.

fivedogit 12y ago

> the authors are confusing causation and correlation... they are all consequences of Google’s success. For example the authors write: “Their plan for creating that great search engine... Hire as many talented software engineers as possible, and give them freedom.” Well, this worked because the search was already successful enough to fund that freedom. This is the key point and the clickbait-y headline notwithstanding, it's a very valid point. People look at Google and say "wow they have super-smart engineers and let them work on whatever they want with 20% of their time" and tons and tons of products sprung up all over the place. But after a while, management seemed to back off of that philosophy quite a bit. In 2011, Google killed off many of its less successful projects, including Google Labs, and I read in some nook or cranny of the Internet that the 20% time has been quietly deemphasized over a number of years. So the idea that you can just hire smart people and magic will happen, though often copied and lionized, is not all it's cracked up to be. <Insert quip about monkeys, typewriters and Shakespeare here.>

deciplex 12y ago
For an even more dramatic example, look at Valve. Great company to work for, no doubt, and open allocation which makes 20% time look like a death march. They can fund this because of the money fountain that is Steam. But improvements to the Steam client are underwhelming and come at a snail's pace, if they come at all (e.g. Steam has been delaying my shutdowns in Windows now for two years). They are about a year behind now with SteamOS, and have pissed off most of their potential partners with SteamBox delays as well. And, of course, Half Life 3, which should be renamed Half Life Pu-239 based on when we should expect it to be released. (How is episodic gaming working out?) "Freedom" certainly makes a place nice to work for. It might even get you some really good technology. And it probably can, eventually, indirectly, maybe eventually manage to achieve some of a company's goals. But if it is the most efficient way to do this, I am struggling to come up with any good examples.
- cpks 12y ago
  Conversely, neither Valve nor Google are digging their graves, like much of the rest of the industry does over time. See the prior post about Dell. Look at Microsoft. Focus helps, but good people make a bigger difference. The overhead, be that 20% time or whatever else, is peanuts in comparison.

millstone 12y ago

I would disagree with characterizing GOOG's P/E (27.5) as "low" or "not on par with its financial performance." That's well above the average. The comparisons are suspect: Facebook is an outlier, MSFT in the 90s was surely overvalued along with most tech stocks, and Amazon is deliberately pursuing growth at the expense of profitability. Why not compare instead to other mature tech companies today: Microsoft, IBM, HP, Cisco? Or Apple, who has had a P/E under 20 for the last five years, yet whose stock has outperformed GOOG by 3x over the same period?

wahsd 12y ago

Interesting article. It also adds more validation to my theory that Google is "successful" in spite of itself in many ways. I really think Google's search supremacy is vulnerable, although there is no one really positioned to disrupt Google's domination in search quite yet.

candybar 12y ago

This article is aggressively awful. His entire premise: "According to the company’s 2013 financial filings, 83 percent of Google’s revenue came from ads, about 7 percent from Motorola (which is now gone), and 10 percent from everything else. In other words, when you add up all the revenue from Google Apps (Gmail, Docs, Drive, Maps, etc.) together with the Android and other mobile businesses, and then add Chromebooks, Chromecast, Chromeboxes, and everything hardware and everything Chrome, Google Developers Network, Google+, Google cars, Google robots and drones, Google Glass and other wearables, Google Cloud, and everything else in the Google world, you get $5 billion or 10 percent of Google’s revenue." is completely wrong because Google's ad revenue cannot be separated from its products outside of Search. Google+, Gmail, Docs, Drive, Maps, Android and Chrome are all designed to add to their ad revenue. Saying that Google's ad revenue is the vast majority of their non-Motorola revenue, therefore Google's non-Search products must not be adding much to the bottom line is to conflate Google's advertising businesss with their Search product, when Search is one of their many products that lead to their advertising revenue. Once you destroy this premise, this whole notion that Search is the only thing Google does well (or makes a lot of money from) becomes obviously absurd. Gmail, Google Maps, Android, Youtube and Chrome are all market leaders in absolutely gigantic markets. Edit: The synergy between many of Google's products and advertising should be obvious. They all capture information about the user, which improves their ability to display "relevant" ads or at least ads that advertisers will pay more money for. They also prevent other dominant players in that space from getting a foothold in advertising. Chrome and Android ensure that Google's various services are not a disadvantage on the web and in mobile computing respectively and may gradually be used to advantage their services over competitors'. Edit2: jjoonathan, your point regarding Amazon and competitive threats they face is correct, but it has very little to do with the article, which is taking Google's successful position for granted and asking how they got there. And the idea that Gmail, Maps, Android and Chrome haven't helped and won't help in the future is fairly absurd. Edit3: Multiple downvotes seem a little fishy, as does this article getting voted to the top of Hacker News. Edit4: Another thing the article is ignoring is that Google's continued dominance in search and web advertising is a massive accomplishment that was not at all guaranteed from its initial success. And its massive investment in engineering that the author sees as excess I'm sure has a lot to do with how it was able to sustain that dominance.

