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Google 'Wasting' $16 Billion On Projects Headed Nowhere 408

Posted by timothy
from the preemptive-sour-grapes dept.
hapworth writes "Google's engineering culture is 'wasting profits,' according to a new report published today that refers to $16 billion worth of Google projects that are going nowhere. According to the analysis, it's not that the ideas — such as the Kansas City Fiber Project, driverless cars, and other engineering efforts — are bad. Rather, it's Google's poor execution that is killing the company and adding billions of dollars worth of projects to its 'trash pile.'" On the obvious other hand, Google's done a lot of interesting things over the years that they've managed to make work well, and that strayed from their initial single-text-field search bar.
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Google 'Wasting' $16 Billion On Projects Headed Nowhere

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  • killed? (Score:5, Insightful)

    by dittbub (2425592) on Tuesday March 13, 2012 @12:19PM (#39339757)
    What do they mean! Is google really being "killed"? I wonder where that money could be better spent, maybe on raises for the execs!
  • by Anonymous Coward on Tuesday March 13, 2012 @12:19PM (#39339767)

    I fail to see how projects that are not yet complete can be considered 'going nowhere' -- especially ones such as driverless cars which was only recently announced.

  • by Kenja (541830) on Tuesday March 13, 2012 @12:20PM (#39339779)
    You fund 1,000 projects, in the hope that 1 of them will return more then the other 999 consume. What Google is doing, is what most US companies are failing to do to get ahead of the rest of the world.
  • by dittbub (2425592) on Tuesday March 13, 2012 @12:21PM (#39339801)
    but investor capitalism is the ultimate creator of innovation! it can't possible stifle it!?
  • by forkfail (228161) on Tuesday March 13, 2012 @12:22PM (#39339813)

    ... into an innovative company, and then don't want them to innovate. They want their nice safe already-innovated to profit like a not-quite-so-safe innovator. Paradoxical, yes - but seems the norm.

    Just waiting for a shareholder initiative to kill the 20% developer personal research time off. To soon be followed by demands of a new CEO that will outsource and reduce staff to improve sagging profits.

  • Re:killed? (Score:5, Insightful)

    by 0racle (667029) on Tuesday March 13, 2012 @12:23PM (#39339829)
    They mean money should not be spent on things that can not be instantly monetized. That's what was killing Bell Labs ; once they went the instant monetize project route it was all wine and roses.

    Google is at risk of not becoming another Bell Labs.
  • Yeah Right (Score:0, Insightful)

    by Anonymous Coward on Tuesday March 13, 2012 @12:24PM (#39339837)

    Article +1 Troll

  • by trainman (6872) on Tuesday March 13, 2012 @12:25PM (#39339849) Homepage

    Also how is this different from Xerox Parc, Bell Labs and IBM Research (or even Microsoft Research) where staff are given the freedom to innovate and experiment with technologies with no immediate marketability. Without such basic research, which corporate America has been languishing in their support of over the past decade or two, we wouldn't have the transistor, laser or so many other key pieces of our modern world.

    Google should be commended for being a good corporate citizen and giving back to science and society. Or as another commenter said, where should the money go, executive raises and dividends for shareholders?

  • by eldavojohn (898314) * <eldavojohnNO@SPAMgmail.com> on Tuesday March 13, 2012 @12:27PM (#39339871) Journal
    Did you know that farmers don't grow just wheat? They actually grow chaff! I'm not kidding, they grow chaff literally around the wheat! Billions of dollars are wasted every year as stupid farmers grow chaff and then waste time separating it from the wheat to discard it. And they don't even burn it for fuel, they often return it back to the soil or feed it to their cattle for roughage and silage! What a waste! Sitting from my high and mighty armchair computer throne, it would save them billions of dollars to listen to me.
  • by Novogrudok (2486718) on Tuesday March 13, 2012 @12:28PM (#39339891)
    "Robots. Elevators to outer space. A nationwide fiberoptic network. ... Is it all worth it?" You need to waste a lot of money and time to generate exceptional results. If you only do low-risk things, then sure -- you can grow you pile of dough now, but then another start-up google will come at some stage and pull the rug under your low-risk business. Besides, "is it worth it?" kind of question is meaningless for a geek. It is interesting, ergo it is worth it.
  • Re:killed? (Score:3, Insightful)

    by phrostie (121428) on Tuesday March 13, 2012 @12:29PM (#39339899)

    I have no interest in driver-less cars, but at least they have an R&D dept and are trying things.

    don't they also have their hands in solar power and wind farms?

    as for management killing a company, that isn't anything new.
    lots of prior art.

