Under Google’s benign management, YouTube had the luxury of continuing to build an audience and a cultural presence without having to worry too much about the bottom line. “We could have spent more time on how we’re going to monetize the system, but we continued to focus on more growth, more users, better experience,” says Hurley. Meanwhile, Google’s legal team did its best to extricate YouTube from its difficult copyright situation. Google created a system that would allow it to quickly remove infringing video once its owner identified it as such. At the same time, YouTube struck a number of deals with studios like Warner Bros. and Sony. Studios had grudgingly come to accept that it was better to have their intellectual property on the site, even for free, than to be out of sight of YouTube’s hundreds of millions of users.
In June 2010, Judge Louis L. Stanton basically affirmed Steve Chen’s gamble on the copyright violations when he granted summary judgment to Google, dismissing Viacom’s lawsuit. As long as YouTube wasn’t given “red flags” about the content from the actual owners, he wrote, the safe-harbor provision of the DMCA allowed YouTube to accept uploaded clips without prescreening them. Though copyright absolutists complained and Viacom set about drafting its appeal, it seemed that the law performed a useful function. A new business had been given leeway to grow, and when it flourished under the guidance of a bigger company, its more questionable practices were tempered. Thousands of people had jobs in a new, thriving industry.
YouTube may not have become as significant a phenomenon as Google search, but it had a huge impact on the country and the world. With the ubiquity of cheap camcorders and video recorders on mobile phones, it became easy to upload clips to YouTube, and soon it was certain that any major goof—whether it was the comedian Michael Richards snapping at black people during a stand-up performance or Virginia Senator George Allen referring to an Indian-American opposition researcher as a “macaca”—would find its way onto YouTube, sometimes with seismic consequences. Cannier politicians would use the service for campaign messages and town hall meetings. A clever video could launch a band or an acting career. Formerly private moments, from schoolyard fights to an overweight kid swinging a laser-sword toy, generated instant celebrities. And millions of people watched cats do silly things.
Even while their company was suing YouTube, some Viacom employees secretly uploaded content under pseudonyms. After Google itself, YouTube was the most popular search engine in the world.
Even someone like David Drummond, who pushed hard for Google to come up with the cash to buy YouTube, would later admit he’d had no idea of how huge a purchase it was. “The impact YouTube has had on the culture, on politics, wasn’t on my radar screen at all,” he says. Nonetheless, two years after the purchase, some analysts and observers were still unconvinced that Google’s YouTube deal was a smart one—because the service wasn’t making money on its own. And in a recession, that would not do.
4
“You can still get braised beef cheek ravioli and lobster bisque!”
As every new year approached, Eric Schmidt would write a letter outlining the company’s status and goals coming into the new annus. When Schmidt wrote his memo for 2009, he had a conundrum. It was a recession year. Though Google had consistently warned shareholders not to fixate on stock price, the serious dip in the price of a share of Google stock—down as much as 50 percent from its high of over $700—cast a pall over the company, especially among those who had arrived at the company too late to be awarded shares at much lower prices. But money was still flowing, and opportunities still abounded. The trick was to foment innovation and ambition while somehow putting a halt to giddy spending. Schmidt saw the situation as an opportunity to acknowledge that Google was now a big company—and no denying it, Google felt like a big company—and could no longer operate with some of the slipshod recklessness of a start-up.
“We had managed to built a company of $20 billion of revenue without operating budgets,” Schmidt explained at the time. “It’s not obvious to me that having budgets prevents the creative mind, especially since we are all over the creative thing. So I reject that argument. I’ve taken a position that we have so many people that I want to know what they are doing.” Schmidt gave an example of what he was talking about: a group had come into an executive meeting the previous week and said it needed $10 million to do a deal. Eric asked why. The answer was, basically, that it seemed like the right thing to do. “They had no budget, no concept of what they were trading off,” says Schmidt. “For them it was free money. Sure, we could do it—but Larry, Sergey, and I looked at it and said no. Just stopped it.”
While much of the country worried about buying bread, Google employees still nibbled free bruschetta in the cafés, although in some locations service hours were cut. For the first time, Google took a hiring breather. Its revenues continued to rise, but the rate of growth leveled off.
Brin and Page actually welcomed the downturn. They saw it as time for Google to recapture some of the hungriness of a start-up. They had never stopped claiming that the hunger was there all along, but as Google had grown, it had developed sleepy backwaters. Bureaucracy and defensive practices had crept in. You could even spot an occasional Dilbert cartoon on a cubicle. Many cheeky activities that had once seemed so refreshing began to assume an aura of calculation when they became routine. How many scavenger hunts can you attend before it becomes a chore?
Page and Brin themselves had grown in the decade since they founded Google. Both were now married and within a year of each other fathered sons. Brin’s wife, Anne Wojcicki, was a cofounder of 23andMe, a company involved in personal DNA analysis. Brin defied corporate propriety when he shifted his personal investment in the firm to a company one. Google’s lawyers made sure the transaction passed formal muster.