AndrewKemendo 12y ago

Being dominant is not the same as being a monopolist. I wish people would quit bringing that term up anytime a company is at the top of a market because it has legal and social implications. I have even heard people say that they have a natural monopoly which is just silly if you understand how natural monopolies work. In fact Google isn't a monopolist on any terms, but they do currently dominate search. My guess is they could be knocked off their perch fairly swiftly if someone came along with an amazing recommendation service (not like what we see now) that was more advisory than search as it would necessarily absorb search.

leoc 12y ago

"First off, the authors are confusing causation and correlation. Schmidt points out a series of characteristics of Google as a company and presents them as the reasons for Google’s success, but in my opinion, they are all consequences of Google’s success. For example the authors write: “Their plan for creating that great search engine, and all the other great services was equally simple: Hire as many talented software engineers as possible, and give them freedom.” Well, this worked because the search was already successful enough to fund that freedom. [...] The key is market dominance. If you have a de facto position of a monopoly in your market, money pours in, and you can afford to give your employees even more than 20 percent of their time free." This is itself backwards, yes? ISTR that http://blogoscoped.com/archive/2007-09-03-n78.html http://blogoscoped.com/archive/2007-09-03-n78.html AdWords — and thus the profitability of Google's search business, if (arguably) not the search monopoly itself — was the product of early Google's 20% time and employee freedom, rather than the other way round. (Oh, and they got GMail into the bargain.) Similarly for: "I would love to see one single company that isn’t dominating a market with no cash cow in-flow that can succeed without strict discipline, sharp focus, hard work, and hands-on management." I thought that Google's 20% time was modelled after practises at 3M and Hewlett-Packard? I have no doubt that in their day these were companies that enjoyed comfortably high margins on many of their products, but from my limited knowledge I don't have the impression that they were monopolists sitting on their laurels from one of two huge hits. (As Xerox apparently was.) I also don't know how reasonable it would be to claim that private-project time didn't contribute anything to the bottom line of these companies either: 3M itself tends to claim that the Post-It note was a product of its 15% time http://solutions.3m.com/innovation/en_US/stories/time-to-think http://solutions.3m.com/innovation/en_US/stories/time-to-thi... . Accordingly I'm unsure why this article has been voted to the top of HN. None of which is to say that How Google Works is a model of candour and insight, or to suggest that Google has no problems with how it handles innovation, of course.

zobzu 12y ago

" “Their plan for creating that great search engine, and all the other great services was equally simple: Hire as many talented software engineers as possible, and give them freedom." Man I so dislike these. Its pure bullshit. (its a quote from the book, mind you).

