I thought Lauren does a good job here of distinguishing between the people who work at a company, and the emergent behavior of a company based on profit motive or other incentives.
Larry Bossidy wrote a book on confronting reality[1] which I found interesting because it tackles some of the issues facing Google today. Basically when you compare your new businesses (Google X, Other bets) to your monster business (Search Advertising) they look puny and weak. But sometimes if you considered them on their own they would look like good things.
One of the PMs I knew at Google told me (as he was leaving) that Google was the only place he knew where you could get fired after creating a $100M/year ARR business. That is only $25M/quarter which was only a .3% increase in revenue, so a loser right? But how many people would love to be in charge of a business generating $100M/yr in revenue? Lots!
The reality Google is missing is that there isn't another "search advertising" business but there might be 100 other smaller businesses that they could invent/run just as profitably. But it is hard to see that.
Heh. My first project at Google made roughly $100M/year. It was shut down by my department (Search) after 3 years because it "didn't move the needle", resurrected by Ads for another couple years because it apparently moved the needle enough to make it worthwhile for them, then shut down for good. I remember joking "Well, could I buy it off you if you don't want it? I'd love to have a $100M business", but it was a little too integrated with Google's systems & salesforce to make that feasible.
That is a very salient observation. Of course if they did that they would lose people who would step out, start their own business and just rent Google's infrastructure, but as AWS has shown that could become a meaningful part of their annual return anyway.
I doubt it was lack of vision. For a long time, one of Google's most important competitive edges was it's efficient infrastructure. With AWS coming in and Google moving to become an AI company, data probably became a more serious competitive advantage and they started Google Cloud Project
3 engineers. I (and a teammate) carried a pager for about 6 months but then Search SRE took over ops; it shared backends with other search systems and was primarily a frontend innovation so the marginal cost was minimal. There was some ongoing AdSales cost for it - basically we built a tool to visualize related queries for your search [1] and then AdSales got a hold of it and said "Woah, we can show this to clients and tell them 'These are all the other queries you should be advertising on'", and then the clients spent a whole lot more money advertising on a whole lot more queries.
I thought Lauren does a good job here of distinguishing between the people who work at a company, and the emergent behavior of a company based on profit motive or other incentives.
Throughout the article, is the explicitly stated assumption that Google's enemies/critics are evil. Google has plenty of good critics with good criticisms. That's precisely the kind of substrate of viewpoint, in which Google is somehow anointed, which Lauren forwards and which underlies the very Google hubris she decries.
>The reality Google is missing is that there isn't another "search advertising" business but there might be 100 other smaller businesses that they could invent/run just as profitably. But it is hard to see that.
i don't think Google missing it, i think they're running a similar model to VC - better hit another one or a couple of 100B+ Unicorns than a 100 of 100M small businesses.
>Google was the only place he knew where you could get fired after creating a $100M/year ARR business. That is only $25M/quarter which was only a .3% increase in revenue, so a loser right?
the same like VC do - no signs of horn in 2-3 years, just cut the "losses" (i.e. take your 2-4x investment growth) and move on.
"i think they're running a similar model to VC - better hit another one or a couple of 100B+ Unicorns than a 100 of 100M small businesses."
It occurs to me that the VC model itself makes a certain set of assumptions about where we are in the economic cycle. It only works if a.) there are industries that can be reinvented by the application of technology in a way that disrupts all the existing firms and b.) those firms are too blind, too set in their ways, or too structurally rigid to adapt that technology.
This has been the case from the 1980s onwards, but was not the case from roughly 1920-1980. At some point we're going to hit the end of the current cycle, and then any firm based upon that assumption is just going to die through bad bets. I don't think we're there yet, but it's interesting to think about the assumptions underlying the model.
The VC model exists largely because these people max out on investing in traditional instruments. Beyond that they have to look at some thing like a VC business.
In his investment class Martin Shkreli talked about this topic in specific. Its just that after a while you realize you can't squeeze much juice out of a fruit anymore, no matter hard you try. At that point, your only options are acquiring good businesses or starting investing into new ones.
I think the reason why your $100M project was shut down is may be they realized if they wanted wanted make $100M out of something they might as well buy a bond, it makes no sense to run a people team, pay them and manage them all for their scale of profits.
Either way it also looks dripping with hubris if your shutting opportunities that could put $100M on the table with little effort.
> I thought Lauren does a good job here of distinguishing between the people who work at a company, and the emergent behavior of a company based on profit motive or other incentives.
I have always found a company to be a mirror of its CEO's personality. Think of Apple under Steve Jobs, Microsoft under Satya Nadella, and Uber under Travis Kalanick. A sense of integrity - or a lack of it - plays a huge role in how we feel about the company.
When you compare a new initiative with established business the dollar values doesn't matter. If it's inline with the company's core mission it's worth doing even if it makes significant loss. But when the team could be working on something closer to the core mission, or much higher revenue potential projects it make sense to cut a $100M business.
Peter is pretty much on the money here. Google's biggest (search engine) threat is Facebook if FB can get their act together. Second is Amazon since they can be a one stop shop. But his comment came before the AI 2nd revolution hit mainstream which has changed R&D at all of the tech companies. Google does have some problems though, it can't go to far down the DoD, Darpa route since Googlers don't want to work with the military (as the article describes) and then it may miss out on innovation in China by not having a Chinese presence and offices in China to get at that talent. That ship may have sailed though as Alibaba and Baidu are giant. What Google really needs to do is unleash its human capital.
Also there are possibly other search ads scale businesses inside google, like youtube ads, display ads, mobile ads, play, cloud, docs.. We just don't know what is ARR for search ads.
>>One of the PMs I knew at Google told me (as he was leaving) that Google was the only place he knew where you could get fired after creating a $100M/year ARR business.
I wonder how much of that is because the organization hierarchies and inner machinations of the people structures are opaque to people like Larry Page and Sergey Brin at their level.
Sure these people could form a Google X and search for the next $100 billion businesses.
But if you have $100M/yr opportunity products coming up all over the company and you don't even bother to look at them. You are already losing plenty of potential $10Bn/yr opportunities. It should be perfectly possible for these people to chase both moonshot and sky shot opportunities.
Potentially. What's it doing and what's its value to the world and the corporation it exists within?
What if you have a product that brings a great deal of value to many people, but for various reasons you can't collect much revenue on it. You could be operating at a loss, but still producing great value. In that case, if there were a way to cover that $20MM/year gap (corporation sinks profits from other divisions into it, for instance) it could be worthwhile.
Or perhaps that business that's losing money brings in customers who go to the other divisions and make them profitable. That is, its return is indirect and hard to measure (though not necessarily hard to verify).
Larry Bossidy wrote a book on confronting reality[1] which I found interesting because it tackles some of the issues facing Google today. Basically when you compare your new businesses (Google X, Other bets) to your monster business (Search Advertising) they look puny and weak. But sometimes if you considered them on their own they would look like good things.
One of the PMs I knew at Google told me (as he was leaving) that Google was the only place he knew where you could get fired after creating a $100M/year ARR business. That is only $25M/quarter which was only a .3% increase in revenue, so a loser right? But how many people would love to be in charge of a business generating $100M/yr in revenue? Lots!
The reality Google is missing is that there isn't another "search advertising" business but there might be 100 other smaller businesses that they could invent/run just as profitably. But it is hard to see that.
[1] Confronting Reality -- https://www.amazon.com/Confronting-Reality-Master-Model-Succ...