The normally gregarious Brin could turn icy when an unfamiliar person referred to his private life—for example, when a reporter offered congratulations at a Q and A at the Googleplex soon after his wedding, he changed the subject without acknowledging the remark. It took the web gossips months to figure out the name of his son. But Brin was genuinely open and emotional during a session of the 2008 Google Zeitgeist. Brin put aside talk of commerce to explain that he had examined his own genome with the help of his wife’s DNA-testing enterprise. Since his mother, Eugenia, had previously been diagnosed with Parkinson’s disease, he had looked specifically for an anomaly on the genetic location known as LRRK2—and discovered a mutation known as G2019S, associated with Parkinson’s. His mother, also a 23andMe customer, had the same mutation. (“She’s okay,” he assured everyone. “She skis.”) Brin immediately began researching the implications of this signal; “I found it fairly empowering,” he said. He also became involved with charities trying to find a cure for Parkinson’s, such as the Michael J. Fox Foundation. He showed rare public emotion as he thanked his wife for her help, support, and genomic expertise. It was a display of candor that one seldom saw in public from a top officer of a huge corporation—motivated in part to thwart the press from reporting on it first. “I viewed it as kind of unavoidable—either you talk about something, or somebody else will talk about it and it will end up in the tabloids,” he later explained. “I viewed it as impractical and not worthwhile to keep it a secret.”
Brin would subsequently attempt to stave off the onset of Parkinson’s with a self-determined regimen of physical activity—he took up diving—and by imbibing gallons of green tea. “This is all off the cuff,” he told Wired reporter Thomas Goetz, “but let’s say based on diet, exercise, and so forth, I can get my risk down by half, to about 25 percent.” Of course, he continued researching the issue, seeking solutions in data.
Page married Stanford graduate Lucinda “Lucy” Southworth and worked even harder to keep his personal life out of public view. It was a life much different from the modest one of a grad school dropout that he had led for the first few years of Google. He held his wedding free from web snoops on the isolated Caribbean island owned b
y a fellow billionaire, Richard Branson, the British head of the Virgin group of companies. There was one moment when he shared his feelings—with an audience of more than 30,000 in the football stadium of the University of Michigan. He had agreed to be the 2009 commencement speaker. The speech was a tribute to his dad; he wore the same velvet hood his father had worn upon graduating from that university. He told the story of how he had decided to search the entire web and recounted the saga of Google, but kept returning to his family, mentioning how happy his dad would be that “Lucy and I have a baby in the hopper.” He ended his speech by invoking family: “They are what really matters in life.”
“Sergey and Larry are not kids anymore,” Eric Schmidt noted in early 2010. “They are in their midthirties, accomplished senior executives in our industry. When I showed up, they were founder kids—very, very smart, but without the operating experience they have now. It’s very important to understand that they are learning machines and that ten years after founding the company, they’re much more experienced than you’ll ever imagine.”
From Schmidt’s comments, it was reasonable to wonder when the inevitable would occur—when Larry Page, now middle-aged and officially seasoned, might once again become Google’s CEO, a job he had been reluctant to cede and gave up only at the VC’s insistence. When asked directly if he was eager to reassume the role, Page refused to engage. “That’s all speculation,” he said.
In 2008, Google hired a new chief financial officer, the first whose job was not to manage explosive growth and stage-manage epochal events such as an IPO. Patrick Pichette was a French Canadian in his midforties who was the operations manager at Canada’s dominant phone company, where he cut operating costs by $2 billion. He had Googley credentials as well: a passion for fly-fishing had taken him as far as Russia, and unless a blizzard hit, he always rode his bike to work. When offered the job, he worried that it would represent a step backward for him—his current post was a higher rung than CFO, a job he’d held at two different firms. But Schmidt told him that as a key voice on Google’s Operating Committee (OC), he’d be a big part of running the company. But maybe a bigger factor in his accepting was the conversation he’d had with Larry Page during the courtship stage of the process. Pichette was at the end of a long day of a tough labor negotiation, and Page called him to have their first discussion ever. Pichette asked if they could have the conversation in two hours, then immediately regretted it, knowing it would be past midnight and he’d be exhausted. In the car driving home that night, he returned the call, and Page asked him what was going on. Pichette shared the details of the negotiation and was surprised to be drawn into a problem-solving negotiation in which Page—theoretically a naïf when it came to labor, since Google has no union employees—intuitively grasped the dynamics. From there, it turned into a discussion about the complicated issues facing Google. “It was like a great table tennis game,” says Pichette. As a result, when he accepted the job, “I didn’t feel like I was being hired as an employee. Larry was really looking for partners in crime.”
In this case, the “crime” would include ushering in a degree of discipline that Google hadn’t previously experienced. Though Pichette professed to hate headlines about him such as “The Axman Comes to Google,” his charter was indeed to do some trimming, albeit, perhaps with an X-Acto knife instead of an ax.
Oddly, whereas Google had built its data infrastructure to reroute around failure, it had no human infrastructure to deal with failed projects. “We didn’t know which ones they were, because we never paused to ask ourselves that question,” says Pichette. “The people working on that project know it’s failing—as senior management you have to say, ‘Let’s declare failure—let’s get the champagne out and kill this puppy. Then we can put you on stuff that’s really cool and sexy.’” That had always been part of Google’s philosophy, but whether from lack of rigor or just distraction, the company had been lax in actually issuing execution orders. One of the first puppies Pichette helped drown was a virtual-reality-style communications program called Lively.