abalone 12y ago

> why have the majority of initiatives at Google either failed or been financially inefficient and unprofitable? If they were standalone startups, they would have most likely already been dead. It takes a lot of experimentation to produce hits. Even the best companies are going to have a lot of failed projects. One reason Google "appears" to have so many failures is that they're more open then other companies. No doubt Apple has tons of internal failures. Projects that don't see the light of day, get canceled if they're not looking good. Tim Cook even talks about it in interviews. I do think that Apple's producing more hits overall, but the point here is that they are not failure-free; they just don't ship crap. Google likes to publicly experiment. In the startup world this experimental function is fulfilled by the startup pool as a whole. Most will fail. Most winners have "focus, discipline, hands on management", but I'm sure that's true for most product teams at Google too.. where "management" = the local team's product & engineering management, which is more equivalent to a startup's executive team than the CEO of Google. If bigger companies want to stay innovative I think there's still a lot of value to supporting experimentation and freedom within the company. It's going to look like a lot of failure. But then so does the startup universe.

deleted 12y ago

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bronbron 12y ago

Hmm. Preface: I do not work at Google. > I would love to see one single company that isn’t dominating a market with no cash cow in-flow that can succeed without strict discipline, sharp focus, hard work, and hands-on management I've worked for plenty. I'm not going to name them because it's tactless, but they were both huge monolithic corporations and small-ish companies that were pretty profitable. I'm sure others have too. Those companies that you think to yourself, "how the fuck are we making money when we're so fucked up?". I wouldn't say it's a rare scenario. The idea of companies as "hyper-efficient market machines" is pretty laughable. In fact, I've met plenty of people who worked at IBM (the company he alludes to being one of these strict discipline companies) who said IBM was/is a complete mess. > why have the majority of initiatives at Google either failed or been financially inefficient and unprofitable The majority of initiatives full stop are failures, or unprofitable. This is kind of pointless without comparing Google to other companies. > When interacting with sales people at Google, I am shocked to see how untrained and inefficient they are This is admittedly one of Google's faults: they're awful at customer support and the like in general. Well known, but it seems to be working out fine for them. > If there are known companies with great sales cultures such as Oracle, Google is doing considerably better than Oracle in most senses of the word. One possible conclusion is the author's, that Google succeeds in spite of this because of their search monopoly. The alternative is that maybe a strong sales culture doesn't mean as much as the author thinks for the bottom line. > everything else in the Google world, you get $5 billion or 10 percent of Google’s revenue. Peanuts! Peanuts? Facebook's revenue last year was $8 billion. > Google is in a situation of monopoly with its search business Why do they continue to be a monopoly? There are certainly competitors. One explanation is because they continually offer the best results, because they hire the best software engineers, because they have free food, and offer "20% time", and etc...

jpatokal 12y ago

Another special characteristic of Google is its sales force. When interacting with sales people at Google, I am shocked to see how untrained and inefficient they are. Did the author just make a wild generalization about a very large number of people, backed up with no evidence whatsoever? Why yes they did. Come on, the least they could do is offer up an anecdote to justify that bizarre claim.

mickreggel 12y ago

"As a fan of his, I’ve followed most articles, interviews, and slides about his latest book" The author of this piece of shit is a fan of Eric Schmidt??? WTF? Someone needs a life. This article is the biggest load of bullshit I've ever read.

mathattack 12y ago

He had me at "Correlation doesn't equal causality" but it rapidly went downhill. I get that the concept of "Cut loose smart creatives" is not universally successful, but the article seems to go rapidly downhill from there.

jackmaney 12y ago

I know that the old saying of "don't judge a book by its cover" has been around a long time for a very good reason, but I honestly can't get past the title of this article. I find myself incapable of taking it seriously.

ajhsieh 12y ago

Its certainly not in Schmidt's interest to proclaim in a book that Google has a search monopoly even if he did realize it.

dang 12y ago

We changed the title in a somewhat feeble attempt to make it less baity. If anyone suggests a better title, we'll edit it again.

rajlalwani 12y ago

Google is one of the most innovative companies. It has successfully maintained agility (start up culture) even after becoming multi billion dollar giant. What Eric might be hinting and what author of the article sees may not be contrary! ... It's perceptual difference deliberately created.