  • by Mabbo (1337229) on Tuesday March 13, 2012 @12:29PM (#39339903)
    While interviewing for an internship with Google, one engineer I spoke to described what Google does from his perspective: Google once discovered a hose that money poured out of. Its name is online advertising. Now, they spend their time searching for either the next hose, or new ways to increase the flow rate of that first one.

    Now, whether this is the Chrome browser, Google+, Google Docs, self driving cars, whatever- they have no idea if any of them will be worthwhile. But, they have some of the smartest people in the world tinkering around to try to find out. And if they spend $16 Billion to find a hose worth $100 Billion, or more, then they come out ahead. But, that's the thing about exploration- you don't know what you're going to find.
  • by Kenja (541830) on Tuesday March 13, 2012 @12:32PM (#39339945)
    "are they a search engine, an ad delivery service, a music retailer, or a venture capital firm". Yes, and more. If you just want the status quo, go back to using infoseek.com. Google is one of the few companies actually coming out with new stuff. This is a good thing (well not the few part).
  • by Necroman (61604) on Tuesday March 13, 2012 @12:33PM (#39339969)

    And you've noticed how much shit Google catches when they kill dead-dick experimental services that only four people use, yeah?

    The people complaining about services being shutdown are users/consumers of Google. The people complaining about Google wasting money are investors. While there will be overlap between the 2 group, this complaining is solely from the viewpoint of an investor.

  • by Missing.Matter (1845576) on Tuesday March 13, 2012 @12:36PM (#39340015)

    You fund 1,000 projects, in the hope that 1 of them will return more then the other 999 consume.

    Except is that really happening? Google is still a one hit wonder, with 96% of their revenue generated by search and advertising.

  • by Shoten (260439) on Tuesday March 13, 2012 @12:36PM (#39340029)

    "If you don't fall down, you're not really trying."

    I once sat with a colleague who was dissing Apple because "Steve Jobs has made so many mistakes." He was partially right...Apple had tried lots of things that didn't quite work. But wow, talk about not seeing the forest for the trees...this was less than 6 months ago, and Apple computer is absolutely rocking. So what if they made mistakes? That's how they had successes as well. I would find it hard to imagine that nothing was learned from the Newton that didn't go into the iPhone and iPad...and nothing needs to be said about what incredible successes THOSE two devices are.

    This sounds like the exact same thing. Google has been so successful that people are fearful of the privacy implications...and, right on cue, Google not only kicks off a benevolent, altruistic redesign of their privacy policy but does everything they can to get people to READ it for once. By doing that, they are working to shift the culture from a world where people expect privacy but do nothing to secure it for themselves to setting a standard for everyone else and trying to get people to start measuring others by it. It's a subtle but incredibly important thing to do for a company whose business model revolves around the collection, analsysis and presentation of information to and from others, and if they succeed it will have a major impact on competitors like Facebook, Yahoo, Microsoft (yes, Microsoft, who are throwing money at Bing like the second coming was around the corner) and others, to Google's advantage.

    And if the investors think for a second, they will realize that nearly all of Google's revenue now comes from things which could have failed, which were just ideas that an engineer came up with in their alloted 20% time for innovation.

  • by forkfail (228161) on Tuesday March 13, 2012 @12:39PM (#39340067)

    Who needs "search"? Gopher fills that niche.

  • by bhcompy (1877290) on Tuesday March 13, 2012 @12:40PM (#39340081)
    Basically. This is why they kept majority control of their shares, and why Facebook and every other new tech IPO is doing the same. Investors hate it and bitch about it to the SEC and others, but fuck you Mr Investor, you destroyed the goddamned economy.
  • by Anonymous Coward on Tuesday March 13, 2012 @12:43PM (#39340141)

    "Or as another commenter said, where should the money go, executive raises and dividends for shareholders?"

