|Google’s Grand Plan |
The search company no longer dabbles in exotic ideas. Now, it’s all business.
By Farhad Manjoo
Posted Wednesday, March 28, 2012, at 4:58 PM ET
In a typical month, David Lawee meets two dozen founders of new companies. He grills them on their businesses, their ambitions, their funding, and their clever ideas for the future. Every once in a while—maybe every 10th meeting—Lawee will encounter someone who blows him away. “They’ll come in, and it’ll be so obvious,” he says. These brilliant founders will have identified some magnificent solution to a problem that ails the world and have proven adept at knocking down all the hurdles along the way to their dream. “When I meet someone like that it’ll just make my whole week,” Lawee says. “I’ll even tell the guy or the woman, ‘Thank you, you’ve just made my week.’ ”
There are a lot of people like Lawee in Silicon Valley—champions of entrepreneurs, people who fall head over heels for new ideas and get a visceral thrill out of talking to the next Steve Jobs, Larry Page, or Mark Zuckerberg. But even in a place that sparkles with optimism, Lawee stands out. Lawee heads Google’s acquisitions department, and is thus one of the few people in the world who can pluck an ambitious tech wannabe from obscurity and bring her into the big leagues.
Google’s acquisitions are a good window on its metamorphosis. The search company is generally recognized as the most acquisition-friendly company in the industry; in 2011, Lawee shepherded Google’s purchase of at least 25 firms, or one every other week. (If you count acquisitions it made only for patents and other intellectual property, the number is even higher.) Facebook, by comparison, bought just six companies in 2011. Apple bought three.
Under Page, the pace of Google’s purchases hasn’t slowed down, but Lawee says the nature of the companies that Google is interested in has changed. He also told me why Google made key purchases last year. I’ve distilled our conversation into a few insights about how Google works now.
Google operates seven businesses. It’s not starting new ones anytime soon. Lawee says that when Page began his term as CEO, many Google employees were “looking for a sense of direction.” Over the previous decade, Google had expanded beyond search into dozens of new products and services, and many at the firm felt that it had lost focus. “At my level in the company, people wanted a sense of our own destiny,” Lawee says. “There was a perception we were losing to competitors. I felt that a year ago, a year and a half ago. I don’t feel that now.”
What’s changed is that Page and his management team have mandated that all Googlers focus on seven business areas, and that they don’t look to expand Google’s reach beyond these core initiatives. The seven areas are: search, advertising, social networking, Android, Chrome, YouTube, and local mobile commerce. “It used to be almost my judgment about what was important to Google,” Lawee says. “Now I have someone telling me.” When Lawee looks at startups, he’s on a mission to find companies that will help each of these business units achieve specific goals. If he finds firms that are interesting but not critical to Google’s mission, he passes on them.
Google wants to add “depth” to its products. In the pre-Page era, Google tended to look for general-purpose solutions. For years, for instance, Google tried to unify user reviews. Whether you searched for reviews for restaurants, cameras, or movies, Google presented the same design—a row of stars—to show you what it had found. As Google saw it, reviews were reviews, and they ought to look the same no matter what they were about.
But Lawee says Google now recognizes that one-size-fits-all approach doesn’t always work. Last September, Google purchased the guidebook publisher Zagat in an effort to improve the way it displays restaurant information. Though Google reps haven’t opened up about their plans, my conversations with people at Zagat led me to believe that the Zagat brand will be featured when you search for reviews. “In all of our discussions, they made it perfectly clear that the Zagat brand was extremely important to Google,” says Nina Zagat, who co-founded the firm with her husband, Tim. Zagat now occupies one corner of one floor of Google’s sprawling Manhattan office, but the space is covered with Zagat paraphernalia. “It looks more Zagat than our old office did,” Tim Zagat says.
Other recent Google acquisitions reiterate the idea that Google will buy companies for their expertise in very specialized areas. Google bought Next New Networks, a video-production company, in order to find new “premium” content for YouTube. It spent $700 million on ITA, a travel software firm, so that it can give searchers better travel search results. And, of course, Google spent $12.5 billion on Motorola just so it could improve Android.
Regulators are slowing Google down. * Google is big enough, now, that it expects a rigorous regulatory review of every one of its major purchases. At the time I spoke to Lawee, he couldn’t discuss the Motorola purchase because that deal wasn’t done; the Justice Department finally approved the purchase in mid-February, six months after Google announced the deal. Google saw similar delays after its purchase of ITA and the mobile advertising firm AdMob.
Several Google reps told me they’ve grown used to managing acquisitions through regulatory delays. Even while the DoJ is reviewing a major purchase, Google works with staff at the new firm to train them on the search company’s ways of doing business. “We do not slow down our integration efforts at all during that time,” says Marcella Butler, a senior director of corporate development who manages how new firms are integrated into Google.
Still, there’s evidence that the regulatory inquiries have made the acquisition process rockier and more unpredictable. * “It’s a painful process. There’s uncertainty to it—there’s a higher power that’s going to decide what’s going to happen with your company,” says Jeremy Wertheimer, the founder of ITA. Lawee cites one instance where the regulators affected the outcome of a Google deal. Omar Hamoui, the founder of AdMob, left Google shortly after the Federal Trade Commission approved Google’s acquisition of his company. * Lawee says there were several reasons for Hamoui’s departure, but one of them was the emotional toll of the FTC’s inquiry. * “I don’t think people realize how hard it is when the government is asking you for documents every day,” Lawee says. AdMob has helped Google make a killing in mobile ads, but Lawee believes the business “would have been much better with Omar.”
Larry Page wants results. This is perhaps the most important change since Page took over: Gone are the days when Google would buy a company only to have it disappear without ever producing a product. Page now expects direct, regular reports from Google’s acquisitions team on how recently purchased companies are performing. “Larry is very keen to make sure that the strategic rationale for every deal is well-understood,” Butler says. That seems an obvious thing for a big corporation, but it’s unusual at Google, a firm known to dabble in ideas just because they seem interesting, even if there’s no apparent payoff. Page’s management style suggests the end of an era. These days, Google means business.