Google CEO Faces Difficult Premiere

Google CEO Faces Difficult Premiere

When Google co-founder Larry Page took over as CEO, he promised to shake up the Internet search giant. Instead, much of the shaking up has happened to the new CEO.

By AMIR EFRATI

When Google Inc. co-founder Larry Page announced that he would take over as chief executive earlier this year, he promised that he would shake up the Internet search giant to speed up decision making. Instead, much of the shaking up has happened to the new CEO.

Challenges have piled up for Mr. Page since he assumed his post in April. They include a broad U.S. antitrust probe of the company's practices; the settlement of a long-running criminal investigation into Google's advertising business; and shifting industry forces that led him to make a deal to buy mobile-device maker Motorola Mobility Holdings Inc. Since he took on his new role, the company's stock price has declined 9.1%, compared with a drop of 8.42% for Nasdaq stocks as a whole.

Last week, federal prosecutors who had investigated Google's practice of allowing ads from illegal online pharmacies on its Web search engine between 2003 and 2009 singled out Mr. Page. They said he had personal knowledge of the alleged crime and failed to prevent it. The federal prosecutors made their comments after Google paid $500 million last week to avoid criminal charges.

Getty Images

Larry Page

A Google spokesman declined to comment on what Mr. Page did or didn't know of the ad practices. He added that "the investigation was not related to current advertising practices and that the company was moving on." The company declined to make Mr. Page, 38 years old, available for comment.

Other setbacks have included a failure to reach a deal with music labels that would let Google's new Internet music service sell songs and albums; a public disclosure by the company in June that China-based "bad actors" spied on Gmail accounts, and the failure to win a July auction for Nortel Networks Corp.'s technology patents, which Google said pushed it to make its purchase of Motorola.

But according to colleagues, Mr. Page has dealt with the eventful past few months by focusing on matters within his control, including positioning Google in new lines of business.

"Larry's very aware of all the things that are playing out internally and externally, and he cares about it," said Sundar Pichai, who leads Google's Chrome browser and operating system. "While he takes all that into his mind, the way he approaches work is with a strong focus around products and users."

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There have also been positives. His reorganization of the company was largely well-received by employees; in April, the government approved Google's purchase of ITA Software, which will help Google build a travel-search service; and Google+, the company's fledgling attempt at social networking, has seen early growth. Employees also credit Mr. Page with facilitating a change in the look of numerous Google's services, including the search engine and Gmail.

Mr. Page has also learned from criticism. Amid questions about Google's growth rate, Wall Street analysts had griped in April that they didn't hear enough from Mr. Page on his first earnings call. During that call, the new CEO said he was "really excited" about the company's performance and prospects but didn't discuss his strategy or stay to answer questions from analysts.

But on the July quarterly call, which followed stronger results, the new CEO spoke extensively about his strategy. Among other things, he said Google would have no trouble finding ways to make money from the growth of its Chrome Web browser, YouTube video site and Android mobile-operating software, which powers more than 135 million devices world-wide.

Google is "only at 1% of what is possible" and "that is why I am here working hard to lead the company into the next level," Mr. Page said during the call.

Jordan Rohan, an analyst at Stifel, Nicolaus & Co., said Mr. Page "has been a pretty quick study" in communicating with investors. "It's clear that Larry Page isn't satisfied with Google's dominant position in Web search and intends to broaden the areas of dominance," Mr. Rohan added, even though that is inviting more government scrutiny and "bumps in the road."

Internally, numerous Google employees say Mr. Page enjoys a broad base of support. Over the past few months, he has tried to shake up the company as he promised he would, clarifying lines of accountability and priorities through a broad reorganization. In addition, he eliminated projects that didn't contribute to those priorities.

Getty Images

Mr. Page at a product launch in February 2010.

Internet Empire

Larry Page in April reorganized Google into seven product areas.

• Android: mobile-operating system, Google Music
• Web search: Google.com
• Commerce & Local: Google Wallet, Google Offers; Google Maps; Google Books
• YouTube: video site, Google TV
• Social: Google+ social network
• Chrome: Web browser/laptop OS; Google enterprise apps
• Ad products: Web-search ads, DoubleClick ad exchange, AdMob mobile ads.

Mr. Page has also taken an interest in newer products, such as local-business advertising initiatives and Google+, the social-networking and Facebook Inc. rival whose performance Mr. Page has tied to the size of employee bonuses this year.

With employees, Mr. Page has tried to shed his image as an introvert. Several weeks after Google+ was launched, he helped organize a July "beach party" at Google's Mountain View, Calif., headquarters, complete with a high-tech wave-making machine, said people familiar with the matter.

Colleagues also said that Mr. Page has been surprisingly adept at communicating with employees, including at product-related meetings, during Friday afternoon "TGIF" all-hands meetings, and through several-minute-long videos posted on his internal Google+ account.

Still, the external headaches have forced Mr. Page to respond quickly. Earlier this summer, Google said it was facing a broad Federal Trade Commission investigation into its practices that could take years to resolve.

Following that disclosure, Google in July made changes to the way its search engine displays information about local businesses, which is among the issues the FTC is investigating, according to people familiar with the matter.

Meanwhile, the growing competition in the mobile arena pushed Mr. Page to bet big by announcing this month that Google has agreed to buy Motorola for $12.5 billion, the Internet search company's biggest-ever deal.

Google Knew About Illegal Ads For YEARS Before Trying To Stop Them

Google Knew About Illegal Ads For YEARS Before Trying To Stop Them (GOOG)
San Francisco Chronicle
But in fact, Google knew what was going on for years and did nothing to stop it. Google even offered customer support to the illegal advertisers, and it didn't close various loopholes that allowed the ads to sneak in front of US viewers until it became ...