    Unfortunately, that is exactly what a lot of people on Wall Street want. They find a goose that lays golden eggs and then kill hoping to extract the golden eggs that are not laid yet. The future be damned!

  • Re:killed? (Score:5, Insightful)

    by Anthony Mouse (1927662) on Tuesday March 13, 2012 @12:43PM (#39340145)

    I hate to have to point out the cynicism, but the GP is not faulting Google with what they're doing.

    And I think the concluding sentence is better written that "Google is at risk of not becoming another Lucent Technologies," which is the mediocre company that Bell Labs turned into after it stopped doing first-class change-the-world fundamental research.

    The point is that asshats don't want another Bell Labs. Bell Labs wasn't about quarterly profits. They invented transistors, lasers, information theory and UNIX. None of that stuff was profitable within two quarters, was it? So obviously it was useless and they shouldn't have wasted the money developing any of it.

    Is the sarcasm clearer now?

  • Re:killed? (Score:5, Insightful)

    by ByOhTek (1181381) on Tuesday March 13, 2012 @12:44PM (#39340151) Journal

    I think it may be more of a case of:
    "These people are doing something new, and it scares us, with our conservative, slow progress, get money now priorities!"

  • by Opportunist (166417) on Tuesday March 13, 2012 @12:46PM (#39340179)

    It used to be that way, get with the times.

    Investing used to be risky. You risked a bit of your money on the chance of getting a ton of revenue out of it. High risk, high gain. Nothing wrong with that, if your risk is high, your profit margin should be high as well, so people actually dare to risk something and push us further on the pursuit of better technology and new, exciting inventions.

    That's no longer the case. Investing today means putting your money into an innovative company whose creator already took all the risk and managed to come out on top. Mostly because they had a new and clever idea and dared to follow it. You pretty much offer them the choice between taking your money or watching you use that money to build a competitor instead. Either's fine by you, and either will allow you to come out on top, but pumping money in their existing venture needs less effort from your side.

    Then you simply milk them dry, throw them away and move on to the next guys that had a nifty idea, risked it and succeeded.

  • by mapkinase (958129) on Tuesday March 13, 2012 @12:46PM (#39340183) Homepage Journal

    > At press time, Google had not responded to Internet Evolution's request for comment on this report.

    Wise decision. One should avoid talking to idiots.

  • by Oswald McWeany (2428506) on Tuesday March 13, 2012 @12:48PM (#39340215)

    I used to work for a company that did many things "badly" and nothing great. I remember once when a co-worker asked what type of company we were- were we a "software" company, a "web-hosting company" or an "insurance company". (yes, in a weird way we did all three... badly)

    The CEO's response was "We're a solutions company... we provide solutions."

    I still hate that answer. What company ISN'T a solutions company. That is just a chicken-out answer for- "I dunno- whatever will make us money is what we'll try to do".

  • Re:What, Pray Tell (Score:4, Insightful)

    by MozeeToby (1163751) on Tuesday March 13, 2012 @12:50PM (#39340249)

    Look around at Google's investment relations pages, read their mission statement, review their bylaws. Seriously, if you're not going to do your due diligence before investing in a company you can't blame anyone but yourself. Their information explicitly says they have no plans to pay dividends. They explicitly say they take risks and maintain a long term focus. They explicitly say they believe building value for the users it he way to build value for the shareholders. They don't say they are out to maximize profit, or short term shareholder value.

  • Re:killed? (Score:5, Insightful)

    by Bigby (659157) on Tuesday March 13, 2012 @12:58PM (#39340329)

    I can't help but think an MBA made the conclusion that they are "wasting" profits.

    Google has been successful because they take risks. All MBAs want to do is minimize risk. For every 99 failed projects at Google, 1 makes up for that and reaps profits that make the 100 projects operate at a 50% profit margin as a whole.

  • by Beeftopia (1846720) on Tuesday March 13, 2012 @01:00PM (#39340359)

    Opinions like this are written from the perspective of a buyout company which is solely interested in maximizing share price.

