For the past decade, Google’s management structure has been something of a three-ring circus. Cofounders Larry Page and Sergey Brin served as the main attractions—the wunderkind Stanford graduates who created the search engine that changed the world. But the master of ceremonies was CEO Eric Schmidt, a seemingly low-key Silicon Valley veteran brought in by the board of directors in 2001 to provide adult supervision and coax the Wall Streeters and venture capitalists into the tent. (One of Schmidt’s earliest acts of mature decision making was to persuade the boys not to get into the “space tethering” business, an idea for low-cost space launches that makes geeks salivate.)
Life is cyclical, and as the boys grew up and became husbands and fathers, Schmidt seemed to be finding his second youth, attracting unwanted attention in the gossip pages with coed trips to Burning Man and other adventures, and off-the-cuff statements that forced Google’s PR team into triage mode. All the while, Google seemed to be losing its mojo to newer rivals like Facebook. And so it is that Page, 37, is replacing Schmidt as CEO, while the 55-year-old moves over to an advisory role with the title of executive chairman. Brin, 37, will focus on developing new products. In many ways, the new management structure is an affirmation of what’s already a reality at Google. Although the three men have ostensibly been making decisions together, Schmidt was rarely the senior member of the triumvirate and often appeared to do the behind-the-scenes bidding of the other two. This unusual and at times cumbersome arrangement always seemed out of place in the streamlined, hyperspeed world of tech, where dictators like Apple’s Steve Jobs and Facebook’s Mark Zuckerberg are more the norm.
In one sense, Page is taking over at an ideal time. Google’s business is still robust. Last week the company reported 2010 revenues of $29.3 billion, up 24 percent from 2009. And Google is ridiculously profitable, generating $8.5 billion in net income for the year. But lately there has been a gnawing sense that Google’s best days may be behind it—that it may be a one-trick pony, albeit a fabulously successful one. For years the company has tried, and mostly failed, to make money beyond its core business of putting advertising next to search results. Android, Google’s mobile-phone operating system, has been a hit, but it is free software and therefore doesn’t contribute to revenues, except indirectly, by helping to generate more online-search advertising.
Google’s repeated attempts to create some kind of social network that could compete with Facebook have fallen flat. An attempt to reinvent email, called Google Wave, was a total flop and finally got shut down. And while Google struggles to find its Next Big Thing, Microsoft has launched a credible attack on its core business, with a search engine called Bing that, for certain things like travel and shopping, can provide better results than Google does. Worse, Google in the past year has started losing top talent, as its engineers keep getting lured away to Facebook and other, younger tech shops. Google reportedly has resorted to paying its biggest engineers bonuses of several million dollars in order to keep them from defecting.
Putting Page in charge might help shake things up and knock loose some new ideas. But it’s a risky move. (P.S.: he’s no spring chicken by Valley standards.) Page is a computer scientist, not a business strategist. And not all founders make great leaders. Page is no Steve Jobs. He’s a nerdy introvert and a terrible public speaker—the YouTube video of his May 2009 commencement address at the University of Michigan, his alma mater, is painful to watch. “He has never seemed that comfortable in a public role,” says Danny Sullivan, editor of Search Engine Land, a website that tracks Google and the search advertising market. Yet Google watchers say Page has always wanted to be in charge. Legend in Silicon Valley is that Page and Brin never really wanted to share power with an outsider, but were coerced into it by early investors who said, in 1999, that they would provide funding only if Google hired an experienced manager to run the shop. Even then, Page and Brin dragged their heels, and it was not until 2001 that they hired Schmidt, a veteran of Sun Microsystems and Novell, a software maker. Schmidt had a reputation as a solid but unexciting executive, but Page and Brin tolerated him because he came from the tech side—not the business side—and thus could speak their language.
Over the years Schmidt has sometimes butted heads with the cofounders, most notably in recent years over China. Page and especially Brin, who was born in the Soviet Union, did not want to kowtow to a repressive regime, while Schmidt was more willing to accommodate Chinese demands that Google censor its search results in that country. “One of the issues that precipitated this change [of the CEO] was what happened in China. But China is not the cause—it’s symptomatic of the broader disconnect between the way that Schmidt wanted to run Google and the way the founders wanted to run the company,” says David Wolf, chief executive of Wolf Group Asia, a Beijing-based marketing-strategy firm.
But the biggest driver of the change seems to be Page’s long-term desire to be No. 1 at the company he started, and his belief that, after 10 years of serving as Schmidt’s understudy, he now deserves top billing. Schmidt seems to agree, writing in a blog post that Page is “ready to lead,” and that while the past decade has been a remarkable one for Google, “the next 10 years under Larry will be even better.” For that prediction to come true, Page will have to dream up a new venture as big and as profitable as Google’s legacy search advertising business. Now, that would be an act of derring-do anyone would pay to see.
With reporting by Isaac Stone Fish in Beijing