Google to pay $500m to end drug ads inquiry

By Joseph Menn in San Francisco中文

Google has reached a landmark $500m settlement with federal prosecutors to halt a criminal investigation into its acceptance of advertisements from companies selling unlicensed pharmaceuticals.

The accord is one of the largest in the history of online advertising and allows the world’s most popular search engine to avoid prosecution in a probe by the US attorney in Rhode Island, Department of Justice officials in Washington and the Food and Drug Administration.

A deal had been expected since May, after the advertising powerhouse reserved $500m for an unspecified legal matter and people involved in the talks confirmed that negotiations were underway.

Google had no immediate comment on the pact announced by Rhode Island prosecutor Peter Neronha. He said the amount represented revenue from the ads, which typically purported to be on behalf of Canadian pharmacies.

Like Microsoft and Yahoo, Google has already changed its ad policies under pressure from licensed pharmacies, major drug makers and the FDA to do more to filter out ads that tout prescription medications that are counterfeit or unlicensed for sale in the US and often manufactured in China, India and elsewhere where law enforcement is difficult to organise.

In 2008, US pharmacy regulators wrote to Google urging it to drop the firm it was using to screen out illicit pharmacies. The firm had let through several advertisers “that source their prescription drugs from various locations outside of the United States … which is contrary to US law,” according to the letter from the National Association of Boards of Pharmacy.

In addition to the intellectual property problems raised by the fakes, the FDA and the Drug Enforcement Administration complained about a public health threat, because some US consumers have died from drugs bought online without a prescription.

Google's purchase of Motorola Mobility

Arming Android

Aug 15th 2011, 19:56 by L.S. | LONDON

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SHOCK. Bombshell. Incredible. Even seasoned observers of the technology industry could not hide their surprise when it was announced on Monday, August 15th, that Google, the online giant, would buy Motorola Mobility, a maker of handsets and other electronic devices, for a whopping $12.5 billion. The deal not only comes as a surprise, it will have a big impact on the mobile industry, too.

For starters, the merger is very good news for the shareholders of Motorola Mobility, among them Carl Icahn, the activist investor. The offer—$40 a share in cash—is 63% above the closing price of Motorola Mobility’s shares on Friday. It is unlikely that shareholders would have got such a price on the open market any time soon. Although Motorola Mobility, which was only spun-off from Motorola in January, has staged something of a turnaround, it is still too small to compete with much bigger rivals such as Apple, Nokia and Samsung. Since March its shares had been trading below their issue price of $25.

As for Google, although it will spend about one-third of its cash on the biggest acquisition in its 13-year history, it will also get a lot: plenty of ammunition in the ongoing battle between mobile platforms. Android, Google’s operating system for smartphones and other mobile devices, has taken the world by storm. In America it now powers nearly 40% of new smartphones, outdoing the platforms of Apple and RIM, the maker of BlackBerry smartphones. Worldwide more than 150m Android devices have been activated, a number that is growing by more than half a million every day.

Yet the Android “ecosystem”, as geeks call it, is also facing growing challenges. For one, the operating system has yet to make much headway in the market for computing tablets, mainly because Android devices are still not as user-friendly as Apple’s iPad. More importantly, although Google does not charge for Android, it is becoming increasingly costly for handset-makers—because rivals claim it infringes on intellectual property owned by other firms. In early 2010 HTC, one of the leading vendors of Android devices, agreed to pay royalties to Microsoft for the use of its patents ($5 per device, according to some estimates). And in July Apple won a legal victory against HTC in a patent infringement suit, which could lead to even higher payments.

Taking over Motorola will help Google to overcome both of these problems. Owning a handset-maker allows the firm to integrate software and hardware more smoothly. It should not only be able to deliver more competitive Android tablets, but speed up the development of other sorts of consumer electronics (Motorola Mobility also sells television set-top boxes). In addition, Google will gain control of Motorola’s huge portfolio of intellectual property, which includes 17,000 patents worldwide. This will give Google—and, indirectly, makers of Android devices—a much better bargaining position in current and future legal battles, which include litigation brought by Oracle, a software firm, over Android’s use of Java, a software technology.

Although Motorola Mobility’s shares soared close to the price offered by Google, suggesting that the market thinks that the takeover will succeed, it could still hit snags. Another suitor may emerge, possibly Oracle. Antitrust authorities on both sides of the Atlantic, which already have Google in their sights, will certainly take a close look, although it seems unlikely that they will block the merger. More fundamentally, the acquisition could discourage other handset-makers from using Android for their devices if they worry that Motorola will gain an unfair advantage. To allay such fears, Google has said that it will run Motorola as a separate business and that it will not change in any way how it manages Android.

Even if the merger, as so many before it, turns out to be a costly mistake, it is another sign that the market for smartphones and other mobile devices will end up looking different from the personal-computer industry. Whereas with PCs operating systems were developed by one set of companies (mostly Microsoft) and the machines by another (Dell, HP, Acer), mobile devices seem to demand a deeper integration of software and hardware, delivered by a single firm. This has always been Apple’s approach. HP also has its own mobile operating system, WebOS.

Google now seems to be going down this path, and others may follow suit. After the announcement of Google’s takeover of Motorola Mobility, analysts began speculating that Microsoft might now buy RIM or, more likely, Nokia, which has already agreed to use Microsoft’s Windows Phone as the software to power its next generation of smartphones.