    Say you've got a company worth 10 million dollars. You have 1 million shares, each worth 10 dollars. Corporate raider [wikipedia.org] comes in, strips out all "non-performing" assets like R&D, internal HR, IT, offshores programming, closes and consolidates stores. Voila! Now you've got a company (for a short period of time) that's worth 20 million since it has no drains on its "profit centers". Sell the company. Profit!

    Private equity companies operate along similar lines. They'll buy a company take it private, "optimize" it, and resell it. As if they're any better business managers than the actual manager. In general, they're not. What they are good at is the leveraged buyout, field strip, and resell.

    These types of activities result in healthy profits for the takeover artists, and jobs lost for the actual workers.

    It's like harvesting the organs of a person while they're still alive in order to minimize the drains on ingested food. After you're done, they're going to be in very tough shape for any kind of long term existence. But by golly, food isn't being wasted on any of those useless organs.

    Google is doing what companies used to do. They're going to become even more of a juggernaut.

    This, on the other hand, is the way private equity execs dream of doing it. [bloomberg.com]

  • by dave420 (699308) on Tuesday March 13, 2012 @01:01PM (#39340375)
    They probably are earning large returns, but they're dwarfed by the ad revenue Google sees.
  • by Kupfernigk (1190345) on Tuesday March 13, 2012 @01:05PM (#39340443)
    Google is about search technology and pattern recognition. In fact, that is the major challenge with driverless cars now.

    At one time the challenge was mechanical - mechanical gearshifts and brakes were just too hard to control. Since the first Prius, that is a solved problem. Now a car can easily be operated by an automated platform, the problem is to guide it safely.

    Once that is solved, there are many new opportunities. Optimum guidance; optimum traffic patterning, looking for people who would like to share your journey all become objects of research.

    If Google cracks driverless cars, it will change the developed world. It will affect town planning, investment patterns, and the way people live. And of course it will transform the car industry beyond recognition.

    This is one area where Google could leverage its core technology to become so huge it could buy Apple to provide in-car entertainment.

  • Re:killed? (Score:3, Insightful)

    by cpu6502 (1960974) on Tuesday March 13, 2012 @01:10PM (#39340517)

    Exactly. Accountants never seems to understand that R&D is costly and often leads to dead-ends.

    But that's also how you discover innovations like Bell Labs used to do, and Google is doing now. The alternative is to count pennies & become like Microsoft. They just copied ideas from other companies like Atari, Commodore, Apple, Netscape/Mozilla, Google, Opera, rather than innovate new ideas.

  • Re:killed? (Score:5, Insightful)

    by fiannaFailMan (702447) on Tuesday March 13, 2012 @01:18PM (#39340643) Journal

    The difference is that Bell Labs did pure research. While Google may be doing pure research, it isn't evident based upon the projects that are publicly visible. Pure research is what yields the long term society–changing breakthroughs, whereas R&D on fantasy projects often have higher capital expenses with nothing to show for it even if the project succeeds.

    How do you differentiate between "pure research that yields long term society–changing breakthroughs" and "fantasy projects" before they've had a chance to prove themselves in the market for a decent length of time?

  • Re:killed? (Score:5, Insightful)

    by Anthony Mouse (1927662) on Tuesday March 13, 2012 @01:20PM (#39340661)

    While Google may be doing pure research, it isn't evident based upon the projects that are publicly visible.

    What makes you think it would have been for Bell Labs? I have some confidence that you don't get to UNIX (or a self-driving car) without a lot of fundamental research. The fact that they don't put the engineers in Central Park so you can watch them work isn't any excuse to conclude they don't exist.

    R&D on fantasy projects often have higher capital expenses with nothing to show for it even if the project succeeds.

    Like the space program, am I right? Those goons at NASA never invented anything useful, and not one penny was ever handed to Neil Armstrong by a single man in the moon. I mean who needs satellites and GPS, fuel cells, more efficient solar panels or any of that other crap.

  • by Andy Dodd (701) <[atd7] [at] [cornell.edu]> on Tuesday March 13, 2012 @01:21PM (#39340683) Homepage

    Throughout history - diversification is the key to survival.

