Google Analyst Day Message: CFO Hallucinated

Google's senior team did an excellent job at the Analyst Day (at least from my 1-square-inch perspective).  No real numbers, but most key issues addressed.  And lunch was reportedly delicious.

A few key points:

• Eric Schmidt sees further keyword pricing upside in ALL keyword categories.
• Jeff Huber (engineering executive) implied that CFO George Reyes was wrong two days ago when he said (clearly) that the monetization SWAT team was encountering diminishing returns.  Actually, it would be more accurate to say that Huber acted as though he'd never heard of George Reyes.  Huber echoed Reyes' description of a big monetization initiative that began 18 months ago.  Unlike Reyes, however ("we got so good and so efficient at that that now all that's left is organic growth"), Huber implied that the campaign was still going strong.
• George Reyes himself never so much as mentioned his stock-crushing comments.  Perhaps it wasn't actually George on Tuesday's webcast but a hacker stunt-double (sponsored by those evil Google-hating short-sellers--or maybe Barron's).  Reyes did say that company will spend "significantly" more in CAPEX this year than last year's $800-plus million.  This is an astronomical sum, and and it raises serious questions about what Google is doing that Yahoo and eBay aren't.  Specifically, are those two companies underspending--or is Google overspending?
• Sergey Brin gave a thoughtful, personal response to the China question, citing his own experience with communism in Russia.  Widespread, knee-jerk anger notwithstanding, Google made the right decision here, and a mature one. 
• Schmidt, Brin, and Reyes all expressed confidence in the company's fraud detection ability.  Schmidt reaffirmed that click fraud was "immaterial."

The only unnerving theme: Early on, there were endless references to the "Founder's Letter," which has apparently already achieved the status of a seminal religious text (a la L Ron Hubbard).  Google isn't a "different kind of company."  It's just a really good company.  It doesn't have to be any more than that.

Comments

[anon]

Agree. Google's a good company, but can't never be a "different kind of company" if, just like any other companies, it's willing to filter out information related to freedom, democracy and human rights to improve its bottom line as a business, i.e. making money.

Of course I have no problem with its business expansion in China -- that's how capitalism works. Just don't BS and claim you're different when you're doing exactly the same thing like any other companies, such as Microsoft, which many consider "evil".

And I don't get the idea that many people consider this company the one that "changes the world", in the sense that it's the only one. Come on. It's built a very good search engine and business model, and very profitable. But there's nothing exceptional about it that makes it better than others, at least not yet. Moreover, every good company has contributed to "changing the world" one way or another.

Haven't Digital, Xerox, GE, IBM, Apple, Oracle, Microsoft, Netscape, Yahoo and the likes changed the world in some ways? I think great companies at one time like Digital, Xerox or Netscape have changed the world much more than Google has, even though they're now just a pale shade of their past, or no longer exist. They're the visionary pioneers who paved the way for later generations.

Google improved search and built a better mouse trap using Overture's model. Hardly visionary. Microsoft bought the little Seattle company and became "the company that changed the world." There have been many obscure and little companies that have since become extinct but have contributed significantly to the world we're in now with their original ideas.

Tim Berners-Lee, the father or the WWW, arguably has single-handedly changed the world since the last decade more than any company has, although he hasn't become filthy rich (if at all) like many others who applied his ideas commercially. Great pioneers tend to work quietly and don't boast about their contributions.

Jack Welch of GE is a lengendary CEO and always greatly values and emphasizes work ethics, but he has never claimed "we're a different kind of company", or "we don't do evil." And, it's especially bad if your actions contradict what you claim you stand for.

[anon2]

"Haven't Digital, Xerox, GE, IBM, Apple, Oracle, Microsoft, Netscape, Yahoo and the likes changed the world in some ways?"

You forgot to mention Bell Labs (C, Unix, Transistors, etc.) The sad part is that AT&T did make much out of these Bell Labs gems.

The key to failure is arrogance.

[Srinivasan]

Henry, if you goto http://internetoutsider.com without the www, you get a page that says "under construction".

[Still Inside]

I agree that, if GOOG is out to change the world, they certainly haven't taken even the first step. Every single one of their product segments existed before GOOG came along. They have slapped a cool brand name and great execution on a bunch of (perhaps underappreciated) product segments, but there's nothing new to see here.

I think the "great company" stuff comes from some lucky+smart guys that aren't content to simply be the billionaires-come-lately and need to push themselves to god-like status. Another scary sign for people hoping the company will deliver stockholder value.

SI

[anon]

Ah, yes, anon2. How could I leave out my favorite Bell Labs of C/C++ and Unix fame, although I did mention: "...Haven't Digital, Xerox, ...and the likes...", :)

Of course, lots of people know Microsoft and Google and their founders, but how many heard about Dennis Ritchie, Ken Thompson, or Bjarne Stroustrup? People surf the web everyday but I bet not too many have ever read about Tim Berners-Lee. These unsung, pioneering heroes personally contributed more to the world than Google or Microsoft ever did.

[anonymous]

To whoever wrote:
'he has never claimed "we're a different kind of company", or "we don't do evil.'
Google has never claimed that they don't do evil. It's their internal motto that they use as a compass to gauge their corporate actions. The problem is that the media has picked on this and talked about it endlessly.

Also regarding:
'Google improved search and built a better mouse trap using Overture's model. Hardly visionary.'
I think you forget that whatever went into making a 'better mouse trap' is also not very elementary and easily reproduceable. You could claim that even Apple just made a better mp3 player, but there's obviously more to what Apple did than just that

[anon]

...
"Google has never claimed that they don't do evil. It's their internal motto that they use as a compass to gauge their corporate actions."
...

- Wasn't that so obviously implied in their corporate statement? They declared publicly: "Don't do evil". So they told everybody not to do evil, but that doesn't apply to them? Moreover, what't the point of using the motto as a compass if you don't really follow, or just plainly ignore the compass?

...
"I think you forget that whatever went into making a 'better mouse trap' is also not very elementary and easily reproduceable."
...

I'm not saying they didn't put in a very good work, and have brilliant ideas of their own, but lots of other good companies have other brilliant ideas as well. I just don't agree with a lot of people who seem to think that it's the only company that "changes the world", hires the smartest people, blah blah.

It's the stock's performance that creates so much emotion over the company. Imagine if the stock stays at the IPO price +/- 20%, do you really think the financial media would talk about the company almost everyday? Remember the heydays of Microsoft, Cisco, Yahoo, Qualcomm? Their names came up frequently during the bubble as well. People always confuse between a company and its stock. Good company doesn't mean good stock.

And being visionary, uniquely creative is something quite different, and Google hasn't shown they have done anything exceptional in the category of "changing the world" yet. I personally believe Bell Labs or Netscape, or even a single pioneer such as Tim Berners-Lee fit the category much better.