In the eight years since Eric Schmidt got hired to run a hot private company called Google (GOOG) in 2001, the company has become one of the fastest growing and profitable companies the world has ever seen.
This growth has propelled Eric from his prior status as a little-known CEO of a technology also-ran (Novell) to one of the world’s most powerful and richest men. He is also now widely regarded as one of the world’s most talented chief executives.
With Google’s growth finally starting to slow, however — to the point that it’s actually starting to lay off workers — it’s time to ask: What has Eric really done for Google that wouldn’t have happened with any moderately competent executive at the helm? Or, put another way, is Eric really that good…or was he mostly in the right place at the right time?
It’s obviously impossible to know how Google’s trajectory would have been different sans-Schmidt. It’s also no small feat to grow an organisation from a tiny enterprise to the global, multi-national behemoth Google is today, and Eric’s leadership presumably played a large role in that. But it’s also easy to imagine Google having been a gigantic success either way, simply because of the superiority of a product and business that already existed when Eric arrived.
So let’s analyse Eric’s performance on what we do know, on a few things that were certainly in his control.
Revenue streams. 10 years into its existence (and eight years into Eric’s tenure), Google is still basically a one-product company: Adwords. (AdSense is very successful, but far less profitable). From a revenue perspective, almost everything else has been a flop. Selling ads for offline media. Video advertising. Mobile (despite Eric’s promising for the past year or so that this is mobile’s year). Selling search or apps to the enterprise. Google Checkout. Display is meaningful, but only because Google acquired DoubleClick. In other words, after 8 years on the job, Eric has not yet built a meaningful revenue-generating product that didn’t exist when he got there.
Expansion. Eric deserves credit for overseeing 7 years of extraordinary growth, as well as for aggressively investing in Google’s international business when the U.S. business was still going strong. He did overhire, and Google was not run as efficiently as it might have been, but it is better to focus on efficiency once you’ve won the land grab, and Google clearly has.
Acquisitions. Buying DoubleClick seems to have been a smart move, but YouTube may yet be a flop. Despite years or trying, Google has not been able to develop a video ad product that advertisers want. A much-maligned new entrant into the video fray, moreover, Hulu, leapfrogged YouTube’s interface, forcing Google to scramble to catch up. We’re hopeful that Google will yet figure out YouTube, but the company’s development of the product and the revenue has not been impressive.
Then you have all the little acquisitions, small startups that have gone to die in Mountain View without ever having been heard from again. Dodgeball, for example, which could have been Twitter if Google had focused on it. Or Jaiku, which at the time, was a hot growing microblogging, status application. What about Blogger? No innovation there in years. What about Grandcentral or Feedburner? Nothing meaningful yet.
Deals. Google has struck two meaningful deals with outside companies: AOL and MySpace. Both were flops. The company has admitted that social networking has not monetized nearly as well as they’d expected it to, and Google probably wouldn’t have paid MySpace $900 million to sell search ads if they could do it again. As for AOL, the value of its 5% stake has tanked since they acquired it, and the strategic advantages have been limited. Now sure, in both of these cases, you might say that Google was playing defence. But defence of what? defence against a combined AOL-MSN combo? Did it really need to shell out all that money for that?
New products and future prospects. If the economy picks up, the core search and ad network business will do just fine (though the heady growth days are gone for good). Meanwhile, Google isn’t much of a player in the social space at all. Open Social got some buzz when it first came out, but the odds of Google ever making money on this space seems low. Free open source tools in an area where even Facebook struggles to make money aren’t particularly promising.
Mobile could be big, both in terms of Android and ads, but Android hasn’t made much noise, and the mobile ad business is as puny as ever. We’ve been hearing how mobile was going to be the second big Google pillar quarter after quarter (from Eric and others), but, so far, it’s disappointed In the meantime, Apple has built a platform and a new revenue model around mobile that blows Google’s inchoate efforts out of the water.
(And as an aside, what was the last startup that Google killed? For years, every time a hot new startup emerged, it was a truism that it was only a matter of time before Google copied the feature and flat-out killed it. But when was the last time they killed anyone? Technorati?)
The new company everyone loves to hate. Eric and Google also miscalculated last summer, when a knee-jerk hatred of Microsoft pushed the company into playing white knight during Microsoft’s attempt to take over Yahoo. The Google-Yahoo search partnership antagonized regulators and trained anti-trust guns on a company that 8 years ago no one had heard of. Now, privacy and anti-trust activists are on high alert for any indication that Google is abusing its power. It has already become the new Microsoft.
Bottom line: It seems, therefore, that Eric’s legacy might eventually look like Meg Whitman’s — a non-founder CEO who was lauded as a genius for years thanks to the success of the company…but whose contribution to that success was likely highly overrated. The going is now tougher. And in Eric’s case, as in Meg’s, a lot of his legacy will depend on what he does next.
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Disclosure: The author is long a few Google shares.
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