    If you don't diversify, if someone attacks your core market, you die.

    Look at Kodak as a prime example of what happens when you choose one thing and focus on it.

  • by luis_a_espinal (1810296) on Tuesday March 13, 2012 @01:23PM (#39340705) Homepage

    When I saw this conclusion, I looked up the background of the authors: Mary Jander: BA, English and Business Kim Davis: PhD, Philosophy Nicole Ferraro: B.A. / M.A., Media Studies and Creative Writing

    Clearly this bunch is qualified to tell the founders of the worlds fastest ever growing company which technology is not going to pan out 30 years from now. To their credit I was expecting to find the resumees of 3 MBA's. At least these guys are not soulless, merely clueless (about tech anyway)

    You are engaging in ad-hominen attacks right there dude. Understand that some of the comments have merit. The thing is, Google pulls the plug on stuff prematurely. Unless we are all missing some in-depth Google wisdom, you can't do that with R&D prematurely, specially if throw millions and millions at it. Now, this is purely an armchair opinion that I'm posting here, I'm no Google insider. But things seems to be either half-cooked (Google+) or killed quickly after spending millions because it is not going fast enough within the next two quarters.

    As it has been mentioned by others here, it's not about blaming Google for doing R&D and trying things out. It's about execution and seeing things through to the end.

  • by alexander_686 (957440) on Tuesday March 13, 2012 @01:27PM (#39340777)

    But Bell Labs was never meant to be profitable.

    Bell Labs was sort of a sop to the Federal Trade Commission and monopoly laws. AT&T could have it’s national phone monopoly, but it had to contribute to the betterment of society via basic research. Which Bell Labs did fabulously.

    That being said – of all the examples you mentioned – how much profit did AT&T make from these? Mind you, they are all wonderful and I am glad that we, as a society have them. But it’s very hard for corporations to turn basic research into profits. Myself, I always think about Xerox Palo Alto Research Center and how they did the ground work for the modern computer but could not execute on it.

    The question that I think the writer is asking is that Google is spending a lot money that belongs to investors on long term high risk speculative projects. And the line between high risk / high return projects and vanity projects to buff the founder’s image is fine.

  • Re:killed? (Score:4, Insightful)

    by slew (2918) on Tuesday March 13, 2012 @01:32PM (#39340829)

    ^
    This.

    More than likely, a lot of the projects that Google is working on are not things that will pay off immediately, but in the end, will pay off. They are at least trying to establish the path that other companies *should* take once the technology becomes cheaper/more viable, instead of just sitting on their cash saying "know what we should do with our money? Put more money on top of it." like most companies would.

    Or, perhaps they are just "investing" for their "retirement". The sad truth could be that they don't plan on being successful in any of these futuristic endeavors, they just plan on establishing the path that companies *should* take, and building a huge IP landmine field for those that will become successful in the future...

    If/when they start declining in relavance (like yahoo), they'll have many more patents to sue the world with as their ship is sinking. That is the retirement pay off at the end...

  • by luis_a_espinal (1810296) on Tuesday March 13, 2012 @01:34PM (#39340859) Homepage

    Those people are speculators, not investors.

    Unfortunately the legal system and day-to-day economics do not make a distinction between the two. Mod points to you if I had them.

  • by jellomizer (103300) on Tuesday March 13, 2012 @01:48PM (#39341047)
    A Masters in Business Administration in not a soulless endeavor. A modern MBA (Post Enron) deals with ethical problems all the time as part of its training. Showing numbers on how happy employees work better etc... The problem is that there are a lot less MBAs then you think they are, and a lot that are got there degree from a Diploma Mill and not from a Fully Accredited Institution. I spent 4 years working for my MBA part time at an accredited institution and it actually help me spot unethical actions a lot easier then I did before I got the degree (Which had lead to me leaving a job for ethical reasons, before I had to get involved, which was good because months after I left the SH*T hit the fan and there was a lot of trouble) Before my MBA training I probably would have gone with the flow because I was unaware of the details on why they are doing what they were doing and I would have seen the increased pay as just a normal raise, not a method to move assets from one unit to an other behind the owners back.