Google’s sudden austerity was contradictory in a sense. While there was indeed an international financial meltdown and Google’s growth had slowed, the company was in no serious danger. Indeed, soon into his tenure, Pichette went to the OC and told it frankly that at Google, there was no crisis. “We generate so much cash that we were always going to make payroll. Our data centers were always going to run. We were always going to pay our suppliers. We were sitting on eleven billion dollars in cash,” he later recalled. But Pichette told the OC that it still made sense to cut. The woes of the financial world outside the Googleplex created a great atmosphere to make tough decisions to cut waste. “And because we’re Google, we’ll do it differently,” he says. “If we were GM or Exxon, we’d set up a committee full of people wearing ties, hire consultants, and come back with a memo saying ‘Here’s the answer.’ At Google, we said to our employees, ‘You live it every day, you tell us where the waste is.’” Google set up an array of web-based tools for the task and recruited the workforce to a data-driven scavenger hunt for waste. Googlers attacked the problem like a math puzzle and came up with answers. Some of them seemed trivial: for instance, instead of Google’s ubiquitous refrigerators being stocked with upscale bottles of designer water, employees would now drink filtered tap water from cups. “We have the best water in the world here in Mountain View,” Pichette said. “And we’re using bottles from Sierra-something and burning CO2 to bring in bottles that end up in landfills!” Did something like that make a difference? “It was a meaningful savings,” says Pichette, while not sharing the number. Other cuts: lavish Christmas gifts to suppliers and the companywide annual ski trip. Just telling Googlers to think twice before booking trips led to a 20 percent decrease in travel. “It’s not about memos and top down,” says Pichette. “Because people here share values, they get it.”
Googlers also took a wonky approach to cutting the food costs, gathering data on consumption and traffic at all the cafés, as well as consumption patterns in microkitchens, and analyzing the data in spreadsheets and pivot tables—what’s the wasabi consumption in Oasis?—to discover underperforming cafés. “We had a couple places where we had full staff, full chef, and nobody in there,” says Pichette. This led to the closing of one café in Mountain View and reduced hours in others. Also, the days of unlimited invites for friends and family were over. A new rule said that at the end of the workday, employees were not to stop into a café to scoop up a free take-home dinner. Even the volume of food a server put on the plates was cut back. “If you make a portion size 10 percent smaller, people won’t overeat so much,” says Google’s director of People Operations, Laszlo Bock. “And it has the benefit of not gaining weight!” According to Bock, Google’s food austerity program reduced food costs by a quarter to a third. But, he noted, “You can still get braised beef cheek ravioli and lobster bisque!”
Brin felt that the cuts addressed a creeping sense of entitlement he’d noticed. “I actually thought carefully about all the benefits,” he says, “and they did start to proliferate out of control. It was a two-year battle to essentially cut down the microkitchens.”
More serious cuts affected Google’s head count. Normally Google’s new hires numbers looked like a rising fever chart; for much of 2008 and 2009 that line turned into a plateau. Judy Gilbert, Google’s director of talent, says that when she joined the company in 2004, the message was “We’re going to hire all the fantastic people you bring up, and don’t stop until we tell you to stop.” Now a directive to proceed with caution went out. The company decided it could get by with fewer engineering offices; some were consolidated, and some plans for new ones were shelved. Google also cut down on the thousands of contract workers it used. During one week in late 2008, for instance, Googlers noted that many of the workers posted at reception desks at buildings around campus had suddenly disappeared, as swiftly and unceremoniously as Google deletes spam from its search ra
nkings. Those wishing to visit Googlers in buildings with vacated lobbies were asked to go first to one of the buildings where receptionists remained and there perform the visitation ritual (digitally sign a nondisclosure form and get a badge printed out).
Also affected by Google’s brief belt-tightening session was its foundation, Google.org, called DotOrg within the company. Larry Page had announced the company’s intention in his original 2004 letter to shareholders, vowing that the company would devote 1 percent of its equity and profits toward philanthropy. Urs Hölzle would remark, “It was launched with the thought that one day it might eclipse Google.com,” reflecting a sentiment Page himself had expressed in the 2004 letter.
In October 2005 Google announced its intentions with almost comical fanfare. Among its goals were to solve the energy crisis by finding ways to make sustainable energy cheaper than coal. Other areas it hoped to transform included “climate change, global poverty, and threats like epidemic diseases,” said Sheryl Sandberg. But though Google had roughly made good on its promise to set aside 1 percent of its equity to philanthropy, the 3 million shares—then worth about $918 million—would not go directly to Google.org. Instead an equivalent amount, spread over twenty years, would be devoted to its social goals. These would also include beneficiaries such as investments in “socially progressive corporations” and money spent “influencing public policy.” Though Google’s intent was laudable and its goals in keeping with its usual pursuit of big dreams, its actual amount of charitable spending did not seem on a scale with its usual ambitions.