    Being an MBA doesn't mean you are a big shot Exec, it is a Masters Degree in Business Administration which helps you understand many details on what goes on businesses, Economics, and best practices learned for other companies and a lot of case studies on what other companies did or failed to do.
  • Re:killed? (Score:5, Insightful)

    by Whatanut (203397) on Tuesday March 13, 2012 @02:02PM (#39341229)

    You keep saying this like it's true...

  • by Anonymous Coward on Tuesday March 13, 2012 @02:06PM (#39341263)

    WHoa richer rich. 1.5Billion is chump change? Wanna buy my iPhone? I give you the cheap price of a half billion.

  • by Anthony Mouse (1927662) on Tuesday March 13, 2012 @02:08PM (#39341301)

    That being said – of all the examples you mentioned – how much profit did AT&T make from these?

    Can you see how having a closet full of transistor-based network switching equipment could be an advantage to them over an entire office building full of vacuum tubes? Or worse, human operators switching phone calls instead of a UNIX-based phone switch? Or how lasers (and thus fiber optics) may have been useful to them? Or information theory, i.e. data compression?

    So how much profit did AT&T make from them? How about all their profit? I am not aware of anything AT&T currently does that doesn't depend on every single one of those things. And certainly anything related to the original, AT&T-as-telecommunications-company role does.

    The question that I think the writer is asking is that Google is spending a lot money that belongs to investors on long term high risk speculative projects.

    That money doesn't belong to investors. It belongs to Google. Google, in turn, belongs to investors -- but that isn't the same thing at all. You can't buy a hundred shares of Google and then walk into the bank and withdraw that proportion of the cash from Google's bank account, because it's not "your" money. The people the shareholders elect to run Google get to decide how that money is spent, and if you disagree with the holders of the majority of voting shares (i.e. Larry Page and Sergey Brin) how the company should be run, you're free to invest in something else.

  • Re:killed? (Score:5, Insightful)

    by trout007 (975317) on Tuesday March 13, 2012 @02:17PM (#39341451)

    My Dad worked at Bell Labs Homdel, NJ. He knew exactly when it was over. They used to encourage home projects. You could take as many electrical components home from inventory as you wanted. The assumption was that while working on your projects you would learn. One day they put someone in charge of monitoring the components and he knew it was over since the bean counters were in charge.

  • Re:killed? (Score:5, Insightful)

    by Anthony Mouse (1927662) on Tuesday March 13, 2012 @06:12PM (#39344987)

    That line of reasoning leads to catastrophic economic consequences. If large companies continue to innovate, they stay relevant and you get a consistent stream of innovation. If they sleepily milk the cash cow for dividends until some disruptive innovation makes them irrelevant, you suddenly have corporate titans who are desperate to staunch the bleeding, who make idiotic decisions backed by billions of dollars in accumulated assets.

    Name any company on the downswing. SCO, Yahoo, Microsoft, the RIAA, any of them. They fail to innovate, they start to lose market share and then they go out and sue everybody. They lobby for protectionist laws to prohibit the innovation that takes profits that would otherwise go to the dinosaurs. Then billions of dollars and thousands of lives become dedicated to a complete and utter waste of human existence known as corporate litigation and lobbying. I don't know if you're aware of this, but lawyers start off as people. It is the process of litigating that turns them into soulless corporate vampires, because no one can countenance such an enormous waste of resources as spending ten thousand hours researching an argument against the invalidation of a series of patents that clearly should never have been granted, and it causes them to lose their humanity. No one can sue a single mother for millions of dollars without abandoning any semblance of a conscience. It is impossible to go to Washington, DC to buy protectionist legislation and come back as anything other than a cynical, emotionally bankrupt husk.

    Yet these are what major corporations who fail to fund research and development produce. They produce soulless vampires who spread themselves throughout the world, sucking the life out of their victims, those who did the right thing and produced products people actually want.

    That is not an acceptable outcome. Major corporations cannot be encouraged to die slowly. The must either die quickly or not at all. The argument that the pattern of neglect that leads to a slow, expensive, litigious decline is what ought to happen is not something anyone should be willing to accept.

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